The June 26 Supreme Court ruling that struck down the 1996 Defense of Marriage Act by a 5-4 vote not only gave same-sex couples legal recognition at the federal level, it leveled the playing field financially, too.
With this decision, married gay couples living in states that recognize same-sex marriage are eligible for over 1,000 federal benefits that opposite-sex married couples enjoy according to CNNMoney (http://tinyurl.com/qfvgpn8).
For married same-sex clients, advisors should act now to ensure that this year they receive all the benefits to which they are entitled.
Estate tax benefits
Many same-sex couples now can leave assets to one another without incurring an estate tax penalty, as reported by The Washington Post. (http://tinyurl.com/pawt7x9).
For Edith Windsor of New York City, the plaintiff in the case ruled on by the Supreme Court, that means a $360,000 refund. When her wife died in 2009, the estate paid $363,053 in taxes because the couple’s marriage wasn’t recognized for federal tax purposes.
Assets for same-sex couples are now exempt at the same cap as those for heterosexual couples, up to $5.25 million for individuals and $10.5 million for couples.
Income tax ramifications
Married same-sex couples now can file joint federal income tax returns. When one spouse makes significantly more, this can amount to thousands in savings every year.
Because the IRS generally allows individuals or couples to amend their last three tax returns, the refunds to which these clients could be entitled could amount to tens of thousands of dollars. That money could be invested so the return itself can pay benefits for years to come.
However, spouses who earn roughly the same amount may wind up owing more if they file jointly. Help clients assess what’s more beneficial — filing jointly or individually — so they can reduce their tax burden.
Before the ruling, some gay couples paid extra income tax on benefits one partner received through a spouse’s health insurance plan, CNNMoney reports. But now the savings for these couples will amount to at least $1,000 a year.
Many federal employees are likely to be granted spousal benefits such as health insurance, which means some retirement plans might extend health benefits to a samesex spouse — the same many do for straight couples.
Till death do us part
There are many other benefits same-sex married couples are now eligible for. However, all the benefits that the Supreme Court ruling made legal don’t extend to nonfederal employees in states where same-sex marriage is not recognized. As for how they apply in states where civil unions are recognized remains unclear.
Of course, the same planning rules apply to all couples: Have a will, a living will, and both a health care and a durable financial power of attorney so there is never a question who has authority to make decisions when one spouse dies or is incapacitated.
We hope this information was useful to you and your clients. If you have a specific case or a question, don’t hesitate to call our office.
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