We often hear about couples sharing their finances and pulling their resources to invest together. It’s a great way to build wealth and work towards shared financial goals.
However, have you ever considered the potential pitfalls of putting your spouse’s name on investment accounts?
While it may seem like a logical step towards building a strong financial future, it’s important to consider potential risks and downsides that could arise.
So with that being said, we’re going to take a deep dive into why you might want to think twice before adding your spouse’s name to your accounts to help you make that all-important final decision.
So keep reading because we’re going to explore the reasons why it might not be the best idea to have joint investment accounts with your spouse.
Can You Get in Trouble With the IRS Because of It?
The first thing many worry about when investing with your spouse is whether putting their name on the investment account could get you in trouble with the government. Simply put, the answer is yes- it could land you in hot water with the taxman.
This is because any income or gains generated from the investment count would be considered joint income, and both you and your spouse would be responsible for reporting it on your tax returns.
Suppose your spouse’s name is added or investigated by the IRS. This could result in penalties, fines, or even legal trouble.
Furthermore, if you and your spouse have asked about the different tax brackets or income levels, adding their name to your investment could impact your overall tax liability. It’s important to understand the potential tax implications of joint investments for jumping in.
Experimenting with the new in short, while adding your spouse’s name to an investment account may seem like a simple solution for shared finances, it’s important to consider potential consequences.
Therefore, it’s always a good idea to consult a tax professional before making major financial decisions.
Why Should You Avoid It?
When it comes to investing with your spouse, you may be tempted to add their name to your investment account.
While it may seem like a good idea to pull your resources and work towards shared financial goals. There are several reasons why you want to read, but it could potentially cause you some issues with the government.
We also mentioned the downside when it comes to managing your taxes. This is a bad idea for one other unfortunate reason! This could be a bad idea if there is a divorce. Joint investment accounts can become a contentious issue in this situation.
Deciding how to split the investments can be complicated, time-consuming, and costly, especially if the investments have appreciated significantly over time.
In conclusion, while adding your spouse’s name to an investment account may seem like a simple way to manage your finances, it’s important to downsize.
Why Do Some People Still Do It?
Though there are potential issues, why do people insist on putting their partner’s name on their investment accounts?
There are some reasons why people choose to do this. First and foremost, adding your spouse’s name to your investment can be a way to simplify your finances.
If you have a joint bank account or credit card, it may also make sense to have joint investments. It can also make tracking your finances easier and keep all your investments in one place.
Another reason to consider joint investments is to take advantage of certain tax benefits.
For example, if you are investing in a tax advantages account, such as a Roth IRA or a 401K adding your spouse’s name can help you maximize your contributions and potentially lower your overall tax liability.
Lastly, joint investments can be a way to demonstrate trust and commitment in your relationship. Pulling your resources and working towards shared financial goals shows that you were invested in your future together.
While joint investments may not be the best choice for everyone, there are certainly some benefits to consider. As with any financial decision, weighing the pros and cons and making an informed decision based on your unique circumstances is important.
What are Some Other Flaws of Doing It?
Earlier in this article, we discussed some potential downsides of putting your spouse’s name on an investment account, such as disagreements over investment goals and tax implications.
But there are a few more potential flaws to consider before you make a decision. Here are some of those flaws:
- It can potentially put your investment account at risk if you are ever involved in a lawsuit or bankruptcy.
- Joint investments can be difficult to manage in the event of death or incapacity.
- Putting your spouse’s name on an investment account can limit your investment options.
Of course, as we discussed, joint investments certainly have some benefits. It’s important to consider all the partial flaws before making a decision, though.
Final Thoughts on Why Not Put Your Spouse’s Name On Investment Accounts
We’ve covered a lot of ground when it comes to the pros and cons of putting your spouse’s name on an investment account. But, at the same time, there are certainly some benefits, as we’ve said, such as amplifying your finances and demonstrating trust in your relationship.
But there are also some potential drawbacks to consider, such as disagreements over investment goals, tax implications, and the potential for legal disputes or incapacity.
Ultimately, the decision to add your spouse’s name to an investment account is a personal one that depends on your unique circumstances and goals. We certainly hope that our look at the pros and cons has helped you weigh them out carefully to make an educated decision.