Understanding your financial challenges ... first-hand
Navigating the Changing LGBT Financial Landscape
What it all boils down to is marriage equality is now the law of the land. Millions of Americans have been waiting for our nation’s highest court to recognize marriage equality–and it finally has spoken in a 5-4 opinion, issued by Justice Anthony Kennedy. Ever since the tide turned wayward in 2013, when the Court found that the federal government had to recognize same-sex married couples under federal law, case after case signaled toward what seemed an inevitable consensus from coast-to-coast, at least until the Sixth Circuit Court of Appeals issued a decision that proved contrary, setting up a showdown at the Supreme Court.
The decision in Obergefell v. Hodges was announced to the cheers of hundreds who gathered on the steps of the Courthouse. Writing for the majority, Kennedy’s words resonated with the significance of the decision: “It is now clear that the challenged laws burden the liberty of same-sex couples, and it must be further acknowledged that they abridge central precepts of equality. Here the marriage laws enforced by the respondents are in essence unequal: same-sex couples are denied all the benefits afforded to opposite-sex couples and are barred from exercising a fundamental right. Especially against a long history of disapproval of their relationships, this denial to same-sex couples of the right to marry works a grave and continuing harm. The imposition of this disability on gays and lesbians serves to disrespect and subordinate them. And the Equal Protection Clause, like the Due Process Clause, prohibits this unjustified infringement of the fundamental right to marry.”
Who is impacted by the changes?
The Supreme Court's decision on the monumental issue of same-sex marriage has far-reaching implications for same-sex couples — not just emotionally, but financially as well.
Recognizing same-sex marriage unlocks a host of federal benefits for many couple. In 2004, the U.S. Government Accountability Office (GAO) calculated there are more than 1,100 federal provisions affected by marital status. The cost of missing out on these benefits can vary quite a bit, but a 2009 analysis by The New York Times found an unmarried same-sex couple could lose anywhere from $41,000 to $468,000 over their lifetime compared to a similar, married straight couple.
Of these benefits, Social Security is on top of many gay couple’s minds. This benefit pays out more for married couples. Spousal rights are a big deal in retirement planning involving Social Security. Spouses are entitled to 50 percent of a partner's benefit if it's higher than their own and can receive that benefit if they survive their partner.
Being married also makes it easier to officially act as a couple, allowing partners to file taxes jointly, adopt a child, make medical decisions and transfer property.
And it's much easier to extend employer-provided health insurance coverage for a spouse than a domestic partner, until now a domestic partner would have paid taxes on the value of that benefit.
Filing taxes jointly is where things get interesting. In general, married couples pay less in property and estate taxes than domestic partners do and usually have less income tax liability.
But couples with similar income levels could face the so-called marriage penalty — combining their incomes by filing jointly could move them up to a higher tax bracket. That's something same-sex couples had to grapple with last tax season, after the court struck down the Defense of Marriage Act, (DMOA).
Many same-sex couples might feel okay with paying more in taxes and losing out on some government programs that one or both partners have received. However, it would be wise to sit down with a Retirement Income Planner, Financial Planner, CPA or Financial Advisor to weigh those benefits and their effect on the “big picture”, especially if you are 10 or fewer years until retirement and cannot afford to “change course” this late in the planning game.
It is worth noting that some federal programs, including Supplemental Security Income (SSI/SSDI) and Medicaid, calculate eligibility by looking at the combined incomes of both married spouses as well as the assets of both partners in a marriage. Getting married could force some people out of these programs.
From the government's perspective, it is believed that the savings from those programs will more than offset increased benefit payouts if same-sex marriages are recognized.
And many major businesses have long been making the case that national same-sex marriage rights will cut down on red tape and help them retain diverse, talented work-forces.
Mohlman Financial offers independent annuity and life insurance product information to the public, and is not a licensed insurance agent or agency. Nothing on this website is a recommendation to buy or sell an annuity or life insurance product. All website content is for educational purposes only. No product companies have endorsed the reviews on this site, nor is Mohlman Financial compensated for reviews. Mohlman Financial does not rate or endorse any specific product, insurance agent or agency and does not warrant any information on this web site. Mohlman Financial does not provide tax, legal, accounting, fiscal, or investment advice. Mohlman Financial claims no liability for any actions or advice given or decisions made in conjunction with this website or the agents on this website. It is your responsibility to research and consult with a licensed financial service professional about your personal situation before making any financial decisions. The strategies found on this website have been provided for an independent network of licensed insurance agents. We hold no liability for any actions or advice given by these independent licensed insurance agents or decisions made by any client in conjunction with this website or agents on this website.