Same-sex married couples just gained financial security
Same-sex married couples just inherited 1,138 federal rights and responsibilities enjoyed by heterosexual couples.
This comes thanks to the U.S. Supreme Court, which struck down a central feature of the Defense of Marriage Act of 1996 (DOMA), ruling that married same-sex couples are entitled to federal recognition.
Why is this an issue on a website dedicated to pursuing financial security? Because, while this is a civil rights issue, the practical effects of the court's ruling are all about money.
With federal government recognition, same-sex married couples now will have the right to:
— File federal taxes jointly. (Depending on the tax bracket and income of the couple, filing a joint federal tax return can save thousands.)
— Receive property from a deceased spouse without paying federal estate tax.
— Receive a spouse's Social Security benefits.
— Receive pension survivorship benefits.
— Receive veteran and military benefits.
— Use the federal Family and Medical Leave Act (FMLA) to care for a sick or injured spouse.
Same-gender married couples who live in the 13 states that recognize gay marriage (or soon will) get these benefits immediately, or at least as soon as any bureaucratic hassles are resolved.
The decision also lets the Obama administration take executive action to broaden benefits in states where gay marriage is not recognized, though we don't know yet if that will happen.
The issue is murkier for same-gender couples who got married in a state that allows gay marriage but live in a state that does not.
The Supreme Court's decision doesn't mandate same-sex marriage throughout the U.S. It also doesn't force states that don't allow same-gender marriage to recognize marriages conducted in states that do.
If I (a woman) marry my husband in Massachusetts and then move to Mississippi, Mississippi will recognize our marriage. We won't have to get married again or pretend to be single. We could file state taxes jointly. When one of us dies, the other will inherit without paying state estate tax.
But if two women or two men get married in Massachusetts and then move to Mississippi, Mississippi will not recognize their marriages.
From a legal point of view, it will treat them as single.
They won't get to file state taxes jointly, and the survivor could owe state estate taxes when the first spouse dies, depending on the size of the estate. (Laws about taxable estate size vary by state.) The state won't automatically recognize them as each other's next of kin.
Until same-gender marriage is recognized throughout the U.S., same-sex married couples are probably better off living (and owning property) in states that recognize their unions.
Because it's tough to know when you might unexpectedly inherit property in South Carolina, have a car accident during a Florida vacation or otherwise find yourself in an unfriendly jurisdiction, it's also important for same-sex married couples to adopt a policy of over-documenting their wishes around health care and property transfer.
Redundant documents carry weight and reiterate your wishes, making it more difficult for someone to challenge them.
In addition to marrying, same-gender couples should consider creating a domestic partnership agreement, in case they move or otherwise find themselves in a state that doesn't recognize same-sex marriage but does accept domestic partnerships.
You don't want to lose a spouse during the same week you move to Connecticut to look after an ailing grandparent — but it could happen, and a domestic partnership could help protect your rights if it does.
Don't depend on your marriage certificate to ensure that a spouse inherits from you. Make a will, to reduce the chance that some other family member will successfully sue for part of your marital property.
Title real estate as jointly owned, with the right of survivorship. That helps primary homes, vacation homes and investment properties stay with the survivor when the first spouse dies.
You can probably trust a hospital in Minnesota or Mississippi to let one spouse make decisions for the other when the patient is incapacitated.
But, even if you live in a state that recognizes same-sex marriage, you shouldn't assume that this state is where you'll be receiving medical care. Set up a health care proxy, or the equivalent in your state, and you'll worry less when you travel about being allowed to serve as your spouse's medical next of kin.
I think that more states will begin recognizing same-sex marriage, at least in part because they're not keen to lose out on high-asset citizens who want to live where their relationships are recognized and considered just as valid as any heterosexual marriage.
For now, though, there's wisdom in taking the financially conservative approach.