Over the years, we’ve worked with a number of same sex couples. Many have been together for years, some are married and yet until the recent Supreme Court decision, their plans often differed markedly from plans for heterosexual couples whose marriages were recognized by the state of Georgia. The differences were myriad, but the upshot is that same sex couples were at a distinct disadvantage versus their counterparts whose marriages Georgia did legally recognize. The Supreme Court’s decision will undo most of those disadvantages, and some of the key changes are as follows:
Social Security – social security is a complex system that isn’t just meant to support an individual worker that has paid into the system, but rather to support the worker’s entire family. Prior to the Supreme Court’s decision, the Social Security Administration deferred to the individual state where a couple lived to determine whether or not a couple was married. Thus, spousal and survivor benefits were not available to same sex couples in states like Georgia, and lack of those benefits could result in a loss of hundreds of thousands of dollars over an individual’s lifetime. In fact, it may now be possible to apply for benefits retroactively, which could result in a financial windfall if those benefits are paid.
Taxes – same-sex couples have been eligible to file a joint return for Federal taxes since 2013. However, in states that did not recognize those marriages, couples could not file jointly. As a result, for couples that had filed jointly for their Federal return, it was necessary to create two dummy individual Federal returns so that they could then create individual returns for their state taxes. This will no longer be necessary, so filing taxes will be more straightforward for couples already filing jointly. For couples who haven’t decided whether to marry, or what filing status to choose if they are married, running tax projections can help determine which filing status results in the lowest amount of taxes.
Estate – same-sex couples were often forced to resort to more complex estate plans for two primary reasons. First, if a state did not recognize a couple as married, laws typically gave precedence to family members when assets were distributed from an estate. Even if the deceased spouse had created a will which directed that their assets be distributed to the surviving spouse, disapproving relatives could contest the will. Assuming this wasn’t a potential problem, same sex couples were still at a disadvantage from a tax perspective. Typically, married couples are allowed an unlimited exemption in terms of the value of assets that could be passed to a surviving spouse, which means no estate tax would be due regardless of the value of assets left to the surviving spouse. However, since same sex marriages weren’t recognized, this unlimited exemption wasn’t available. Trusts were often created to address both issues, and while they were generally effective, they added complexity and cost to estate planning.
Employer Benefits – spousal employer benefits – including life insurance and health insurance coverage – should now be extended to couples whose marriages are newly recognized. Along these lines, both the State of Texas and the Veterans Administration announced earlier this week that all benefits would be available to all married couples. One ancillary impact of this change may well be that companies will discontinue extending benefits to domestic partners.
With the Obergefell decision, marriage is marriage. While some states and employers will undoubtedly challenge the decision in an attempt to treat same sex married couples differently, over time we expect to work with fewer and fewer clients for whom this remains an issue and that, to our minds, is progress.