Same-Sex Marriage: Planning for the Future

(picture from Huffington Post)

Q. My mother has been in a same-sex relationship with a wonderful woman for ten years. She is thrilled about last week’s decision that she could get married to her partner, if they choose to do so.  What does the U.S. Supreme Court decision mean for same-sex couples who plan to marry?

A. Last Friday, in a landmark decision, the U.S. Supreme Court held that same-sex marriages are legal nationwide and, wherever they are performed, they must be respected in every state.  Before the decision, same-sex couples could marry in only 37 states and the District of Columbia, and the marriage wasn’t always recognized in other states.

Friday’s ruling resulted in tearful embraces across the country, the first same-sex marriages in several states, and resistance in others. For supporters of same-sex marriage, Friday’s ruling came as another important milestone that followed the Supreme Court’s 2013 ruling that struck down the federal Defense of Marriage Act and required the U.S. government to provide the same benefits to both gay and heterosexual couples.

According to President Obama, “Today is a big step in our march toward equality. Gay and lesbian couples now have the right to marry, just like anyone else.” We share in President Obama’s enthusiasm, and will clarify what it means for our LGBT clients when it comes to planning for the future.

For LGBT clients who marry:

-Marital deduction: Before the fall of the Defense of Marriage Act (DOMA) and states coming on board legalizing same-sex marriage, a same-sex couple would be treated as two single people for tax purposes. Now, married LGBT couples can get an unlimited  gift/estate tax federal marital deduction for assets gifted or left to their spouse — either in life or death — without paying federal or gift tax.

-Combining individual gifting allowances: As an individual, you can give $14,000 in 2015 tax-free to any individual without using up any part of your federal lifetime exemption ($5.43 million). With the recognition of same-sex marriage is, if agreed upon, a couple can combine their individual allowances, gifting up to $28,000 to a child or any other person without having to send two separate checks.  However, when gifting, always be aware of the downside of gifting as you age.

-Estate Tax “Portability:” The portability clause is an estate-tax benefit that is now open to legally-married LGBT couples. Portability means that if one spouse has any unused exclusions under estate tax laws, it can be passed to the surviving spouse in the case of one spouse’s death. The second spouse to die can then leave property worth up to $10,860,000 free from federal estate tax. Unmarried couples do not get the “portability,” so that the second partner in a relationship to die can leave only $5,430,000 tax-free.   Needless to say, most Americans don’t have enough assets to worry about this provision in any event.

-Tax Refund for past years: Same-sex married couples may be able to seek a state income tax refund for past open years and they can file state income tax returns as a married couple. Couples should consult their accountants for advice about filing a protective claim, which essentially involves filing an amended tax return.

-Social Security Benefits: Married couples get a big financial boost from certain Social Security benefit programs that have not historically applied to LGBT couples.

-Spousal survivor benefit: A surviving spouse of a worker entitled to Social Security retirement or disability benefits may be entitled to receive retirement benefits based on the deceased spouse’s earning record.

-Spousal retirement benefit: For retired married couples, a person whose calculated Social Security benefit is lower than that of his or her spouse may take half of his or her spouse’s higher benefit, rather than receive the amount calculated from his or her own earnings.

-Veteran and Military Benefits: Spouses of deceased veterans are entitled to numerous benefits, including health care, pensions, educational assistance; home loan guarantees, vocational training, and bereavement counseling.  Spouses of living military personnel may be eligible for health care, family separation pay, and relocation assistance, among many other benefits.

-Federal Employee Benefits: Last summer, the Office of Personnel Management announced that federal employees in LGBT marriages could apply for health, dental, long-term care, life and retirement benefits.

– Medicare: The Department of Health and Human Services said that legally married LGBT seniors on Medicare would be eligible for equal benefits and joint placement in nursing homes.

-Immigration: The Department of Homeland Security will treat LGBT spouses equally for the purposes of obtaining a green card if the spouse is a foreign national. And the IRS has begun treating same-sex marriages equally for tax-filing purposes.

Useful Estate Planning Documents for LGBT Couples (and everyone else)

I strongly encourage you to set up the following documents:

-Revocable Living Trust: To spell out how your assets are to be distributed, you should transfer your assets, during life or at death, to a Revocable Living Trust. This strategy protects your assets from having to go through probate, which is an expensive, public, and time-consuming nightmare.

-Possibly an Irrevocable Trust: If you want  to protect your assets from the nightmare of probate PLUS lawsuits PLUS nursing home expenses, then you need our proprietary Living Trust Plus™ asset protection trust.

-Financial Powers of Attorney and Advance Medical Directives empower someone you choose to make financial and medical decisions on your behalf should you become incapacitated. Spouses can appoint each other, but it is wise to have a “Plan B,” which involves naming another (preferably younger) person to serve simultaneously or in succession.

Although LGBT couples may now marry, it does not mean all LGBT couples will get married. In fact, according to a UCLA study, the rate of marriage among LGBT couples is significantly lower than among traditional couples. Estate planning is advisable for all couples, and it remains critical for unmarried couples (including unmarried LGBT couples).

Whether you are married or unmarried, if you don’t have an estate plan in place, it is important to meet with an experienced estate planning attorney, such as myself, to craft a comprehensive plan tailored to your situation. We encourage you to call us to make an appointment for a consultation:

Fairfax LGBT Estate Planning: 703-691-1888
Fredericksburg LGBT Estate Planning: 540-479-1435
Rockville LGBT Estate Planning: 301-519-8041
DC LGBT Estate Planning: 202-587-2797