Jim Lange, a CPA and Attorney, has written a much-needed book reflecting recent changes in state and federal laws that affect same-sex committed couples. Mr. Lange is donating all proceeds to Freedom to Marry. These are excerpts:
Thank you, Jim Lange."'A man has made at least a start on discovering the meaning of human life when he plants shade trees under which he knows full well he will never sit.' -- Elton Trueblood quote."
"The Windsor decision and its aftermath will have a far-reaching impact on income taxes, inheriting IRAs and retirement plans and likely Social Security for same-sex couples."
"On August 29, 2013, the U.S. Department of the Treasury and the Internal Revenue Service ruled that same-sex couples who are legally married in states and other countries that recognize their marriage, will be treated as married for federal income tax purposes."
"Same-sex couples who live in any of the 33 non-recognition states might want to consider getting married in New York or any of the recognition states, and then come back home to resume their lives."
As of right now, if you reside in any of the 33 states not recognizing same-sex marriage, you cannot get spousal benefits for Social Security.
"There is a 15% inheritance tax (in Pennsylvania) for same-sex couples whether they are legally married or not (the inheritance tax is zero for straight couples).
"Finally, you can take advantage of some of the same long-term planning strategies that have always been available to straight couples."
"Good planning could mean the difference between the surviving partner'/spouse being financially secure and living comfortably, versus living out his or her retirement years in poverty."
"I am recommending that many, if not most, 60+ year-old same-sex couples in committed relationships consider entering into a legally valid marriage in a state that recognizes same-sex marriage."
"It's better to save in IRAs and retirement plans versus saving in after-tax accounts."
"For IRA owners, pension participants, and retirement plan owners, the financial implications of getting married are enormous."
"It's generally best to spend assets in this order: 1) after-tax savings. 2) traditional IRA and retirement assets."
"Estate planning: Get married to provide maximum IRA and retirement plan assets for your partner after your death."
"Estate planning: Get married to provide maximum assets for your children or to your heirs after both you and your partner die."
"Independent of getting married, it's better to wait until 70 to take Social Security than electing to take Social Security at 62."
"It's better to 'Apply and Suspend' Social Security benefits until age 70. -- In this scenario, none of the individuals die. The unmarried couple runs of of money at age 92, while the married couple's assets are over $2,000,000 and growing."
"There are also financial reasons why you might NOT want to get married. -- This is because of the so called 'marriage penalty' that currently hurts many straight couples."
"Alimony, child support and equitable distribution of property are just as painful for same-sex as straight divorcees. We recommend considering such unpleasant, but often necessary, legal documents like prenuptial agreements and other property agreements."
"Currently the Social Security Administration is urging same-sex couples to apply regardless of the legality of their marriage in their state."
"An increasing problem for same-sex married couples who live in states that that do not recognize their marriage is the inability to obtain a divorce."
"While you are still working, you shouldn't pass up the opportunity to contribute the maximum allowable to your retirement plans."
"It must be understood that the IRS does not permit you to leave money in tax-deferred retirement plans indefinitely."
"For an Inherited IRA, under the current laws, both the RMD start date and the life expectancy values combine to force you to accelerate your income taxes and deplete your Inherited IRA more quickly than with a Spousal IRA."
"It looks like the extended tax and wealth accumulation benefits afforded by the Stretch IRA may soon go the way of the dinosaur."
"Unless absolutely essential, delay taking Social Security as long as possible."
"There are significant Social Security benefits for married couples, which are not available for two non-married partners."
"The Social Security Administration now recognizes same-sex marriages in states that also recognize same-sex marriages."
"Unfortuantely, sophisticated Social Security strategies are unfamiliar territory for same-sex couples, advisors to same-sex couples and even most financial advisors to straight couples."
"Do not use the person who works for the Social Security Administration as your Social Security Expert. -- That's like taking the advice of the teller at the bank who says you should buy an annuity."
"I hate it when people who enjoy their work retire early so that they can get a benefit earlier."
"Holding off on Social Security benefits until after you're retired -- will give you an opportunity to make larger Roth IRA conversions while you are in the lower tax brackets."
"I like to integrate everything: a Social Security plan, an IRA plan, a long-term Roth IRA conversion plan, a general tax plan, an estate plan and an investment plan."
'Most legally married same-sex couples who currently live in states that do not recognize their marriage, cannot file their state income tax returns as married."
"Attorneys love to set up trusts and they are not always appropriate."
"Love all, trust a few, do wrong to none. -- William Shakespeare quote"
"A trust is basically an agreement to have a trustee administer your asset in a way that is consistent with your wishes."
""If the underlying (trust) asset is an IRA or other retirement plan, a poorly drafted trust can trigger an avalanche of income taxes."
"Some children are spendthrifts who cannot hang on to money, and need the structure of a trust well into adulthood and beyond."
"Some attorneys name themselves as trustee when they draft wills and trust for their clients, but I believe there is an inherent conflict of interest in that scenario. I usually recommend naming sibling or other family members as trustee, not because it is the best choice, but because it is the best of the bad choices."
"Same-sex couples must remember that if they are legally married in a state that recognizes same-sex marriage, the the Affordable Care Act (Obamacare) require them to file a joint federal income tax return to be eligible to receive tax credits to lower their health care premiums."
Before the DOMA decision, same-sex spousal benefits could not be treated on a pre-tax basis. Now, a same-sex spouse is also eligible for federally tax-free reimbursements for medical expenses from an employee spouse's Health Savings Account, Flexible Spending Account or Health Reimbursement Arrangement.
"Legally married same-sex couples living in states that do not recognize their marriage might want to consider gifting strategies and co-ownership of assets to avoid transfer taxes."
"The older, richer and sicker your are, the more appropriate it is to consider gifting."
"You must trust your spouse beyond a shadow of a doubt if you are going to gift away part of your money or other property."
"Name your spouse, not your partner, as the beneficiary of your IRAs and retirement plans."
"No one key unlocks the treasure of financial security and getting the most out of what you've got; the solutions is more like a combination lock where you have to get a lot of things right to maximize your assets and financial security."
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Best wishes.
Taylor
