By Ann Dyste, assistant vice president for U.S. Bank Wealth Management
June is Pride month, and all over this country we are experiencing a mix of polarizing emotions – a deep sadness at the recent tragic events of Orlando as well as a feeling of overwhelming accomplishment that the legal right to marriage is a reality. June 26 marked the one year anniversary of Obergefell v. Hodges – the landmark court case that changed everything. We truly have a great deal to celebrate. Above all, LGBTQ couples can celebrate the choice to marry – and although the good news is that our pocketbooks will forever thank us, the crux of the conversation is less gay versus straight and now more about married versus unmarried.
My partner, Angela, and I will marry next month. Like most LGBTQ couples, we have become accustomed to calling one another “partner”, never thinking we’d be able to use the word “wife” in the truest sense of the word. For years, we’d taken care to make sure that no stone was unturned with our joint finances – all beneficiaries, account titling, powers of attorney and other areas were up to snuff. Everything was accessible, at least in the cloud – nothing short of proverbially carrying our legal documents with us wherever we traveled to ensure we had a plan in the event of an accident, or worse, death. In the absence of the legal benefits marriage provides, LGBTQ couples had become accustomed to seeking out advanced estate and insurance techniques to essentially fill the void. Now, a great deal of that uncertainty was taken care of by the Supreme Court decision last year.
Marriage is certainly not for everyone, and more and more Americans are choosing to stay single for a multitude of reasons. For those planning to wed in the near future, LGBTQ couples should begin to understand how marriage affects their pocket books, as well as the implications of entering into what amounts to as a legal contract. Upon marriage, Angela and I will be recognized as spouses, with the following rights and benefits.
- Access to Social Security spousal benefits. If I pass away, Angela can take the higher of my Social Security benefits at full retirement age (this is called the spousal benefit) or her own benefit. This is not possible for unwed couples – same sex or otherwise.
- Tax benefits and savings. Same-sex couples can now elect to file taxes as “married file jointly.” It is recommended that newlyweds conduct a mock tax return to ensure they aren’t paying more taxes than necessary.
- Estate transfer. An estate can now be transferred to a surviving spouse unencumbered, untaxed, and in full upon death. This is arguably the most important reason why marriage might make sense for LGBTQ couples. Unwed couples face the risk of steep taxation upon the death of one individual, despite the fact that beneficiaries and estate planning documents indicate full transfer of assets to the surviving partner.
Despite marriage being the law of the land, LGBTQ couples still are uncertain about their financial future, and are actively translating what the decision means and how it impacts their financial future. A full 60% of same sex couples report that “there is not enough financial guidance designed for my family type” (UBS Investor Watch, 2015). And that’s a problem for same-sex couples, even after the Obergefell decision. We have become accustomed to seeking out advice on things like wealth transfer, how to title our assets, and potential advanced planning techniques – none of which are cheap. LGBTQ couples are aware of, and welcome, the extension of rights that marriage now provides; however a lingering sense that we face unique financial circumstances still remains. For example, many LGBTQ individuals may want to marry, but fear the potential backlash or discrimination at work. Obergefell may have solved much of the financial disparity between straight and gay married couples; but it had nothing to say about the potential fear faced in the workplace by simply coming out and revealing your partner’s name and gender on a human resource form.
Since I work in the financial services industry, I often get asked by my LGTBTQ friends where they can go for financial planning advice and assistance. Same-sex couples seek advice from knowledgeable advisors who understand how to prepare for a major life stage like marriage. Many friends also still seek an expert who also understands the historical significance of the Obergefell decision – in short someone sympathetic to the meaning and gravity of the court case. They ask, too, because they seek advice on whether marriage makes sense – both in respect to the heart and their pocketbook. Equally, how marriage might impact one’s coming out at work. I am lucky to work for an organization like U.S. Bancorp that has a profound respect for diversity of all kinds, including sexual orientation. Many aren’t so lucky.
LGBTQ couples continue to face uncertainty even after marriage officially became the law of the land. Couples, no doubt, should lead with their heart, but also do sufficient planning to determine and map out the pro’s and con’s related to this major life stage. Angela and I still have some financial preparations to make – and we’ll get there together. What’s even more important during this one year anniversary of Obergefell, is that we all take time to reflect on how amazing it is that we have a true choice, a freedom to marry.
U.S. Bancorp and its representatives do not provide tax or legal advice. Each client’s tax and financial situation is unique. Clients should consult their tax and/or legal advisor for advice and information concerning their particular situation.
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