On June 26, 2013, in the case United States v. Windsor, the U.S. Supreme Court declared Section 3 of the Defense of Marriage Act (DOMA) as unconstitutional. This landmark case will impact legally married same-sex couples in many different ways, influencing the handling of federal income taxes, gift and estate taxes, divorce issues, healthcare benefits, federal benefits such as Social Security, and more.
In total, the decision affects more than 1,000 federal statutes that pertain to the rights, privileges. and obligations of spouses. Some of these rights:
- Same-sex couples can now utilize the spousal deduction for gifts made during life, or bequests made at death, for gift and estate tax purposes. Before June 26, any amount gifted over the annual exclusion amount (currently $14,000) would eat into the gift-giver’s lifetime exemption amount, or if already fully utilized, incur a gift tax. On the estate tax side, prior to the recent ruling, any assets left to a spouse in a same-sex marriage were ineligible for the spousal deduction and subsequent tax benefit offered to married heterosexual partners.
- An individual’s lifetime exemption not used at death can now be transferred to his/her same-sex surviving spouse.
- On federal income tax returns, same-sex couples must now file as Married Filing Jointly or Married Filing Separately, rather than as single individuals.
- Same-sex spouses are now eligible to collect Social Security spousal and survivor benefits based on a spouse’s record.
- IRAs left to a surviving same-sex spouse can be treated as his/her own, an opportunity that has only been afforded to spouses and no other IRA beneficiaries.
- International spouses can more easily obtain Green Cards, or, if they have been married to an American and lived in the U.S. for at least three years, apply for citizenship.
- Same-sex spouses are now eligible for benefits under the Family and Medical Leave Act (FMLA).
If you’re a legally married, same-sex couple, you may still have some financial planning to do, particularly if you move to a state that does not recognize same sex marriages. Currently, some Federal agencies look to the place of celebration to determine if a couple is considered married or not. This means that regardless of where a couple relocates to after marriage, as long as the marriage was celebrated in a state where same gender marriages are recognized, the Federal agency will respect the marriage. Other Federal agencies adhere to a state of residence standard to determine if a couple is deemed married. This definition would mean that if a married couple moves to a state that does not acknowledge same gender marriages, the marriage would not be respected from a Federal level. Currently, agencies such as the IRS and the Social Security Administration have a state of residence standard, while immigration has a place of celebration standard. The Federal government will have to decide if and how a uniform definition of marriage will be provided to have consistent treatment for Federal benefit and statutes based on a place of celebration standard. Even if this is implemented, it could take several months or even years to be accomplished.
Even if there ultimately is a uniform definition of marriage applied based on a place of celebration basis, couples who relocate to a state that does not recognize same gender marriages will still need to actively address state-specific income, gift, and estate-tax issues, as well as healthcare and other state-provided benefits (pensions, etc.). Also, it’s not yet completely clear how this recent ruling will impact New Jersey couples, as New Jersey does not currently recognize same-sex marriages, but does offer civil unions.
If you are a legally married same-sex couple, we highly recommend that you contact your tax, legal, and financial advisors as soon aspossible. This is a smart time to review and potentially amend prior-year tax returns, update your current estate planning documents, and discuss how to most efficiently plan for your future in light of the new legislation.
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Please remember to contact RegentAtlantic ifthere are any changes in your personal or financial situation or investmentobjectives for the purpose of reviewing our previous recommendations andservices, or if you wish to impose, add, or modify any reasonable restrictionsto our investment management services. A copy of our current written disclosurestatement discussing our advisory services and fees is available for yourreview upon request. This article is not a substitute for personalized advicefrom RegentAtlantic. This information iscurrent only as of the date on which it was sent. The statements and opinions expressed are,however, subject to change without notice based on market and other conditionsand may differ from opinions expressed in other businesses and activities ofRegentAtlantic. Descriptions ofRegentAtlantic’s process and strategies are based on general practice and wemay make exceptions in specific cases.
This information is based on RegentAtlantic’scurrent understanding of the Supreme Court ruling.
Please remember that RegentAtlantic does notprovide tax or legal advice. Pleaseconsult with the tax or legal professional of your choosing prior to implementingany of the strategies discussed in this article.
Important disclosure information
Please remember that different types of investments involve varying degrees of risk, including the loss of money invested. Past performance may not be indicative of future results. Therefore, it should not be assumed that future performance of any specific investment or investment strategy, including the investments or investment strategies recommended or undertaken by RegentAtlantic Capital, LLC (“RegentAtlantic”) will be profitable.
Please remember to contact RegentAtlantic if there are any changes in your personal or financial situation or investment objectives for the purpose of reviewing our previous recommendations and services, or if you wish to impose, add, or modify any reasonable restrictions to our investment management services. A copy of our current written disclosure statement discussing our advisory services and fees is available for your review upon request.
This article is not a substitute for personalized advice from RegentAtlantic. This article is current only as of the date on which it was sent. The statements and opinions expressed are, however, subject to change without notice based on market and other conditions and may differ from opinions expressed in other businesses and activities of RegentAtlantic. Descriptions of RegentAtlantic’s process and strategies are based on general practice and we may make exceptions in specific cases.
RegentAtlantic does not provide legal or tax advice. Please consult with a legal and or tax professional of your choosing prior to implementing any of the strategies discussed in this article.