Tying the financial knot

They say that love is blind, but marriage is a real eye-opener. Stanley R. Smiley, an attorney with 35 years' experience, including a stint at the Internal Revenue Service, said that he has seen many sad examples of how that truism can play out when one spouse has money problems. Especially in a marriage where one spouse has more assets and better credit than the other, the better-off partner may end up paying off back taxes or credit card debt that the other owed before the wedding. Sometimes an investor's financial adviser may be the only one in a position to provide advice. Extremely wealthy investors “have their attorney on speed dial,” he said, but for the merely comfortable, an adviser can be a stand-in and supply the names of a few attorneys who have the right expertise, said Mr. Smiley, senior vice president of Cetera Financial Group's Advanced Planning Group. Mr. Smiley said that local bar associations often can provide the names of lawyers, and he recommends that advisers interview potential referrals. Both would-be spouses should have a good idea of the other's creditworthiness and amount of debt, including student debt. If the potential spouse is a deadbeat, there are ways to protect the other spouse's assets, but it is best and easiest to do it before the marriage, Mr. Smiley said. Patrick Cox, president of Tax Masters Inc., a tax representation firm, recommends full examination of any negative tax history. Key questions to ask are: Have you filed all your tax returns and paid taxes in full and on time every year? If you have been audited, how did it turn out? Has it happened more than once? Has the IRS ever levied your accounts, garnished your wages or put a lien on your property? Mr. Cox said that he has seen estimates that up to 20% of the U.S. population have some sort of tax problem, and the percentage is higher for business owners. “The main problem with asking your betrothed these questions, other than it being uncomfortable, is that you may not like the answers,” he said.