DENVER -- Want to be an expert in financial planning for same-gender couples?
Get ready to navigate a complex, ever-changing landscape, said Jim Casey, the founder, president and chief executive of Integrated Wealth Management of Newport Beach and Palm Springs, Calif.
He spoke Wednesday at a session titled "Financial Planning for Same-Sex Couples: What's Changed a Year After the DOMA Ruling," at the Schwab Impact conference here.
Same-sex married couples are now entitled to receive more than 1,100 federal benefits and rights, Casey said. "That's a lot of money," he said.
The availability of those benefits, however, depends on how individual government agencies view the technical legality of same-sex marriage.
"Even though Section 3 of the Defense of Marriage Act has been ruled unconstitutional, there is still a lot of gray area, especially for couples who live in places that don't recognize same-sex marriages," Casey said.
"Not only do different states either recognize or not recognize same-sex marriages, but different government agencies interpret rules differently," he said.
"One agency might use a couple's state of residence to determine benefit eligibility," Casey said. "Another agency might use the same couple's state of celebration to determine benefit eligibility status."
As a result, a couple might live in Atlanta but get married in San Francisco, because California recognizes same-sex marriage and Georgia doesn't, Casey said.
After they return home, the Internal Revenue Service is happy to let them file as married people and even allows them to amend their 2011, 2012 and 2013 tax returns. The Department of Defense offers both spouses military benefits, and the Immigration and Customs Department considers them married for the purposes of immigration and visa status.
But if one spouse later falls ill, the other may be unable to use the Family Medical Leave Act to take a protected leave of absence from work, because FMLA rules respect the law of the state where the couple lives. Medicaid eligibility goes by place of celebration, so California's law applies, but states that don't recognize the marriages of same-sex couples may use the rules of the state of domicile, if they choose.
Our imaginary couple might be eligible for Medicaid. Or maybe not. If the couple moves to another state, whether it is for personal or financial reasons, their benefits eligibility may or may not change again.
Confused yet? So are same-sex couples and their planners. "This stuff changes every day of the week," Casey said.
In order to do good work for same-sex couples, he said that planners need to ask themselves:
- Is the couple legally married? Civil unions and domestic partnerships don't carry the same federal benefits.
- Does the state in which they live recognize their marriage?
- From which government agencies do they hope to claim benefits?
- Do those agencies follow the rules of the state where the couple lives or the state where the couple married?
Along the way, planners and their clients will need to think carefully about DOMA's effect on multiple parts of their financial lives, Casey said.
Investments. Before DOMA, same-sex couples had separate brokerage accounts, and transferring assets could mean gift-tax consequences. After DOMA, couples can merge accounts without paying federal tax, but may still have state tax liability.
Estate planning. Before DOMA, estate planning for same-sex couples involved multiple layers of documentation and life insurance policies designed to pay estate taxes. After DOMA, the same couples benefit from the federal unlimited marital deduction, but state tax situations vary.
Taxes. Pre-DOMA, same-sex couples filed separate federal returns but sometimes created a ghost federal return to file with state taxes in a state of residence that recognized same-sex marriage. Now the same couples must consider whether to file jointly or singly and may have to file separate state tax returns as single people in states that don't recognize their legal unions.
Real estate. DOMA has changed the landscape of real estate taxes, cost basis and refinancing for married same-sex couples.
Retirement planning. Before DOMA, same-sex married couples had no Social Security spousal benefits or continuance, and medical spouse impoverishment was a non-issue. Retirement plans had to be transferred into a beneficiary individual retirement account to keep their tax status and were subject to required minimum distributions.
After DOMA, same-sex married couples have the Medicaid community spouse allowance, a continuance of spousal Social Security benefits, and spousal IRA and Employee Retirement Income Security Act of 1974 rules.
Casey suggested website sources that planners can consult for up-to-date information about rules for same-sex married couples: SageUSA.org, freedomtomarry.org, lambdalegal.org, glad.org/DOMA, and Nolo.com.
"You can't just get good at this once," he said. "It's a moving target."
- Advisor Opportunity: LGBT Planning Expertise
- Big Opportunity for Many Advisors & Clients After Gay Marriage Rulings
- Same-Sex Couples Unaware of Financial Rights: Wells Fargo