by David M. Kendrick CPA/MST

The world of estate & tax planning is always changing and the latest upheaval comes from the U.S. Supreme Court overturning the Defense of Marriage Act (DOMA) on June 26th.  This act had previously barred the federal government from recognizing same-sex marriages in states where local law deemed them legal.  For Washington residents, same sex marriage was signed into law by Governor Christine Gregoire on February 13, 2012 and there are currently 13 states that permit same sex marriages.

The ruling on DOMA will impact many benefits due to the number of federal rights linked directly to marital status. Some of the areas married same-sex couples may encounter changes include:

  • income and estate tax provisions
  • social security benefits
  • retirement plans
  • healthcare benefits
  • immigration
The following article does a nice job on covering the “top 10” tips for post-DOMA planning:
http://www.thinkadvisor.com/2013/07/25/10-wealth-planning-tips-for-a-post-doma-world-aspi?page=2

The change of law may present new complications where the same-sex couple is legally married in a state that permits same-sex marriage but resides in a state that does not.  The IRS and Social Security Administration adhere to the “place of abode standard”, the taxpayer’s tax home; the couple has to reside in a state where same-sex marriage is permissible in order to be considered as “married” by these agencies.  Other government agencies will recognize the union as long as the couple is legally married regardless of whether the couple resides in a state where same-sex marriage is permitted or not.

Of course, equality also comes with potential drawbacks; ever hear of the “marriage penalty”?  Same-sex taxpayers filing a joint return with combined income may reach the thresholds more quickly for the newly implemented Affordable Care Act  tax provisions which include the .9% Additional Medicare Tax and the 3.8% additional tax on Net Investment Income Tax .  Another consideration is the phase-out of itemized deductions and personal exemptions that come into play once certain income thresholds are met. “Married Filing Separately” may not be a solution since many tax breaks are limited or eliminated when a couple goes this route.  Like much of recent tax legislation, progress can be very complicated.