Another legal complication, recently brought to my attention. Let's say you have a 401K sitting with your former employer, and you have considered whether to roll it over or take it out and pay the tax. You get married in the interim.
You see a chance to buy a business, and decide to use your 401K money, even though it will result in a sizeable tax bite. Your spouse is against you taking that chance, feels it should remain as a retirement savings. You say "You're entitled to your opinion, but this is my 401K money from BEFORE we were married, so you have no say in the matter! I'm doing what I want,"
WRONG. Once you are married, your spouse must sign off on any distribution from a retirement plan. If he doesn't, you can't withdraw the money.
The above is the case whether OR NOT you are in a community property state. But let's take this a step further: Let's say spouse eventually agrees to let you take the money out, and signs off on it. You take the distribution and deposit it into your joint checking account, waiting for the closing on the purchase of the business. Meanwhile, your marital problems escallate, and you separate. You decide it would be wise to move the money out of the joint account, but he beat you to it, and you find that half of it is gone. You scream that he had no right to it, since it was not community income, but (deferred) earnings from before the marriage.
WRONG. You "tainted" it by depositing it in an account that *was* community property, thus allowing him access to his half of it, under the CP laws of most states.
One more variation: You figured that putting the money in the joint account might come back to bite you, so you instead deposited it into your old, separate checking account, where your biweekly wages are also direct deposited by your employer (You pat yourself on the back for not switching that to the joint account!) You're still screwed, since the money deposited in your separate account by your employer is earned income, which is community income by default. Tainted account, reachable in legal action by your spouse.
This shit gets complicated, folks. My advice is (1) Be VERY sure before you marry, including have a written pre-nup on any financial actions you want to take which might not be supported by your spouse. and (2) Realize this is an entirely new ballgame, with a new set of rules. Don't assume anything, unless you consuult with your attorney, insisting on advice in writing.
- TaxTrollEA, aka The Marriage Grinch :)