Some financial impact from overturning DOMA for same-sex couples
Today, the Supreme Court struck down the Defense of Marriage Act (DOMA), the 1996 federal law prohibiting married same-sex couples from receiving federal benefits. According to Justice Kennedy who wrote the majority opinion “DOMA is unconstitutional as a deprivation of the equal liberty of persons that is protected by the Fifth Amendment.”
For states such as Massachusetts where same-sex marriage is legal, federal benefits that were previously unavailable can now be accessed by married same-sex couples. Many of the benefits are financial or have a financial impact. For instance, with DOMA overturned, same-sex couples will now have the ability to file taxes jointly, or to qualify for social security benefits. In addition, same-sex couples can now simplify their legacy planning, since they will be subject to the same rules as opposite-sex couples.
Same-sex couples who divorce will now be able to get the same benefits as opposite-sex couples. For example, same-sex divorced couples can now divide property without incurring gift taxes. When alimony is paid, the payor may now deduct the payments from taxable income.
Divorced same-sex couples may need to revisit their separation agreements. For those people who have an alimony arrangement, as the alimony amount can now be deducted from the payor, it will also become taxable to the payee. Hence the amounts may need to be recalculated to take that new fact into account. People who have had to pay gift taxes as a result of a property division pursuant to divorce may be able to reclaim those taxes.
These are exciting times for same-sex couples. Life without DOMA will be easy to settle day to day. For financial issues, such as financial planning and tax planning it may take a little more adjustment. Make sure to contact your CFP and CPA for more details.