Law Offices of Thomas Sciacca, PLLC, and a longtime SAGE volunteer and supporter. In the wake of the Supreme Court decisions on the Defense of Marriage Act (DOMA) and Proposition 8, many same-sex couples are wondering how the law will impact them. Tom offers insights on the decisions, and five points for couples to consider in an article originally posted on SAGE’s National Resource Center on LGBT Aging. Below is an excerpt from the article; read the full piece here. Note: While these tips are aimed at New Yorkers, the main points here apply to older same-sex couples in other states where marriage equality has passed.
On June 26, 2013, the United States Supreme Court ruled that Section 3 of the so-called Defense of Marriage Act (DOMA) violated the Equal Protection Clause of the United States Constitution. In ruling for the basic equality and dignity of all people, the Court held that the Federal government could not lawfully discriminate against same-sex married couples by declining to provide them with the same rights Federal law affords to opposite-sex married couples.
[T]he Court’s recent decisions are certainly cause for celebration. However, the savvy reader may inquire—how does this decision affect the legal affairs of the legally-married LGBT New Yorker? To respond to that, I humbly offer five legal tips that should help start an informed conversation between you and your attorney, financial advisor, and tax preparer:
1. If you haven’t already done so, now is the time to consider getting married. Under the yoke of DOMA, LGBT married couples faced a level of discriminatory hurdles while interacting with the Federal government. New York State recognized their marriages and afforded them all available rights, while the Federal government regarded them differently. With the Supreme Court ruling Section 3 of DOMA unconstitutional, much of the disparate treatment has fallen by the wayside.
2. Same-sex couples can now file joint Federal income tax returns. Here is something you never had before—a reason to get excited when filing your 1040! Since 2011, New York’s same-sex married couples could file a joint NYS income tax return, but not a joint Federal income tax return. Often, this resulted in couples preparing two sets of tax returns listing different marital status on each, with all the resulting frustration and cost. Effective immediately same-sex married couples can file a single return, or, if it is to their financial benefit, file as “married filing separately.” Couples should also review their previous Federal income tax returns (since their marriage)—it may be in their interest to file amended Federal income tax returns if it will result in a larger refund. Additionally, a surviving spouse may wish to file an amended Federal estate tax return if it will produce a refund.
3. Be wary when traveling or relocating to a state that does not recognize marriage equality. As mentioned above, the Supreme Court only invalidated Section 3 of DOMA, which regulates Federal recognition of valid same-sex marriages. It did not invalidate Section 2, which allows states to not recognize your marriage, and, essentially, deny you with all of the rights of a married couple. Think twice before moving to a state that bans same-sex marriage, and, if you do, consult your attorney to make sure you have a Will, Power of Attorney, Health Care Proxy, and Living Will in place to protect your legal status. Sometimes, the lost civil liberties greatly outweigh the lower taxes or nicer weather.
4. Check beneficiaries on retirement accounts. A Federal law known as ERISA governs all retirement accounts, including most 401(k), 403(b), SEP, SIMPLE, and IRA programs. This law requires that your spouse inherit a minimum of half of the qualified retirement account, unless he or she consents to an alternate distribution by signing the beneficiary designation form before a Notary Public. Often, people choose to name non-spouse beneficiaries (younger relatives, charities, etc.) on these accounts because of the significant tax advantages offered by such a designation. If those are your wishes, make sure your spouse signs the consent. In the past, this was not necessary, as DOMA prevented the Federal government from recognizing all same-sex relationships. A simple check on the form will save hassle/aggravation later.
5. Review your Wills. In general, one should review his or her Will (and other estate planning documents) every 2-3 years. Under New York law, a subsequent marriage may automatically revoke some or all of an existing Will. In general, a Will that lists an individual by name is more effective than one that lists an individual by relationship (such as “to my domestic partner”—especially if that person is now a spouse). Spend a few minutes reviewing these documents, and speak to your attorney about whether or not they still reflect your wishes fully. Now that same-sex spouses can transfer assets between each other free of estate, gift, and generation-skipping transfer tax, now may also be a good time to review the tax planning in those documents to ensure you can take advantage of all available rules.
Of course, these tips are not a substitute for a meeting with the appropriate professional, who can tailor his or her advice to your specific needs.
And remember—it is a time to celebrate!