Liz Skinner for Investment News writes: Same-sex couples in the states that allow gay marriage gained access to more than 1,000 federal benefits with the June 26 ruling by the Supreme Court that the federal Defense of Marriage Act is unconstitutional.
“The 1,138 rights and obligations that had been taken away from same-sex couples are all back in play,” said financial adviser J.T. Hatfield Charles, an adviser with Raymond James Financial Services Inc. “That includes benefits from the Family Medical Leave Act, estate taxes at death, federal government employees' spousal pension benefits and access to Social Security.”
Until the high court's ruling, legally married same-sex couples had been subject to state laws recognizing their union and federal law prohibiting it. That confusing setup has, among other things, forced gay couples to claim one marital status on forms sent to state revenue services and yet another on those mailed to the IRS.
“The tax forms are ridiculous,” said Kent Sargent, a resident of New York whose partner resides in Connecticut. They were married in Connecticut four years ago. “Both states recognize same-sex marriage, yet we still have to fill out five tax returns.”
“We called it death by a thousand paper cuts,” said Marlena Sonn, a certified financial planner at Christopher Street Financial, a New York-based wealth management firm specializing in same-sex couples.
Beyond the reduction in paperwork, the DOMA ruling also should shrink the amount many gay couples pay for health insurance coverage.
“When I was working, my partner was on my health insurance plan,” said Mr. Sargent, who is a client of Ms. Sonn. “Now that I'm retired, I'm on his plan. In both cases, we had to pay penalties. Because we weren't a heterosexual married couple, our benefits are taxed differently.”
LEGAL MATTERS SIMPLIFIED
Gay couples can expect fairer — read simpler — treatment in other areas of financial planning, as well. Estate planning, for one, will be-come a much simpler proposition.
That's good news for Allen Ceppos. He and his partner of 40 years have been extremely concerned about the treatment of same-sex couples under estate law. “If one of us dies, we'll lose our business because it's split 50/50,” Mr. Ceppos said. “You obviously don't want your partner to die, but you're doubly afraid.”
Mr. Ceppos and his partner sat down with Ms. Sonn a few weeks ago to set out a financial plan. Eventually, they decided to table the discussion pending the court's ruling.
“For 25 years, we've been seeing lawyers, brokers, advisers, to get around the inheritance issue,” Mr. Ceppos said. “The problem has kind of been solved. It's pretty much changed everything.”
Mr. Charles noted he'll have a thorough conversation with his same-sex-couple clients to evaluate whether they should lower their life insurance coverage if they reside in one of the 13 states or Washington, D.C., that allow gay marriages. These couples may want to drop any extra life-insurance coverage they carry to cover potential federal estate taxes and lost pension income since those planning issues should no longer apply.
However, Mr. Charles will urge some caution because if clients were to move to a state that didn't recognize same-sex marriages they would not likely retain those federal benefits.
Cathy Pareto, a financial adviser with an eponymous firm, said it's a “ground-breaking decision” for same-sex couples to gain access to the federal rights afforded heterosexual married couples, including spousal individual retirement accounts and untaxed corporate health benefits. She said she communicated the day of the ruling with gay clients through Facebook, including some who reside in Florida and Texas, “where the battle is not over.”
For clients in these two states and the 35 others that don't allow gay marriage, nothing much changes. In fact, even for those in states that do allow same-sex marriages and will now have access to federal benefits, Ms. Pareto is urging some caution in case they move in the future.
“It's a case-by-case thing,” she said. “I will tell them that they could find themselves in a change that they can't forsee at the moment.”
Gay marriage is legal today in Connecticut, Delaware, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, New York, Rhode Island, Vermont and Washington, and the District of Columbia.
California became the 13th state to allow gay marriage folllowing a separate Supreme Court ruling June 26 that effectively threw out a state referendum banning such unions.
Most other states prohibit it in their constitutions or have passed laws against it.
Ms. Pareto said gay married couples who may have been denied federal health benefits in the past because they weren't recognized as married should consider going back to the health insurance provider or COBRA administrator and asking again. For instance, one of her clients recently was denied COBRA health insurance coverage from her working partner's company after she stopped working to care for the couple's adopted child.
Additionally, married gay couples should be able to seek retroactive tax treatment for tax years that are still open, namely 2010, 2011 and 2012, said George Karibjanian, an estate-planning lawyer with Proskauer Rose LLP.
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