The recent U.S. Supreme Court rulings have stirred up the LGBT community like never before. Many same-sex couples have already made a mad dash to City Hall, anxious to claim their rights to marriage and equal treatment under federal law. Others are unclear on what the changes mean for them, or are confused by the options they now have for legalizing their relationships. Decisions that should be carefully thought out are being made in haste, or not at all.
Careful estate planning has always been vital for same-sex couples who are in a long-term relationship or registered domestic partnership, and even for those few who were legally married. Special protections were required for these various relationships; for assets and health care; and to avoid tax complications and other issues that were often different from those of straight married couples.
With the repeal of Section 3 of the Defense of Marriage Act (DOMA), suddenly, in California and the 12 other states and District of Columbia that now permit same-sex marriage, these couples have acquired rights to more than 1,100 federal benefits and programs that were not available to them before. Many of the programs offer essential protections as well as obligations that can alter their lives.
Social security retirement and veterans’ survivor benefits will offer new sources of income and maintenance of quality of life. A foreign-born spouse can now be sponsored for citizenship. There is the option to file joint income taxes and roll-over a deceased spouse’s qualified retirement account. Spouses can benefit from the unlimited marital deduction from federal gift and estate taxes. These and many other benefits will now give same-sex marriages a solid foundation of rights that were never available before.
It is easy to see why so many people are jumping into marriage as soon as they can.
The right to marry is finally settled in California, and the lure of all those federal benefits is exciting. But same-sex marriage is not a one-size-fits-all proposition. There are consequences and obligations that come with the marriage license and the effects can be widely different depending on each couple’s situation. I find that many, perhaps most, of my clients don’t understand what marriage will really means to them.
For example, California is a community property state for all married couples. What does that mean? Essentially, an asset of mine is automatically an asset of yours. And a debt of mine is a debt of yours. Community property is a whole new mind-set when it comes to finances. In another example, health care benefits under MediCal (the federal-state Medicaid program that pays for some or all of the medical care of chronically ill people) can possibly be terminated if the recipient marries. It is likely that the new spouse’s income must be considered as available to that person, taking him or her above the qualifying income level and out of the program. A third example is joint filing of income taxes. Couples can’t be sure whether that will be a positive or a negative thing until they run all the figures.
It is vital that couples consult their estate planning attorney, financial advisor and tax planner before marriage. Current estate plans, such as trusts and wills, need a careful review. There will likely be many changes needed. Pre-marital or post-marital agreements are very important for making a new marriage solid. Joint and separate assets should also be examined carefully to maintain the best financial position for each partner or spouse. And tax issues should be clearly identified before rushing off to marry. Once these steps are taken, the marriage question will be much easier to answer.
This article is part of an ongoing series of articles pertaining to legal issues relevant to the LGBT community, and is intended for general information purposes only – not legal advice. Christopher Heritage is an attorney in Palm Springs, and San Diego, Calif., who focuses on LGBT estate planning, domestic partnerships, same-sex marriage, probate, trust administration, and bankruptcy. He welcomes questions and comments, and can be contacted at 888.974.3748, or by email: chris@heritagelegal.com
