Money Advice for Same-Sex Couples After Court Ruling

Today’s Supreme Court ruling making same-sex marriages legal in all 50 states — Obergefell v. Hodges — has major financial implications for LGBT couples. The Court held that same-sex married couples are entitled to equal protection under the laws and that their marriages must be recognized nationwide.

Here are the most significant impacts for same-sex married couples:

Since state laws banning same-sex marriage are effectively invalidated, same-sex spouses will now enjoy all state tax benefits and other spousal benefits that other couples enjoy.

These include:

• The ability to file taxes jointly as a married couple (typically, the more a couple’s incomes differ from each other, the more they gain by filing jointly)
• The married couple’s state estate tax exemption (where applicable)
• The ability to access Social Security spousal and survivor benefits no matter where they live when they file (a recent analysis by Financial Engines estimated that a same-sex married couple could get $20,000 to $250,000 extra in lifetime benefits from Social Security that they couldn’t get as single filers).
• Spousal survivorship rights under state pension or other retirement benefits, even in states that previously didn’t recognize same-sex marriage
• Spousal inheritance through intestacy (when a spouse dies without a valid will or trust);
• Spousal priority in matters concerning an incapacitated spouse’s care, or recognition in the event guardianship or conservatorship proceedings are necessary
• Spousal identity or priority in the event will or trust proceedings are contested after death
• Any other spousal contract right where the contract is construed under the laws of a state that did not recognize the marriage
• Adoption and child custody proceedings, even in states that didn’t recognize two persons of the same gender as a child’s parents

They will also follow state rules for divorce proceedings and separation agreements.

Same-sex couples absolutely should still proactively plan, however, taking control of their will and trust planning and clearly setting forth their wishes in enforceable legal documents.

Specifically, they should:

• Express their wishes concerning their medical care during periods of incapacity, through durable powers of attorney
• Structure the distribution of their property — ideally in protective trusts — for the benefit of their surviving spouse and children after death
• Establish trusts to preserve privacy and to avoid the delay and expense of guardianship or probate proceedings during incapacity and after death
• Provide legal mechanisms that allow flexibility in administering those trusts to account for changes in the law or in beneficiary circumstances after death
• Provide clarity and discretion to a trustee to make strategic tax decisions through trust administration after death (through various investment powers, and accounting and tax provisions)
• Provide for family members other than a spouse or child through their estate plans
• Make gifts to religious or other charitable organizations through their estates
• Allow orderly operation and transition of businesses or professional practices through incapacity or death

The Obergefell decision likely represents the last word on same-sex marriage, elevating these relationships to equal stature with other marriages. But even though same-sex married couples are now entitled to equal protection under the laws of every state, the efficacy of those laws in ensuring dignity in disability and death and orderly and structured distribution of property after death is very limited for all couples.

Families (same-sex and otherwise) should always take control of their planning and leave as little to state law interpretation as possible. That is best done through careful planning with experienced professionals who can intelligently guide the family through the process.