As the number of states that recognize gay marriage continues to grow, it is important for financial advisers to be aware of the Social Security benefits that may be available to clients now or in the future.
Since the Supreme Court struck down a key part of the Defense of Marriage Act in June 2013, 19 states and the District of Columbia have legalized same-sex marriage.
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Those jurisdictions encompass every state along the Eastern seaboard from Maryland to Maine — including Vermont, New Hampshire, Massachusetts, Connecticut, Rhode Island, New York, New Jersey, Pennsylvania and Delaware —as well as the West Coast states of California, Oregon and Washington. In addition, Hawaii, Iowa, Illinois, Minnesota and New Mexico permit same-sex couples to legally marry.
In another 12 states, judges have issued rulings in favor of the freedom to marry, with many of these rulings now stayed as they proceed to appellate courts, according to Freedom to Marry, a grassroots organization promoting the legalization of same-sex marriage. Judges in Arkansas, Idaho, Michigan, Oklahoma, Texas, Utah, Virginia and Wisconsin have struck down marriage bans, and in Indiana, Kentucky, Ohio and Tennessee judges have issued more limited pro-marriage rulings, according to the lobbying organization's scorecard.
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The Social Security Administration began processing and paying spousal and survivor benefits to some married same-sex couples last August.
Gay couples in states where their marriage is legal are entitled to spousal benefits during marriage and survivor benefits after the death of one spouse. If they have minor dependent children at the time one spouse claims benefits, the children may also be entitled to benefits.
And if one or both spouses wait until at least their full retirement age to claim benefits, they can engage in creative claiming strategies such as filing a restricted claim for spousal benefits or filing and suspending benefits. These strategies can be used to allow one spouse to collect benefits while the other continues to accrue delayed retirement credits in order to maximize lifetime income.
To qualify for spousal benefits, a couple must be married at least one year. For same-sex couples, they must also live in one of the states or the District of Columbia where gay marriage is legal.
However, Social Security benefits based on state of residence could change in the future. Legislation has been introduced in Congress to award benefits to legally married same-sex couples regardless of zip code. The Justice Department is also reviewing the situation.
The Social Security Administration is encouraging retirement age same-sex married couples who live in states that do not recognized their marriage to apply for benefits any way.
“We continue to work with the Department of Justice to develop policy and processing instructions on this issue,” National Press Office spokesman William Jarrett told me in an e-mail. “In the meantime, we encourage people to apply right away for benefits, even if they aren't sure of eligibility,” he wrote. “Applying now will protect against the loss of any potential benefits.”
The Social Security Administration also recognizes some same-sex marriages that were performed in a foreign country.
Retirement and spousal benefits are available as early as age 62, but are reduced compared to waiting until full retirement age, currently 66, or later to collect benefits.
To qualify for Social Security survivor benefits — worth up to 100% of what the deceased worker was receiving or entitled to receive at the time of death — the surviving spouse must have been married to the worker for at least nine months prior to the time of death. Divorced spouses who were married for at least 10 years and who are currently unmarried may be entitled to survivor benefits on an ex-spouse.
Survivor benefits are available beginning at age 60, but are worth just 71.5% of a deceased worker's benefit compared to 100% if the surviving spouse waits until full retirement age or later to collect.
The Social Security Administration also considers same-sex marriages when it is processing claims for Supplemental Security Income, a program that provides benefits to low-income people who are 65 or older, blind or disabled. The agency said individuals must notify Social Security of their marital status when applying for or receiving SSI and notes that a spouse's income and resources could affect SSI eligibility or payment amount.
The agency also stressed that there is no penalty or fine for applying for benefits that Social Security later denies. Likewise, if you appeal that decision or apply again, you will not receive a penalty or a fine.
If you have questions about how a same-sex marriage may affect a claim for benefits, contact your local Social Security office or call the toll-free hotline at 800-772-1213.
(Questions about Social Security? Find the answers in my new ebook available at www.investmentnews.com/MBFebook for $19.95.)