Gay or straight, marriage costs more
As President Obama endorses same-sex marriage, all couples are paying more to tie -- and untie -- the knot.
This post comes from Kelli B. Grant at partner siteSmartMoney.
President Barack Obama's endorsement of same-sex marriage this week propelled the controversial social issue back into the national spotlight, just six months before the November elections. But while politicians and pundits debate the ethical and religious implications, advisers point out that the costs of marriage -- and its ugly flipside, divorce -- are soaring, even as many Americans' salaries remain stagnant.
First, the positive: At the state and national level, experts say more marriage is a good thing, from a financial standpoint at least. Indeed, some studies suggest that if the right of same-sex couples to wed were granted nationally, the policy could generate hundreds of millions in extra revenue.
For example, one study conducted this year by the Williams Institute for Sexual Orientation Law and Public Policy at UCLA estimated that New Jersey would generate $48 million to $119 million over three years if same-sex marriage was allowed. The gains would come mostly from the spending on the weddings themselves, although some experts say these couples could put more money into the economy over time, due to long-term savings from filing joint tax returns.
But for couples -- straight and gay -- marriage can mean higher costs, especially when it leads to divorce. One big reason for the spike, say experts, is that marriage and divorce now come with even more financial strings attached. For example, more than half of divorce attorneys say they have seen a rise in women paying child support over the past three years, according to a new survey from the American Academy of Matrimonial Lawyers. And nearly half have seen a rise in women paying alimony.
"Everything has gotten more expensive," says Michael Goodman, a certified public accountant and president of Wealthstream Advisors in New York City.
SmartMoney talked to financial planners, accountants and other experts to find out ways that saying "I do" means more spending now (or later if you decide you don't).
Here are five ways marriage and divorce are getting more expensive:
The big day itself is getting cheaper: Average total spending dropped about 3% last year to $25,631, according to The Wedding Report, a market research firm. With inflation, it's closer to a 6% decline.
But where it once was traditional for the bride's family to shoulder all wedding costs, it's now typical for the happy couple to be on the hook for at least some -- if not all -- of that bill, says Matthew Saneholtz, a certified financial planner with Tobias Financial Advisors in Plantation, Fla. "We're seeing there's more equality there," he says.
Wedding spending isn't universally down, either. Average spending in the New York metro area was up slightly last year, to $33,387 on average. And nationwide, spending is up more than 20% on expenses like ceremony and reception locations, full-service wedding planning and engagement photography.
In this tough economy, consumers may find alimony to be an increasingly large burden on their finances. Several states, including New Jersey and Connecticut, are considering reforms that would place limits on alimony and allow for more modifications after the fact, based on the exes' financial situations. (Post continues below.)
In March, a new Massachusetts law took effect that limits many alimony payouts based on the marriage duration -- a 10-year marriage, for example, permits a maximum of six years. Currently, many leave it to a judge's discretion, which experts say can be tough to appeal. Although more consumers are asking for reassessments based on financial hardship, filing for bankruptcy or foreclosing on a home often fails to change the status quo.
"The court sees it as freeing up more money, so they are in a better position to pay alimony," says Kenneth Altshuler, the president of the American Academy of Matrimonial Lawyers. Increasingly, women find themselves subject to paying up, too. Some 47% of divorce attorneys saw a rise in women paying alimony over the past three years, according to a new survey from the AAML.
Deciding what to do with the house has become a bigger financial issue for divorcing couples, says Carole Peck, certified divorce financial analyst and the owner of Carole Peck Financial Center near Chicago.
At the end of 2011, 23% of residential properties with a mortgage were underwater, according to CoreLogic. That means exes may need to come up with extra cash to cover the shortfall if they want to sell, or more equity to refinance if one of them wants to stay in the home and assume responsibility for the loan. In the latter case, it may still require that both parties shell out cash, she says. Otherwise, the home could remain a joint asset for a longer period, which is usually something neither person wants.
Someone entering a second marriage after getting a divorce or being widowed has more to lose these days, financially speaking, says Ted Sarenski, the chief executive and president of Blue Ocean Strategic Capital in Syracuse, N.Y.
Alimony, Social Security and pension benefits from the previous spouse may all dwindle -- or cease altogether. Losses could total thousands per month: Social Security benefit amounts for many recipients increased 3.6% this year, in the agency's first cost-of-living adjustment since 2009, and as previously mentioned, alimony payments are both high and pervasive.
On top of that, higher incomes from years of working could mean spouses may owe more in taxes filing jointly than they would collectively as singles, Sarenski says. The combined losses are so great for some adults that they're opting to skip remarriage altogether. "They just don't see the benefits of doing it," he says.
When spouses divorce, the more moneyed of the two often ends up on the hook not just for child support, but for college costs as well, says Goodman. That obligation gets steadily more expensive.
For the 2011-2012 academic year, the total cost to attend a four-year private college averaged $38,589, up more than 4% from the previous year, according to the College Board. At four-year public colleges, it's $29,657, up 5%.
And the College Board reports those increases are coming at higher rates relative to previous decades. Goodman says exes may shoulder more collectively, too, because the arrangement often means they aren't pushing for a less-expensive school or considering additional student loans as a married couple might.
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