M arriage, divorce, cohabitation, birth, death, adoption -- each of these changes in one’s personal life affects tax and financial matters.

These life changes have strong emotional components that take center stage, leaving tax matters to play a secondary role. But the failure to pay attention to the tax consequences can produce unintended results.

Worse: Failing to change beneficiary designations as the situation demands can be a serious problem.

Example: Jim, twice divorced, still had his first wife listed as the beneficiary of his life insurance policy. This was not required by the terms of his divorce, and he had wanted his children to be the beneficiaries. But he never got around to signing a change of beneficiary form. When he died, his first wife took the insurance proceeds.

TAX CONSIDERATIONS

The following areas on a tax return are most likely to be affected by a major life change. Review them carefully...

Filing status on your income tax return.

Dependency exemptions.

Medical expense deductions.

Child tax credit.

Dependent-care credit.

Education credits.

Alimony income or deduction.

In addition, family changes can affect such financial matters as...

Health care coverage.

Cafeteria plan deferrals and benefits.

Life insurance, retirement plan and IRA beneficiary designations.

Ownership of (title to) assets.

Wills and trusts.

MARRIAGE

Pick the wedding year. For tax purposes, marital status is determined on the last day of the year. So if your wedding is on December 31, you’re considered married for the entire year.

If a marriage is contemplated for late in the year, decide whether it’s best to marry this year or early next year. Generally, if both parties work, the marriage penalty favors postponing marriage into the new year.

Choose filing status. Usually filing jointly saves taxes. But if one spouse has sizable medical expenses and a smaller income, it may pay to file separately.

Caution: Joint filing means joint and individual liability for the taxes on a joint return. While innocent spouse relief from joint liability is available under certain circumstances for the spouse who is not responsible for reporting income or deductions, it’s safer to file separately if there are any questions about potential liability.

Consider whether parents can still claim an exemption. Some newlyweds continue to receive support from parents. If you have enough income to file a return, you must file separately from a spouse to let your parents claim you as their dependent (assuming other dependent exemption requirements are met).

But if you’re only filing to claim a tax refund, joint filing with your spouse won’t prevent your parents from claiming you as their dependent.

Health coverage. There is usually an open enrollment period following marriage in which you can obtain immediate coverage for a spouse. Ask your employer.

Review beneficiary designations. Most people want to name their spouse as the beneficiary of life insurance, retirement plans and IRAs. But if it’s a second marriage, you may want to make arrangements for children of a first marriage.

Note: A spouse has rights in certain retirement plans. To name a beneficiary other than your spouse, you need your spouse’s written consent.

Examine title to assets. Decide how you want the names to read on bank accounts, brokerage accounts and mutual funds. Most opt for joint ownership, especially when estate taxes are not yet a concern. But if this is a second marriage and/or there is potential estate tax exposure, consider separate accounts.

See your attorney. Review all wills and trusts. It’s generally advisable to have new documents drawn following marriage to provide for your spouse or, if desired, to limit your spouse’s rights to assets following your death as permitted under state law.

BIRTH AND ADOPTION

The birth or adoption of a child is a blessed event. It is also a tax-changing event. The first step to obtaining any tax benefits for having the child is to obtain a Social Security number.

Caution: The child tax credit and other tax benefits will be denied without the child’s Social Security number.

Single parent. An unmarried parent may qualify for head-of-household status because of supporting the child. The parent may also be eligible for the earned income credit.

Foster child. Someone caring for a foster child placed by an authorized agency in the home for adoption can claim a dependency exemption for the child who lives there at least six months. But if the child is a foster child residing in the home, the exemption can only be claimed if he/she is a member of your household for the entire 12 months.

Grandparent caring for grandchild. Supporting a grandchild in your home can entitle you to tax benefits.

Example: If you’re raising your grandchild, you can claim head-of-household status for yourself and a dependency exemption for your grandchild. If you pay expenses for your grandchild’s care so you can work and your grandchild is under age 13, you may be eligible for a dependent-care credit.

PARENTS

Often, adult children are providing financial and personal support for aging parents. Tax consequences...

Eligibility for head-of-household status. Generally, to claim head of household status, you must maintain your house as the home of the dependent. But in the case of a parent, maintaining parents in their home can qualify you.

Example: If you’re paying for your parents’ upkeep in their own home, an assisted living facility or a nursing home, you may qualify for head-of-household status.

Deduction for medical expenses. If you pay your parent’s medical costs, you can treat those costs as your own if you can claim your parent as a dependent (or you would have been able except that your parent had gross income over the limit -- $2,800 in 2000, $2,900 in 2001).

Payment of household employment taxes. If you pay someone to care for your parent in your home, you are an employer responsible for employment taxes if cash wages exceeded $1,200 in 2000 ($1,300 in 2001). Responsibility for employment taxes for household employees is explained in IRS Publication 926, Household Employer’s Tax Guide.