I’m sure you’ve all heard by now that the Supreme Court has decided to hear cases on the Defense Of Marriage Act (DOMA) and Proposition 8. Let’s assume DOMA is ruled unconstitutional and Prop. 8 is overturned. That would mean same-sex couples could legally marry in California and qualify for the 1,100 federal benefits currently received by opposite-sex married couples.
The financial benefits for same-sex married couples are far-reaching. The impact of the Supreme Court’s decision will be seen and felt in areas of taxes, Social Security benefits, pensions and estate planning. These benefits will drastically improve the financial lives of thousands of California same-sex couples if the Supreme Court rules in favor of marriage equality.
Let’s start with income taxes because this area affects all same-sex couples right now. Filing tax returns will become much easier. Couples will no longer need to file individual federal tax returns, and then complete a “dummy” federal joint return so a California joint return can be completed.
Just writing that sentence makes me confused. I can’t imagine how confusing it must be to actually jump through these hoops. After marriage equality is achieved, couples will be able to file one federal joint return and one California joint return.
Some of the other changes in taxes include:
• No more “splitting income” on tax returns
• Health insurance for your partner won’t be a taxable benefit any longer
• A surviving spouse will be able to rollover 401(k)’s and IRA’s of their deceased spouse into their own name allowing them to delay paying taxes until they retire.
The biggest financial benefit same-sex couples will get is the Social Security spousal benefit. This allows a spouse to receive 50 percent of their partner’s Social Security check even if they never worked. While both spouses are living, the retired couple collects 150 percent of the working spouse’s Social Security.
When one partner dies, the surviving spouse receives either their own Social Security benefit or their partner’s, whichever is higher. This will allow more gay and lesbian couples to have one parent stay at home to raise kids without sacrificing their Social Security benefits in retirement.
For pensions, couples will have the peace of mind that they have spousal survivor benefits. A survivor benefit is when a still-living spouse continues to collect their deceased partner’s pension. Many widowers of same-sex couples have already been financially devastated because they don’t have the right to their deceased partner’s pension.
Estate planning is another area that will be impacted by the Supreme Court’s decision. If DOMA is overturned, then a surviving same-sex spouse will no longer have to worry about paying estate taxes or how the assets of their deceased spouse will pass to them. Currently, there are legal hoops couples need to jump through to make sure this happens.
This is probably too much detail for some of you. However, if you are currently in a relationship, have ever been in a relationship, or ever desire to be in a relationship, then you should be following the Supreme Court hearings on the DOMA and Prop. 8 cases.
Their decision will have an enormous impact on your financial life.
Steve Doster is a Certified Financial Planner™ professional providing commission-free financial advice for do-it-yourself investors. You can reach Steve at Doster Financial Planning by phone 619-688-1192 or email steve@dosterfinancialplanning.com. You can also follow Steve on Facebook, Linked In, Twitter, or blog to get more personal finance advice and tips.
