Financial and Legal Problems Faced By Same-Sex Spouses

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June 11, 2012

Financial and Legal Problems Faced By Same-Sex Spouses

Even though several states have legalized same-sex marriage, same-sex couples are still running into legal and financial problems because the federal government does not recognize same-sex marriage. Recently the Defense of Marriage Act has faced legal challenges based upon the argument that it unconstitutionally discriminates against legally married couples.?However, only the First Circuit Court of Appeals has ruled in favor of same sex couples on this issue. The Supreme Court has yet to weigh in on this subject.

In addition, the financial costs of estate planning for same-sex couples might cost more because of the additional work that will be needed to plan for the future. This concept applies to all legal aspects of the marriage, and can also include the additional costs that might occur from divorce proceedings. For example, suppose that a same-sex couple were to divorce and a judge ordered that one spouse pay spousal support. Because the federal law does not recognize the spouse, the spousal support payments cannot be deducted under the I.R.C., which means that the spouse has to pay more in taxes even though he or she has less income. On the subject of taxes, same-sex married couples have to prepare about four tax returns. Usually a couple would prepare a federal joint tax return, and use the information to file a state joint tax return. After that, the federal joint tax return is useless, and so they would have to file two separate federal tax returns. Furthermore, there are more rules regarding community states and filing tax returns.

There are other problems that a same-sex couple can face. For example, there are benefits that only a surviving spouse can claim, and if one the partners dies in a state where they do not recognize the marriage the surviving spouse will have no claim to the benefits. This also applies to medical and financial proxies. The partner will have no right to make medical decisions for their partner in a state that does not recognize same-sex marriage unless they file a health care and financial proxy.

See Temma Ehrenfeld, Same-Sex Spouses Still Getting Tripped Up By Financial, Legal Tangles, Daily Finance, June 5, 2012.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

June 11, 2012 in Current Affairs, Estate Planning - Generally | Permalink

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