Planning Considerations for Same-Sex Couples

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March 18, 2014

When the Supreme Court overturned section three of the Defense of Marriage Act (DOMA) in 2013, it changed the estate planning landscape for same-sex couples.


From a financial planning standpoint, the ruling

means same-sex married couples may be able to take advantage of tax benefits that heterosexual couples enjoy, including gift and estate tax exemptions, joint filing status, personal and dependency exemptions, employee benefits, IRA contributions and many others.


“This is an enormous positive change for married same-sex couples,” says Louise Hildebrand, Regional Trust Manager for The Private Client Reserve.


However, there are still financial and legal issues with which couples need to contend. As of March 2014, only 17 states and the District of Columbia have legalized same-sex marriage, and each has different tax rules and regulations that can potentially impact same-sex couples and their children.

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March 18, 2014

U.S. Bank and its representatives can’t provide tax or legal advice, so we encourage you to consult your tax and/or legal advisor for information concerning your particular situation. In addition, to help your family be prepared, keep these issues in mind:


State Tax Returns: If a same-sex married couple moves to a state that does not recognize the marriage, the couple can still file a joint federal tax return but likely will have to file individual state tax returns, says Taryn Pream, Assistant Vice President, Fiduciary Services for The Private Client Reserve. “It’s important to be aware of the tax law implications when you file.”

Federal Tax Refunds: Depending on the marriage date, same-sex couples may be eligible for a federal tax refund for the years in which the federal courts did not recognize the marriage. Pream encourages same-sex married couples who were required to file separately to consult with their tax advisor on whether to file amended returns: “You might be able to get some of that money back.” 


Parental Rights: When couples use assisted reproductive technology to have children — employing donor sperm or eggs and/or gestational carriers — it can impact how the state views their parental rights. In states that don’t recognize same-sex marriage, there may not be an automatic presumption that both partners in the couple are legal parents to the child. “The rules around assisted reproductive technology are currently very unsettled,” Hildebrand says.

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March 18, 2014

This can create familial havoc if one partner dies or the couple splits up, and the parentage of the other partner is thrown into question. “This isn’t just an issue of inheritance; it’s about parental rights,” Hildebrand says.


To avoid such problems, couples should make sure the non-genetic partner is legally recognized as a parent, usually achieved through an adoption process. They should also explicitly define any genetic donor’s rights in a formal contract. “All of this should be done with the help of a family rights attorney familiar with these issues,” Hildebrand says.


Estate Planning: Individuals in a same-sex     marriage who intend to leave assets to their spouse and family should draft a will and estate plan that explicitly defines their intentions. If you live in a state that doesn’t recognize your marriage

and you don’t draft a proper will, your partner may not be able to inherit your estate.


Estate plans should also ensure that the spouse retains power of attorney and healthcare decision-making. “Without appropriate documents, all of those decisions will go to the biological family,” Hildebrand says.


Even couples living in states that recognize same-sex marriage should take every step to legally and financially protect themselves. “Because the laws are still unsettled and vary from state to state, you need to be extremely careful about estate planning,” Hildebrand says. “Following the utmost formality in documentation may be one of the best ways to protect yourself.”


For more information, see The Private Client Reserve’s “Three Current Considerations in Estate Planning” paper.


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