2/8/2013 1:45 PM ET|
Gay marriage can muddle finances
Although some states now allow same-sex marriage, the federal government does not recognize it, and that complicates things.
Valentine's Day is for love, couples and proposals. Now that voters in three more states (Maine, Maryland and Washington) have legalized same-sex unions, more gay partners likely will be popping the question on Feb. 14.
David Rae and Ryne Meadors of Los Angeles have their rings picked out and are planning a summer 2014 wedding. But even if the state of California would grant the same-sex couple a license to get married, they wouldn't get one -- at least not now.
"People are assuming that if they get married they'll have all these benefits because … the opposite-sex couples they know have them," said Rae, a certified financial planner and vice president of investments for Trilogy Financial Services in Los Angeles. "But the majority of the benefits are on the federal level."
Joshua Hatfield Charles, who helps represent the Certified Financial Planner Board of Standards, disagrees. He married his partner, Dixon Charles, in Connecticut four years ago, and the pair plan to remarry on Feb. 16, now that their home state of Maryland is issuing same-sex marriage licenses.
"The protections are fabulous," said Charles, adding that marriage offers significant legal and contractual benefits. "Relationship recognition -- that's huge."
But marrying can pose financial disadvantages for same-sex couples. That's largely because the federal government doesn't recognize such marriages, even though eight states (Connecticut, Iowa, Maine, Maryland, Massachusetts, New Hampshire, New York, Vermont and Washington) and Washington, D.C., issue marriage licenses to same-sex couples, and several others acknowledge civil unions or domestic partnerships.
Should that keep you from saying "I do"? Not necessarily, but you should know what you're getting into.
At a minimum, you'll be filing multiple tax returns: as single filers for federal returns, and marrieds filing jointly at the state level. State tax returns often depend on federal figures, so a "dummy" federal return has to be created (although it won't be filed). All that work can double your tax preparation costs, Rae said.
You may owe more taxes as well, particularly if you're both big earners. On the state level, you could push yourselves into a higher tax bracket or wind up losing deductions that phase out at higher incomes. At a minimum, you should talk to a tax professional before you make a decision.
Two big benefits of legal marriage involve hospital visitation and estate planning. Spouses married in states that issue licenses to same-sex couples have automatic inheritance and visitation rights. Otherwise, same-sex couples have to craft legal agreements, which could be upended by other relatives if courts deem those relatives to have superior legal standing, Charles said.
According to Stuart Armstrong of Centinel Financial Group in Needham Heights, Mass., "Visitation rules while hospitalized and the right to make medical and financial decisions would be strengthened in states where marriage is recognized, particularly in the absence of documents indicating those designations." Couples still need to be careful when traveling to states that don't recognize gay marriage, so creating powers of attorney and medical care directives can be a wise backup.
Additionally, several states where gay marriage is legal levy estate and/or inheritance taxes on assets bequeathed to heirs but allow unlimited amounts to pass to spouses tax-free. Since Maryland, for example, levies taxes on estates worth more than $1 million, plus an inheritance tax of 10%, marriage there has significant potential tax benefits, Charles said.
However, the "unlimited spousal exemption" that protects married people from estate taxes doesn't extend to same-sex marrieds on the federal level.
"I can call him my spouse, but the IRS doesn't care," Rae said.
That's just one of the 1,138 rights, obligations, protections and privileges of marriage identified by the Government Accountability Office in 2004 that don't apply to same-sex couples.
Unlike opposite-sex married couples, gay marrieds also can't:
- claim Social Security benefits based on a spouse's working record.
- fund an IRA or Roth IRA for a nonworking spouse.
- split a retirement fund or other assets without potential tax bills if they divorce.
- exempt health care benefits for a spouse from their federal income.
Planner Sheryl Garrett recounts the story of a couple who were delighted when one partner's company added health care insurance for domestic partners. The other half of the couple was self-employed, so getting reasonably priced health insurance was tough.
"They were thrilled right up until they got the W-2," said Garrett, a CFP who authored a book on same-sex finances. The tax form showed the partner's health insurance was a taxable benefit, she said. "They had a little over $3,000 in additional tax liability."
These differences could melt away if the U.S. Supreme Court affirms a fundamental right to same-sex marriage. The court is currently considering two cases that argue the issue, including one that challenges the Defense of Marriage Act, the 1996 federal law that defines marriage as a legal union between one man and one woman.
"Personally, I don't think there's enough benefit until (same-sex marriage) is federally recognized," said Garrett, who lives in Kansas with her partner and their daughter. "But I'm really happy that people are going forward and taking advantage of their right where they can. Without that, a lot of people may not recognize this is something folks want."
The financial planners all encourage same-sex couples to consult with certified financial planners who are familiar with these issues. (There's even a certification for Accredited Domestic Partnership Advisor, or ADPA.) The planners also recognize that some will want to marry regardless of any potential downsides.
"To a lot of people, it's a huge thing," Garrett said. "It's not just a financial thing."
Join the conversation and send in your financial questions on my Facebook fan page at https://www.facebook.com/asklizweston.
Liz Weston is the Web's most-read personal-finance writer. She is the author of several books, most recently "The 10 Commandments of Money: Survive and Thrive in the New Economy" (find it on Bing). Weston's award-winning columns appear every Monday and Thursday, exclusively on MSN Money. Join the conversation and send in your financial questions on Liz Weston's Facebook fan page.
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Paying less depends on how you file your taxes in the first place....Married or not. I also depends on how many deductions your allowed not only on your taxes, but on your W-2.
Same sex marriage has a lot more to do with love for another person than money in the first place, although money and taxes should also be a consideration no mater what (Straight or Gay).
A marriage license is no more th****gal contract anyway.
I don't know why the heterosexual community is so focused on us gays, when more than 50% of their marriages end in divorce.....Seems to me you would want to find out the reasons why your marriages & relationships are failing before condemning ours.
Regardless of the ceremony or who performs it, whether the government or a religious sect, the marriage is only valid if the couple then engage in sexual intercourse -- this is called consumation of the marriage. No court or church (don't know about jews, buddists, islamites,or other sects) will consider the marriage valid unless it is consummated. Look up annul and divorce with regards to marriages.
Same sex couples cannot engage in sexual intercourse -- they can do an*l or oral or rubbing against or kissing or sodomize each other, but they cannot do sexual intercourse -- at least with each other. Hence, there just doesn't seem worthwhile for same sex couples to marry because they cannot consumate the marriage. Any attempt to claim validity of a same-sex marriage fails by definition, because an unconsumated marriage is invalid on its face.
JUST TELL OBAMA - AND HE'LL FIX IT!!
Sorry LIz, but ever since you recommended that married women start hiding money from their husbands if they suspect a divorce is in the future (HIGHLY ILLEGAL ADVICE THERE........would you support men doing that?) I can't support any financial article you write.
Why do gay people feel the need to join straight people in discriminating against single people? Single people are the ones that are really discriminated against. A person is a person, and their relationship status should never be considered by the government.
Each and every one of you against same sex marriage are talking about your own family. Someone somewhere in your family is gay, and probably will have to live their lives unhappy and a lie. Never being able to commit to the one person they really love and loves them. Marriage is two people vowing to take care of each other in sickness and in health. It's not a choice it's how God mades us. He approves!! The United States of America says everyone is created equal. Since when did the word EVERYONE give a defination of only one man and one woman. You have the freedom to do as your heart wants, why can't I?? I"m not asking you to marry me, as a matter of fact, I would never want you to, you all are close minded and selfish and have no idea what it means to be gay, to want to take care of who you love...so please, just stay out of my business, and let me be happpy.
Remember Sodom & Gomorrah.
Who have eyes to see...let them see, who have ears to hear...let them hear.
The trumpet has sounded!!
Liz,...what you wannabe reporter/journalists call "gay marriage", we NORMAL folk call "FILTH & PERVERSION".
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