This article was originally published on www.joycepaynepartners.com in August 2013.
Written By: Lisa Strohm
The DOMA Ruling
This past June the United States Supreme Court voted 5-4 to strike down a central feature of the Defense of Marriage Act (DOMA) that banned the Federal government from recognizing same-sex marriages performed in a state. In a related case, the Supreme Court denied standing to backers of California’s Proposition 8 law, a voter ban on same-sex marriage, leaving intact a U.S. District Court decision declaring the proposition unconstitutional.
Benefits for Same-Sex Couples
The recent DOMA ruling essentially gave same-sex couples who marry the same federal benefits as opposite-sex married couples. There are over 1,000 rights that heterosexual couples enjoy to which gay couples are now entitled. These new federal benefits were extended immediately to same-gender couples in states where they are legally able to marry.
Some key federal benefits now afforded to same-sex couples married in states allowing same-sex marriage include:
- The ability to file federal taxes jointly (which also subjects legally married gay men and women to the same federal burden – the “marriage penalty” – with which straight married couples must contend)
- The ability to receive property from a deceased spouse without paying federal estate tax
- The ability to take advantage of unlimited gifting to a spouse during lifetime without owing federal gift tax
- The ability to receive a spouse’s Social Security benefits and pension survivor benefits
- The ability to use the Family & Medical Leave Act to care for a spouse.
- The ability to open Spousal IRAs
- Rollover rights in retirement plans
- The ability to obtain untaxed corporate health benefits through a spouse’s employer
- COBRA health coverage elections
In the states that now allow and legally recognize gay marriage, married same-sex couples will be able to take advantage of benefits offered by both federal and the state government.
Financial Planning Obstacles Remain
While the overturning of DOMA marks progress for married same-sex couples, there are still several hurdles facing those couples from a financial planning perspective.
First, the ruling does not affect states that do not allow or recognize same sex marriages. So couples living in states that do not permit same sex marriage will not have access to the federal benefits. Currently only 12 states and the District of Columbia recognize same sex marriages. Most other states (including Pennsylvania* and Virginia) prohibit or have passed laws against same sex marriage.
In addition, there are some other challenges involving moving or traveling to a state that does not recognize gay marriage. For example, what if a couple that gets married in a state allowing same-sex marriage moves to another state that doesn’t recognize same-sex marriage? Will the federal government still recognize their marriage? The answer to this and similar questions may require further federal regulation.
Married same-sex couples should consider pursuing additional protections in case they find themselves in a position in which they must defend their rights in a state that does not recognize gay marriage, including the following:
- In addition to marrying, should consider putting a domestic partnership agreement in place, in case they move to a state that does not recognize gay marriage but does recognize domestic partnerships.
- Title real estate as jointly-owned with rights of survivorship
- *Secure a spouse’s right to make medical decisions for an incapacitated patient with a health care power of attorney
In addition, married same-sex couples may now be able to reduce life insurance coverage carried to cover potential federal estate taxes. Also, since DOMA was found unconstitutional, couples may consider seeking retroactive tax treatment for tax years for which an amendment for a refund may still be filed.
*Pennsylvania does not currently sanction same-sex marriage. However, according to a recent AP article, a court is set to decide whether an elected clerk in the Philadelphia suburbs who has been granting marriage licenses to same sex couples in recent months has in effect added Pennsylvania to the list of states that allow same-sex marriages, or whether he has been acting illegally.