Just Because You Join Hands in Wedlock Doesn’t Mean You Have to Join Assets Too
Q My fiance would like to add me to one of his credit card accounts but is concerned that due to my bad credit, his excellent credit may be ruined. Do we have any reason to be concerned? Can my poor record harm his good one?
--S.F.
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A The unfortunate answer is yes. Your tarnished credit history can taint your fiance’s impeccable one. The good news is, however, that you do not have to commingle your credit lives, even as you plan to combine the rest of your lives. This is true even in community property states such as California.
Now, let’s admit upfront that it is theoretically possible that by marrying someone with an impeccable financial history you could improve your mediocre one. But the reality is just the reverse in most cases: The clean record becomes tarnished.
Experts recommend a simple strategy for avoiding this scenario: Before marrying, a couple should sign an agreement pledging to keep their financial assets, including property, credit cards and any debts incurred by each, separate property.
Beyond signing this statement--actually, it’s a type of prenuptial agreement--the two must be careful to notify any new creditors of the agreement after the marriage. This is especially important in community property states.
For example, in California, if a married person gets a new credit card, the debts accumulated on the card are presumed to be the obligation of both spouses regardless of whether both are listed on the card.
The only way to avoid this assumption of financial obligation is to notify the card issuer of your separate property arrangement at the time you apply for the card.
The fine print on the application should explain the process; if you can’t find it, submit a letter with your credit application, explaining your arrangement.
At any time during a marriage, spouses in community property states may establish themselves as separate financial entities. But they may opt out of community property debts only in advance of incurring them.
Obligations incurred before the financial separation remain the equal obligation of both spouses, regardless of who incurred them. Couples adopting this strategy should promptly notify their creditors of their decision.
You will probably be required to apply for new credit cards as individuals and to face an individual evaluation of your credit-worthiness based on your earnings and marital credit history.
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Q I am 71 years old and receive a small pension in addition to my Social Security. I am currently employed but fear that I will soon be laid off. Do I qualify for unemployment insurance if I am unable to find another job?
--C.V.
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A Age is no barrier to qualifying for unemployment insurance in California. The sole issues are whether you lost your job through no fault of your own and whether you are available for new employment. If both answers are yes, then you are eligible to collect unemployment compensation.
However, depending on the type of pension you are receiving, you may not get all the insurance benefits you are otherwise entitled to.
If your pension is 100% paid by your former employer, your unemployment insurance benefits will be reduced by the amount of your pension. If, however, you contributed to your pension account in any way during your earlier employment, your jobless benefits will not be reduced.
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Q The credit cards I have from my bank charge high interest rates. Where can I find a card that charges a lower rate?
--K.C.
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A Bankcard Holders of America is a good source. This nonprofit organization publishes a report detailing the interest rates and annual fees charged by many (but not all) credit card issuers in the United States. Each report costs $4 and is available by writing Bankcard Holders of America, 524 Branch Drive, Salem, VA 24153.
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Q What happens when a person who has won the state lottery and is entitled to payments over a 20-year period dies before all the payments are made? Are his heirs entitled to all future payments, or does the money revert to the state?
--B.M.
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A Lottery winnings, including future payments, are considered assets of the winner and become a part of that person’s estate if he should die before the payments are completed.
In the event of death, the winnings are disbursed on schedule according to the requirements of the Probate Court, which approves the will of the deceased. If there is no will, the lottery winnings are disbursed according to the court’s ruling. In no case do the winnings revert to the state.
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Carla Lazzareschi cannot answer mail individually but will respond in this column to financial questions of general interest. Write to Money Talk, Business Section, Los Angeles Times, Times Mirror Square, Los Angeles, CA 90053, or e-mail carla.lazzareschi@latimes.com
