Supreme Court Legalizes Gay Marriage Nationwide: Now What?
What is the impact of the Supreme Court's Ruling on LGBT Financial Planning?
The Supreme Court’s momentous decision to defend gay marriage in all fifty states will have a variety of ramifications for the LGBT community. One often overlooked effect is the numerous financial benefits that could accrue from a nationwide right to marriage for gay couples. While 36 states had already recognized same sex marriage, those living in states that had not recognized same sex marriage will have to deal with a variety of financial and estate planning opportunities. And with hundreds of laws on the books that relate to financial costs and benefits of marriage, couples should meet with a professional to help them make the best possible decisions.
The Supreme Court’s decision means that married same sex couples will be able to file their taxes as married at both the federal level and now in all fifty states. This will reduce some paper work, as those gay couples living in states that did not recognize same sex marriage will no longer have to fill out two separate tax returns.
Residents in those states where gay marriage has now been legalized should analyze their previous year’s return with a tax professional. One is allowed to change, or amend, their tax return up to one year prior. If a couple gets married, it may make sense to amend their return to married status for the previous year. However, given the possibility of a marriage penalty, one should also look at their current tax returns. A couple may have to change the number of personal allowances on their W-4 form to make sure they have enough withholdings to avoid paying the marriage penalty. Additionally, newly married couples will want to look at everything from their employee benefit plans (i.e. health insurance coverage) to workers compensation to child support payments in order to make the most tax efficient decisions.
LGBT couples who can now get married will have a variety of estate planning decisions to make. One primary consideration will be changing your beneficiary designations for assets upon death to your new spouse. In states that have an estate or “death tax”, one should be aware to a key benefit of marriage; any current or future transfers of wealth to a surviving spouse will be able to avoid inheritance taxes. Finally, one should consider the possible financial responsibilities involved in child custody rights that will become inherent upon marriage.
Retirement Benefits and Social Security
One major plus for LGBT couples will access to Social Security in ways that married couples only previously could do, such as through spousal and survivor benefits. This will be especially important for those gay couples who are married, but working in one of the thirteen states that until the Supreme Court decision did not allow gay marriage. LGBT couples that get married should also review newly available options in terms of Roth and other Individual Retirement Accounts with a financial professional.