This summers historic Supreme Court decision, Obergefell v. Hodges, affirmed a constitutional right to same-sex marriage in all 50 states, opening up tax, estate planning and employee benefits opportunities for couples in the 13 states that have not permitted same-sex marriage. For one, same-sex married couples may be able to claim state income tax refunds. They no longer have to worry about state estate taxes at the death of the first spouse. And they may save on health insurance at work.
Forbes responded to the recent Supreme Court ruling with a very thorough article titled “Tax, Estate Planning, Benefits Opportunities After Supreme Court's Same-Sex Marriage Decision” that describes its effect and the ramifications. Here are a few of the important changes that the Obergefell decision will have on tax and estate planning:
Income Taxes. Married same-sex couples will now be able to file joint state income tax returns. This usually means lower taxes than for two people filing individual returns. The article notes that the changes apply retroactively to open year tax returns. As a result, those couples who were married out-of-state should file for refunds for past years.
Gifts. One notable benefit of married status is that an individual can make unlimited gifts to their spouse without any federal or state gift tax liability. There are no federal gift tax bills now for same-sex couples buying a house. Now if they purchase a home together, even if each contributes a different amount towards the purchase price, they own the home jointly without gift tax issues.
Estate Planning. The Supreme Court’s decision means that same-sex couples can make use of the spousal exclusion in their estate planning. This lets spouses leave one another property without paying estate taxes when the first spouse passes away. A ruling last year gave the federal right to same-sex couples, and last week’s case extended it to the state level. Intestacy laws also now apply to married same-sex couples: they will be able to inherit property in the event that a spouse dies without a will.
Divorce. There are now no issues of support rights with same-sex marriages recognized. Also, where same-sex couples can get divorced isn’t an issue, as every state will grant a same-sex divorce.
IRA rollovers. The article advises to check IRA beneficiary designation forms, because when a spouse inherits an IRA, there’s a special exception that permits a surviving spouse to immediately take distributions until age 70½. This will stretch out the tax deferred payments over the surviving spouse’s lifetime and reduce federal and state income taxes.
One of the main goals of our law practice is to help families like yours plan for the safe, successful transfer of wealth to the next generation. Call our office today to schedule a time for us to sit down and talk about your estate plan, where we can identify the best strategies for you and your family to ensure your legacy of love and financial security. Our office is located in Santa Ana, CA but we serve all of California including Irvine, Orange, Tustin, Newport Beach, and Anaheim.
Reference: Forbes (June 26, 2015) “Tax, Estate Planning, Benefits Opportunities After Supreme Court's Same-Sex Marriage Decision”