What Individuals and Employers Need to Know about Same-Sex Marriage Ruling by Edward N. Cooper, CPA
Posted on August 06, 2015 by
The recent Supreme Court ruling legalizing same-sex marriage brings with it far-reaching economic implications to lesbian, gay, bisexual and transgender (LGBT) couples and the businesses that employ them.
In the wake of the Court’s decision, all 50 states and the District of Columbia must now recognize same-sex marriages and provide to same-sex couples the same rights and privileges they provide to marriages between opposite-sex couples. This presents a sea of new opportunities and challenges for same-sex couples blending their lives and finances as well as the businesses that employ them.
Tax and Financial Benefits to Same-Sex Couples
Bringing the rights of LGBT couples in line with those granted to heterosexual couples simplifies a range of tax and financial-planning opportunities, including healthcare, retirement and death benefits. For example, married LGBT couples in all states may now claim spousal benefits for health insurance coverage and Social Security survivor benefits. Similarly, LGBT couples may name their spouses as next of kin and beneficiaries of individual retirement accounts and pass other property onto surviving spouses free of estate taxes. The same exemption will apply to same-sex spouses who may now make unlimited gifts to each other without incurring tax liabilities.
Also on the tax front, since the Court’s 2013 landmark decision in U.S. v. Windsor, same-sex couples married in jurisdictions that sanctioned their marriages have been recognized as legally married on the federal level and, therefore, permitted to file joint federal tax returns. However, because their unions were not recognized in every state, many couples were forced to file separate, individual returns on the state level, often resulting in additional costs of time and money in preparation. With state recognition of same-sex marriage, these couples may now file both federal and state tax returns jointly, when it makes financial sense, regardless of the state in which they were married or currently reside. Moreover, legal recognition of LGBT marriages on the state level means similar recognition of divorce among same-sex couples, which could include requirements of spousal alimony and child support.
With these provisions, LGBT couples should take the time to meet with legal and financial counsel to assess the financial dynamics that their unions will create. In most instances, it will mean that couples will need to review and update wills, estate plans, retirement accounts and insurance policies to take advantage of the benefits now afforded to them and prepare for the resulting tax implications. For example, legal recognition of these marriages may result in increased income and, subsequently, increased taxes, for which advanced planning will help couples minimize tax liabilities. Similarly, the issue of pre-nuptial agreements should become a consideration to protect both parties in case of divorce.
Considerations for Employers
Up until this point, businesses have been navigating through a maze of conflicting federal and state guidelines concerning benefits for LGBT couples. Some employers offered to same-sex couples who could not legally marry “domestic partnership” benefits, which they often extended to opposite couples who lived together. The question now will be whether or not these employers will continue to offer domestic partnership programs or eliminate those benefits all together and instead require same-sex couples to legally wed to enjoy spousal benefits. With LGBT couples’ legal right to marry, employers will have no other choice but to extend spousal benefits to same-sex couples or risk exposure to discrimination lawsuits. Similarly, if employers continue to offer domestic partnership benefits, they will need to consider extending them to all employees or open themselves up to claims of reverse discrimination.
While the June 2015 Supreme Court decision did not specifically address employee benefits it did redefine marriage and domestic partnerships among same-sex couples. As a result, employers will need to begin recognizing and providing benefits to homosexual and heterosexual employees in the same manner.
The LGBT Business and Families practice of Berkowitz Pollack Brant works individuals and same-sex domestic partnerships and married couples to navigate complex tax issues related to financial planning, tax compliance and planning and business ownership in a challenging and changing environment.
About the Author: Edward N. Cooper, CPA, is a director of Tax Services with Berkowitz Pollack Brant where he provides business and tax consulting services to real estate entities, multi-national companies, investment funds and high-net-worth individuals. He can be reached can be reached in the CPA firm’s Ft. Lauderdale office at (954) 712-7000 or via email at firstname.lastname@example.org.