With Supreme Court ruling on same-sex marriage, time to change financial plans

The Supreme Court made same-sex marriage legal in every state Friday, meaning gay couples can plan their retirements, support their spouses and raise their families with all the benefits afforded heterosexual pairs. The justices voted 5-4 that no state can deny a marriage license to two people of the same sex and that states must recognize lawful same-sex marriages of other states. "They ask for equal dignity in the eyes of the law. The Constitution grants them that right," Justice Anthony Kennedy wrote in the majority opinion. Practically speaking, with the decision now on the books, gay married couples nationwide won't need to file different state and federal tax returns or use complicated estate planning techniques to protect families if a spouse dies. They also will be afforded spousal and survivor benefits from the Social Security Administration, no matter where they live in the U.S.

Morgan Stanley's Michael Pellman Rowland breaks down the ruling

Much of the immediate work for advisers with gay clients who are married or plan to wed will be to unravel years of advanced financial and legal planning. "We turn our attention to any of our clients who have already gotten married but were waiting to make changes in their plans to see if those rights were affirmed," said Lorraine Johnson, an adviser with Triangle Financial Advisors. For example, clients who bought life insurance policies to cover estate taxes won't need those policies for that purpose, because now all same-sex couples will be able to pass on assets to their spouse tax-free. Like heterosexual couples, gay couples will have an unlimited marriage exclusion from estate taxes nationwide and portability of the deceased spouse's unused exclusion amount. (More: "A lucrative market opens for advisers as marriage legalities level") Two years ago in U.S. v. Windsor, the Supreme Court struck down the federal ban on gay marriage. Since then, all but 13 states have voted to support marriage equality. Same-sex couples, ironically, also now have access to divorces because of Friday's high court ruling in Obergefell v. Hodges. Previously, a homosexual couple married in a state such as Massachusetts with marriage equality,d who moved to one without, such as Texas, could not be granted a divorce because that state didn't recognize the marriage, said Matthew McClintock, a trust and estates attorney for WealthCounsel. "Now all marriages are created equal, so if you need to dissolve your marriage you can," he said. "This provides a lot of clarity that we didn't have after Windsor." States also must grant same-sex couples equal rights when it comes to adopting children, Mr. McClintock said. Obviously, parenthood brings with it a whole new set of financial planning considerations. (More: Goodbye Cleavers, hello Modern Family) But importantly for advisers, this ruling simplifies the planning process, in that it sets decisions for all couples on equal ground, no matter who they are married to or where they live. “In some ways, it makes the planning easier and better since if they are married, we can consider Social Security and pension strategies that would not otherwise be available,” Lisa Kirchenbauer, president of Omega Wealth Management, wrote in an email. “It actually helps potentially secure better retirements for committed gay and lesbian couples who get married.” Joshua Hatfield Charles, an adviser focused on gay planning issues and chief executive of Financial-360, said that for 15 years he has looked forward to the day when his planning specialty was no longer needed. "It's closer today," he said. "Discrimination will persist, but it will be harder." 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 and they worry they'll be fired, Ms. Johnson said. "Gay couples can get married on Friday and fired on Monday," she said. "Whether marriage is a good idea legally can be overridden by the fact that they need a job."