Menashe Morley Group

Money Sense

How Legal Same-Sex Marriage Has Changed LGBT Finances

Posted on December 10, 2016

With marriage rights secured, what’s next? These insights from Merrill Lynch Wealth Management explain what the law does—and does not—mean for same-sex couples.

The June 2015 Supreme Court ruling on marriage equality places all couples on the same footing when it comes to marriage and, as a consequence, to wealth planning and many other issues. Same-sex couples can be legally married in any state and most territories of the country, including the District of Columbia, and a same-sex marriage validly performed in any state or territory must be recognized in all other states and territories.

What it means financially

From a practical financial perspective, married same-sex couples now have access to the same rights and advantages as married opposite-sex couples. The ruling has simplified the way married LGBT couples handle their taxes, purchase their homes, plan for retirement and give their money to charities or loved ones.

Married same-sex couples now must file joint returns (married filing jointly or married filing separately) at both the federal and state levels. However, married couples who file jointly may find themselves in a higher tax bracket now. They could be hit with the so-called marriage penalty, and should carefully review their tax filing status with their tax advisors.

The financial impact of the Supreme Court ruling is overwhelmingly positive. Benefits to same-sex married couples include the marriage tax credit, education tax credits, the ability to take advantage of spousal IRAs, the unlimited federal transfer tax marital deduction and spousal portability of transfer tax exemptions. Where once the home that an LGBT couple owned typically was held in just one partner’s name to avoid gift taxes, now property can be jointly owned without triggering the federal gift tax, regardless of contribution level. Private pension plans in every state must now also recognize the rights of same-sex spouses—even in the event of divorce or death.

Married LGBT couples everywhere are also now eligible for Social Security retirement and death benefits, as well as veterans’ benefits and all benefits under the Family and Medical Leave Act (FMLA).

Spouses in same-sex marriages are now able to inherit from their spouse through state intestacy laws and further inherit property from a spouse without paying any estate or inheritance taxes upon the first spouse’s death; this applies even in those states that impose their own estate or inheritance taxes and that did not previously recognize same-sex marriage. Estate planning, as a result, can be more streamlined. Prior to the ruling, many couples created trusts to ensure that their partners would receive an intended inheritance. That may no longer be necessary, although trusts have other potential advantages, just as they do for opposite-sex couples.

For more information, contact The Menashe Morley Group in the Rancho Santa Fe office at 858-381-8113. The Menashe Morley Group, serving the community for over 30 years: David Menashe is a Senior Vice President and Wealth Management Advisor, Bruce Morley CRPC is a First Vice President and Wealth Management Advisor and John Naviaux CPWA is a Vice President and Wealth Management Advisor for Merrill Lynch, Pierce, Fenner & Smith Incorporated. This article is designed to provide general information about ideas and strategies. It is for discussion purposes only since the availability and effectiveness of any strategy is dependent upon your individual facts and circumstances. Always consult with your independent attorney, tax advisor, investment manager, and insurance agent for final recommendations and before changing or implementing any financial, tax, or estate planning strategy. Merrill Lynch makes available products and services offered by Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”), a registered broker-dealer and member SIPC, and other subsidiaries of Bank of America Corporation (“BofA Corp.”). Bank of America Corporation (“Bank of America”) is a financial holding company that, through its subsidiaries and affiliated companies, provides banking and nonbanking financial services. Investment products: Are Not FDIC Insured, Are Not Bank Guaranteed, and May Lose Value. Equity securities are subject to stock market fluctuations that occur in response to economic and business developments.

© 2016 Bank of America Corporation. All rights reserved. ARB6HJFS

Menashe Morley Group

Menashe Morley Group

Photo Caption: Menashe Morley Group

Photo Credit: Photo by Jennifer Nelson