Financial Planning for Same-Sex Couples

Aug 26, 2013

MoneyLife100 In June 2013, the U.S. Supreme Court declared the Defense of Marriage Act unconstitutional, a decision that has sweeping financial implications for same-sex couples who were married in states that recognize same-sex marriage. According to financial experts at the Pennsylvania Institute of Certified Public Accountants, these couples should consider both the immediate and long-term impact of the ruling. Here are some of the questions they should be asking. 

Should Couples File Amended Tax Returns? 

Although tax season is long past, same-sex couples should locate copies of the returns they've filed since they've been married. Because their unions are now recognized under federal law, same-sex couples who qualify are eligible for deductions and credits available to all married couples. If a joint return would have meant a lower tax bite in years that are still open under the statute of limitations, they may want to consider filing amended returns for those years to collect a refund. 

Is There Any Impact on State Tax Returns? 

The answer depends on where a couple lives or if they've moved since being married. For example, if a same-sex couple marries in one state but lives in another that does not recognize same-sex marriage, then they will likely be able to file joint federal returns but will have to continue filing separate state tax returns. However, official resolution is still pending on the tax treatment of same-sex couples who marry in a state that allows it but move to a state that doesn't. In Pennsylvania, same sex-marriage is not currently recognized, but Sen. Daylin Leach (D-Montgomery) introduced SB 719 to provide for same-sex marriage and repeal the ban. Rep. Brian Sims (D-Philadelphia) has circulated a co-sponsorship memo seeking support for legislation that would do the same. 

How Does This Change Estate Planning? 

An estate tax issue was actually the impetus for the Supreme Court case, so this should be a key consideration for couples. Surviving same-sex spouses were not previously allowed the right to take advantage of the estate tax exemption that applies to married couples. Since same-sex marriages are now recognized under federal law, surviving spouses do not have to pay estate tax on the first $5.25 million that they inherit from a spouse. Couples who had previously set up trusts to minimize the taxes paid by a surviving spouse may now want to examine whether those trusts are still necessary or update them in light of the ruling. Keep in mind that pensions and retirement savings also are no longer subject to an inheritance tax when passed to a surviving same-sex spouse, and that same-sex couples now qualify for certain Social Security benefits that were not previously available to them. Same-sex couples will also be able to take advantage of gift tax rules that make it possible for married couples to pass assets to each other without being taxed on the exchange. 

 Is Health Care Coverage Involved? 

This is a good time to review your health coverage choices. For many same-sex couples, spouse coverage under an employer’s health plan was previously a taxable benefit, which may have meant they chose the least expensive option to minimize the tax bill. If you no longer have to pay taxes on that coverage because of the ruling, you may want to reconsider which coverage is best. Any Other Steps to Take? Same-sex couples may want to consider making or revising their wills, adding their spouses as beneficiaries to life insurance or retirement plans, as well as adding each other’s names to accounts, mortgages, or leases, as appropriate.  

Turn to Your Local CPA 

You can rely on your local CPA for answers to all your financial questions. He or she can provide the advice you need to make important financial decisions. To find a CPA in Pennsylvania by location or area of expertise, ask your family and friends for recommendations or use PICPA's CPA Locator.

About PICPA

The Pennsylvania Institute of Certified Public Accountants (PICPA) is a premiere statewide association of more than 22,000 members working in public accounting, industry, government, and education. Founded in 1897, the PICPA is the second-oldest state CPA organization in the United States.

Money & Life Tips are a joint effort of the AICPA and the Pennsylvania Institute of Certified Public Accountants (PICPA), as part of the profession’s nationwide 360 Degrees of Financial Literacy program.


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