On Sunday, the first day that same-sex couples will be able to marry in New York, chances are good that a client or two of Brian D. Emery's will be lining up to apply for a license.
“I have two weddings in the coming six weeks, and maybe more in the fall” among his same-sex client couples, said Mr. Emery, managing director of Westbury, N.Y.-based Emery & Associates, a financial advisory practice of
Ameriprise Financial Services Inc. Of the $100 million in assets managed by Mr. Emery's firm, around 15% comes from gay, lesbian, bisexual or transgender clients, according to his estimate.
Like other couples anywhere, gay and lesbian partners considering marriage in New York — which last month became the sixth state to legalize same-sex marriage — probably won't be put off by whatever negative affect marriage may have on their tax and benefits status. But financial advisers must be ready to advise the couples when the inevitable questions come up, according to specialists who work with nontraditional couples.
LOTS OF QUESTIONS
In anticipation of the new law, advisers with a substantial New York gay clientele said the phones have been ringing nonstop with questions. The financial implications of marriage are more complicated for same-sex couples than for the general population because the federal government — through the 1996 Defense of Marriage Act — does not recognize same-sex marriages, even if their state does. And not all states treat all marriages equally, with some states opting to recognize same-sex marriages performed in states that permit it and others not.
Jennifer Hatch of Christopher Street Financial, a New York advisory firm that manages $200 million in assets and focuses on the gay and lesbian market, said that there is “a significant amount of confusion and inquiry” among clients over how marriage will affect their finances.
PROS AND CONS
Ms. Hatch and other advisers at her firm have been scheduling client presentations that go through the pros and cons of marriage in particular situations. She also has scheduled webcasts for clients and prospects who want general information. During one of the webcasts, she revealed that she and her long-term partner are thinking about getting married but don't plan to rush things. On the webcast, lawyer Ralph M. Randazzo of Randazzo & Randazzo LLP, which works with Christopher Street, related an anecdote about how marriage can help couples.
When his father would go fishing, Mr. Randazzo said, his mother would frequently join him, not because she liked to fish but because his father could fish until he filled each of their limits. The point of the story, he said, is “there are lots of small benefits that accrue to marriage,” and some of them can help in accumulating wealth.
But there also are some financial downsides to marriage, said Michael P. Vito, an attorney with Lowenstein Sandler PC.
For example, while many same-sex couples may end up paying lower state taxes, preparing tax returns may become more complicated, he said. For their New York income tax returns, same-sex couples can file jointly, but because they are not considered married under federal law, they must file their federal income taxes individually, he said.
As a result, same-sex couples will need to prepare three federal returns: filing two individual returns and then completing — but not filing — a joint federal return in order to supply the numbers required for their New York return, which is based on federal figures for income and adjustments.
Couples may find that they save some money on state taxes as a married couple, but if both spouses earn a high income, they could get hit with the so-called marriage penalty, which can cost several hundred dollars or more in extra taxes, Mr. Vito said.
But what they lose on income taxes they will make up in New York estate taxes, which kick in when an estate tops $1 million.
Married couples can pass their property to a surviving spouse tax-free. Same-sex couples won't qualify for a spousal exemption for federal estate tax, which kicks in on larger estates.
Estate planning is often more complicated for same-sex couples, Mr. Vito said, primarily because people without children tend to have more-elaborate plans for what to do with assets, while couples with children tend to have more-predictable estate patterns, he said.
Two other issues of interest to same-sex couples that Mr. Vito noted involve travel and government benefits.
Because some states and countries don't recognize same-sex marriages, such couples who routinely travel should prepare and take with them advance health care directives.
These provide each partner with the unquestioned legal authority to make health care decisions for a critically ill spouse, Mr. Vito said.
And because worker's compensation benefits typically are administered by the state, same-sex spouses may be entitled to such benefits if their spouse is injured on the job; same-sex spouses aren't awarded spousal benefits for federal programs such as
Social Security.
E-mail Lavonne Kuykendall at [email protected].
