Financial Planning for Same-Sex Couples: A Quick Checklist

On June 26, 2015, the Supreme Court issued a decision in Obergefell v. Hodges holding that same-sex couples have a constitutional right to marry in all U.S. states. As a result of this ruling and other changes in state and federal laws in recent years, same-sex couples across the country now have greater access to many of the benefits that opposite-sex couples have enjoyed for years.

Below is a “checklist” highlighting some of the most important financial items same-sex married couples should re-evaluate in their lives, in light of the changes that have taken shape post-Obergefell.

Financial-Planning-After-Obergefell

1. You may be eligible to receive various Social Security benefits available to spouses.

As the spouse of a qualified wage earner, you may be entitled to receive Social Security retirement benefits based on your spouse’s earnings record — even if you never worked or did not work enough to qualify for a Social Security benefit based on your own earnings record.

If your spouse becomes disabled and can no longer work, you may also qualify to receive a disability benefit; you’re eligible to collect this benefit if you are age 62 or older, or if you are caring for your disabled spouse’s child (provided the child is younger than age 16 or is disabled). You may also be entitled to receive survivor benefits if your spouse passes away. You can start collecting survivor benefits at age 60; at age 50, if you are disabled; or at any age, if you are caring for your deceased spouse’s child (provided the child is younger than age 16 or is disabled).

If you were married to a qualified wage earner for at least 10 years and have not remarried, you may be eligible to receive retirement, disability or survivor benefits based on your ex-spouse’s earnings record. The Social Security Administration (SSA) advises that any spouse of a same-sex marriage or a non-marital, legal same-sex relationship apply for benefits as soon as they are eligible. Visit the SSA’s website for more details regarding benefits.

2. Take a look at the beneficiary designations on your employer-sponsored retirement plan and/or individual retirement account (IRA) to ensure they are up-to-date.

In order to be tax-qualified, retirement plans that are sponsored by private employers and governed by federal laws are required to provide all couples (both same- and opposite-sex) with mandated spousal benefits and consents. This means that, in most cases, same-sex spouses are also eligible to receive retirement or medical benefits provided by a private employer-sponsored plan. Retired, same-sex spouses of most federal, state and local government employees are also required to receive equal treatment under federal law. Make sure that you carefully review your plan’s summary plan description (SPD) document to see if these provisions are included; you can also contact an attorney with expertise in employee benefits law if you have questions about your plan.

It is also important to make sure that the beneficiary designations on your IRA are current, even if your spouse is already listed as the beneficiary of the account. If you want your spouse to benefit from special rules that apply only to spousal-inherited IRAs, then he or she must be listed as a “spousal beneficiary” on your account. Spouses are eligible for special rollover provisions that typically aren’t available to other types of beneficiaries, such as children or other relatives, so it’s important to make sure your spouse’s status is designated accordingly.

3. And while you’re at it, review your health insurance policies.

With the Supreme Court’s ruling, most employer-sponsored medical plans that offer coverage via an insurance company (also known as “fully-insured health plans”) can no longer deny coverage to same-sex spouses. Review your policies to ensure that you are taking full advantage of the coverage available to spouses.

4. Consult your tax professional regarding the various income, gift and estate tax implications of your new legal status as “fully married” under state and federal laws.

Starting with tax year 2013, the IRS has required married same-sex couples to file their federal income tax returns as “married.” Prior to the Obergefell v. Hodges ruling, many state laws barred married same-sex couples from filing as “married,” whether jointly or separately, on their state income tax returns. Now, a same-sex couple that is currently married (or plans to get married) must file both federal and state income tax returns as “married”, whether jointly or separately. Aside from this new requirement, keep in mind that the “single” and “head of household” filing statuses might no longer apply to your state (or federal) income tax returns.

Same-sex spouses are also eligible to make unlimited gifts to one another without worrying about paying federal or state gift taxes. This is an important change in the law, one that has the potential to save you thousands of dollars in taxes, in a myriad of ways.1

Same-sex spouses can transfer property to one another without paying estate taxes, in the event that one of them passes away.2 They also have the right to inherit property under state intestacy laws, which apply when a deceased spouse does not have a valid will in place. Importantly, a surviving spouse in a same-sex marriage can now add a deceased spouse’s unused estate tax exclusion amount (the limit is $5.43 million for 20163) to his or her own unused exclusion amount at the time of death.4 Again, this provision gives same-sex couples the ability to save thousands of dollars in estate taxes; it’s important that you speak with your tax professional to see if you and your spouse can benefit.

5. Update your estate planning documents.

This is also a good time for you to update your will, trust, power-of-attorney forms and other estate planning documents, or get these documents in place, if you haven’t done so already.

Thanks to the Supreme Court’s historic ruling in Obergefell v. Hodges, same-sex married couples are now entitled to equal protection under the laws of every state. To ensure that you take full advantage of these and other protections, as well as the resulting, broad range of benefits, we recommend that you work with an experienced and qualified financial advisor to guide you in careful planning.

 

Need help navigating the planning process?

 

Hewins Financial Advisors, LLC d/b/a Wipfli Hewins Investment Advisors, LLC (“Hewins”) is an investment advisor registered with the U.S. Securities and Exchange Commission (SEC) under the Investment Advisers Act of 1940. Hewins is a proud affiliate of Wipfli LLP. Information pertaining to Hewins’ advisory operations, services and fees is set forth in Hewins’ current Form ADV Part 2A brochure, copies of which are available upon request at no cost or at www.adviserinfo.sec.gov. The views expressed by the author are the author’s alone and do not necessarily represent the views of Hewins or its affiliates. The information contained in any third-party resource cited herein is not owned or controlled by Hewins, and Hewins does not guarantee the accuracy or reliability of any information that may be found in such resources. Links to any third-party resource are provided as a courtesy for reference only and are not intended to be, and do not act as, an endorsement by Hewins of the third party or any of its content or use of its content. The standard information provided in this blog is for general purposes only and should not be construed as, or used as a substitute for, financial, investment or other professional advice. If you have questions regarding your financial situation, you should consult your financial planner, investment advisor, attorney or other professional. Hewins does not provide tax, accounting or legal services.
Paola Ramos
Paola Ramos

CFP® | Financial Advisor

Paola Ramos is a Financial Advisor based in the Bay Area. Paola focuses on personal financial planning, retirement planning and Social Security planning strategies for women, same-sex couples and small business owners. She also has a background in environmental advocacy and specializes in planning issues and strategies for nonprofits.

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Financial Planning for Same-Sex Couples: A Quick Checklist

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