The 2015 Supreme Court ruling that prevents states from banning same-sex marriage and gives same-sex couples the right to legally marry means more certainty from a financial planning and legal perspective. But some questions still remain, including issues of child custody and whether the ruling is retroactive.
That means gay couples planning their nuptials still have some special financial considerations. Below are the marriage benefits — and the uncertainties that exist — that couples should read up on before walking down the aisle.
THE BENEFITS OF MAKING MARRIAGE AVAILABLE TO ALL
Protection if a spouse dies without a will. Let’s be clear: It’s always a good idea to have a will. But if someone dies without one, nearly every state favors a surviving spouse for the purpose of distributing assets.
Decision-making when a spouse is incapacitated. When people can’t make decisions about their finances and health due to injury or illness, family members must ask a court to appoint a conservator or guardian. In this situation, most courts give priority to a spouse.
Paying the marriage penalty — or not. Generally speaking, married couples with two incomes filing jointly pay more in tax than single-income married couples earning the same amount. It’s called the “marriage penalty.” Fortunately, there’s also a “marriage bonus” that enables some couples to pay less tax. A tax professional can help you understand the implications for your situation.
Spousal Social Security benefits. Spouses are able to receive either their own benefit or one-half of their spouse’s benefit, whichever is higher. In addition, the surviving spouse in a marriage can receive survivor benefits based on his or her deceased spouse’s record.
Veteran and military benefits. The Veterans Benefits Administration offers a variety of benefits and services to spouses of service members and veterans who are either deceased or totally and permanently disabled due to their service.
Becoming the automatic beneficiary of a retirement plan. Under the Employee Retirement Income Security Act (ERISA), the spouse must be named beneficiary unless he or she agrees to allow the participant to name a different beneficiary.
IRA contributions beyond the maximum. In a marriage where only one spouse works, the couple can maximize annual individual retirement account (IRA) contributions by opening a spousal IRA, which is a separate IRA opened in the non-working spouse’s name.
Getting covered under a spouse’s health insurance. If one spouse works full time and has company-sponsored health insurance, the other spouse can typically be added to the policy. Such coverage can provide a huge financial benefit.
If there isn’t a will, a surviving spouse is in a better position legally if you're married.
Children. There hasn’t yet been a federal judicial ruling to establish whether both spouses can adopt a child or whether same-sex couples can become foster parents. It’s still handled at a state-by-state level. It’s also not clear what happens in situations in which the marriage falls apart; for instance, can one former spouse deny the other custody and visitation rights?
Retroactive rights. As stated earlier, if there isn’t a will, a surviving spouse is in a better position legally if you're married. But what if a spouse died prior to the ruling? It’s not clear if the ruling should be applied retroactively to allow the surviving same-sex partner the right to inherit property. And what about past state income tax returns? Should same-sex couples amend previously filed returns to change their filing status to married?
Partner benefits. Employer-sponsored benefits for domestic partners are being questioned. Now that same-sex partners can choose to get married, will domestic partner benefits provided by certain employers disappear?
Remember that laws vary among states. In collaboration with tax and legal advisers, a financial professional can help same-sex married couples navigate their options so they can make more informed decisions.