Since the Supreme Court decision that legalized gay marriage a year ago this Sunday, advisers have been busy rethinking and redrafting financial and estate plans.
In addition to attending lots of weddings, financial advisers who specialize in helping same-sex couples have been unwinding strategies to protect unrecognized spouses that were put in place before the
landmark ruling providing gay couples with about 1,000 rights afforded to other wedded couples.
“Before the decision we had to duplicate marriage via legal documents in order to make sure they could take care of their significant other,” said Ellen Krider, a financial adviser with RBC who has worked with the lesbian, gay, bisexual and transgender community for nine years.
So over the year, clients have needed to rewrite trusts and change the beneficiaries on documents, such as their individual retirement accounts, she said.
Some clients also added their spouse as a co-owner of the house they reside in together now that they qualify for the unlimited marital deduction and could gift the property without incurring federal or state gift tax.
She directed all her LGBT clients, married and unmarried, to revisit their own corporate benefits.
In the wake of the ruling, some companies have decided to eliminate benefits for domestic partners, now that marriage is a legal option for all couples.
Pension beneficiaries are another area where “two people who are not married used to have to go through steps and hoops to make it so their partner would receive benefits,” said Anthony Domino, a financial adviser with Strategies for Wealth.
Now those plans need to be updated, he said.
Other planning issues advisers are looking into for married LGBT clients include
Social Security spousal and survivor benefits, some veterans benefits, military spousal benefits, estate tax relief for surviving spouses, and employer health care benefits.
Financial advisers who specialize in helping same-sex couples also attended lots of weddings over the year since the Obergefell v. Hodges high court ruling created a nationwide rush to the altar among LGBT couples.
“Nearly every weekend one of the couples we know is getting married,” Ms. Krider said. “That's been the case all year.”
Most of the couples had been together for a decade and ranged in age from their 30s to their 90s, she said.
About a million same-sex couples are now married, according to a Gallup poll released on Wednesday. About half of all same-sex couples who are living together today are married, versus 38% a year ago, the poll found.
For same-sex clients still wondering whether they should marry, advisers said they counsel them on the advantages and the downsides of getting hitched — most notably the income tax hit when couples combine their income on their filing to the
Internal Revenue Service.
For example, partners with $150,000 each in taxable income would fall in the 28% tax bracket for single filers; with combined taxable income of $300,000, they'd fall into the 33% bracket.
(More: Some married gay couples surprised by new tax burden)
“If you file as a married couple you end up paying more taxes because of the marriage penalty,” said Thanda Fields Brassard, a lawyer with wealth management company Fiduciary Trust. “But anyone who had to do that, who I know, was thrilled to do it because of the emotional importance of what they were doing.”
And the benefits of unlimited gifting between spouses — allowing them to transfer assets to each other without tax implications — results in a huge tax savings for people, she said.
Mr. Domino also helps same-sex clients with financial issues surrounding divorce.
“Because now that same-sex couples can get married, they can now get divorced,” he said.
(More: How advisers can take advantage of new financial opportunities with LGBT clients)
Advisers who specialize in
financial planning for gay couples and individuals say there are still discriminatory issues gay couples have to think about when they come out as gay by marrying a partner of the same sex.
Without employment nondiscrimination protections, some same-sex clients are not getting married because marriage licenses are a matter of public record.
Additionally, compliance to the Supreme Court decision by localities is still an issue.
In three states — Alabama, Kentucky and Texas — there are about 13 counties where marriage licenses still are not being issued to same-sex couples, Ms. Brassard said.
