When the euphoria of Friday’s landmark Supreme Court ruling, effectively legalizing same-sex marriage in the U.S., wears off a bit, it will be time for many couples to take a good, hard look at the ramifications on their financial planning, estate planning and tax planning strategies going forward.
For those already living in states that recognize same-sex marriage, the ruling may not result in recognizable changes right off the bat. However, for those in states that previously did not recognize same-sex marriage, or for those who may have been planning to relocate to another state now or in the future, the outcome is likely to be a real game-changer.
Back in 2014, we wrote a piece (http://td-wm.com/blog/was-2013-watershed-year-same-sex-couples) outlining many of the financial effects that could play out as a result of the Supreme Court’s 2013 ruling to strike down the Defense of Marriage Act (DOMA), which, at the time, only applied to federal law. That ruling left in its wake, a patchwork of different laws, relating to a wide array of financial issues from tax filing status to beneficiary designations to gift and estate tax exemptions, just to name a few, depending on the state each couple resided in.
Prior to the ruling, same-sex couples living in one of the 14 states that did not recognize their marriage were routinely forced to file two sets of tax returns. First they would complete their federal return as married, but then would file a ‘dummy’ return as singles so they could complete their state returns. Additionally, couples in these states could not receive spousal benefits for social security, were often denied spousal and survivor benefits for employer-provided retirement and health plans, and many had to deal with potentially major estate-tax implications since they could not inherit all the assets of a deceased spouse tax-free, as ‘traditionally’ married spouses could.
To deal with these different sets of standards, financial advisors, estate planning attorneys and tax professionals were required, in many cases, to cobble together elaborate strategies, just to execute the most basic planning directives for their same-sex couple clients.
Friday’s ruling should put an end to the need for much of this complicated (and costly) planning work, by standardizing the laws across all states for all married couples. Same-sex couples will now be able to take advantage of all the benefits and financial strategies that have been available to married couples for years.
As we have always seen with major cultural changes in the past, there will undoubtedly be saber-rattling and challenges to come from the opponents of this ruling, but it is clearly a win for equality, both socially and economically. And, while it makes perfect sense that those who have waited so long for this day to arrive, might not have tax strategies, financial plans and estate plans, foremost on their minds, once the jubilation has worn off a bit, they would be well advised to revisit those plans to make sure they are taking full advantage of the benefits they now enjoy.
This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor
This article originally appeared on NerdWallet’s Ask an Advisor