Monday, June 29, 2015

Federal And State Tax And Estate Planning Benefits Now Extended To Same Sex Couples

Here is a brief summary of some of the tax and estate planning benefits now available to same sex couples in all states.

Income taxes. Married same-sex couples can now file joint state income tax returns, which typically leads to a lower tax liability than filing two individual returns. This applies retroactively to open year tax returns, so couples who were married out-of-state should file for refunds for past years. And going forward, including for 2014 on extension, same-sex couples should consider filing joint returns.

Gifting. A big advantage of married status is that you can make unlimited gifts to your spouse without worrying about federal or state gift taxes. This will help same-sex couples who have been stuck with federal gift tax bills when they’ve bought a house. Now if a same-sex couple buys a house together, even if they put in different amounts towards the purchase price, they can have joint 50-50 ownership of the house with no gift tax consequences.

Estate planning. The spousal exclusion is a basic estate planning principle that allows spouses to leave one another property without paying estate taxes at the first death. The Supreme Court in Windsor extended that federal right to same-sex couples. Now Obergefell extends that spousal exclusion right at the state level. Married same-sex couples will also have the right to inherit property under a state’s intestacy statute that kicks in if there’s no will. The issue of where same-sex couples can get a divorce is now off the table. Until now, couples who wanted a divorce didn’t necessarily have access in their own states to bring a divorce action. Now there’s a fundamental right to a divorce in every state, Pearl says. That will help spouses fighting for support rights.

Divorce. The issue of where same-sex couples can get a divorce is now off the table. Until now, couples who wanted a divorce didn’t necessarily have access in their own states to bring a divorce action. Now there’s a fundamental right to a divorce in every state, Pearl says. That will help spouses fighting for support rights.

IRA rollovers. Same-sex couples who marry now that’s it’s allowed in all states should double check their IRA beneficiary designation forms. If a spouse inherits an Individual Retirement Account, there’s a special spousal rollover provision that lets a surviving spouse delay taking distributions until age 70.5 and stretch out tax deferred payments over the survivor’s lifetime. That saves federal and state income taxes.

Hospital visits. Something as basic as the right to visit a spouse in a hospital is now certain for same-sex married couples—whether they are at home or traveling out-of-state.

Health benefits. In states that denied same-sex marriage, fully-insured medical plans could deny coverage to same-sex spouses. Now fully-insured medical plans will likely now be required to cover same-sex spouses. Self-insured medical plans can arguably continue to exclude same-sex spouses from coverage, but would be at risk of challenges under sex discrimination laws, says Todd Solomon, an employee benefits lawyer at McDermott Will & Emery in Chicago. And same-sex couples should get a tax break everyone else enjoys: Same-sex spousal health benefits will no longer be taxed at the state level.

Sourced From Forbes Magazine

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