Financial Considerations for Gay Families in Light of DOMA Demise
On June 26, the Supreme Court repealed the 1996 Defense of Marriage Act (DOMA). DOMA essentially said that even gay couples who were legally married at the state level, weren’t recognized as such at the federal level (and weren’t entitled to its marriage benefits). With DOMA since being repealed, gay couples now have additional financial rights.
Which issues does this ruling affect in particular?
The ruling affects a multitude of issues.
Filing Status for Federal Income Tax
Federal Income Tax Status & Estate Tax Laws
Joint / Single, Entitlement Programs
Social Security Benefits
Employer Health Benefit Plans
IRA and Retirement Plans
Still, at present, we are left with more questions than answers.
What we do know is there is a tremendous need for guidance as these discussions evolve amidst uncertain financial and legal implications. What is paramount for all same-sex couples is having a team of professionals in place to help them sort through the laws as they currently are, as well as what they may look like in the future. -->
It may be helpful to have professional relationships with various people including a CERTIFIED FINANCIAL PLANNER Professional (CFP), an Accredited Domestic Partnership Advisor (ADPA), an Estate Planning Attorney, and a Certified Public Accountant (CPA). These are people with specific experience who are well-versed in the current set of challenges, along with planning techniques available to help tackle some complexities of existing laws.
Where do I begin?
To help kick-start more conversations, there are some important areas to consider if you are beginning this process. This is not an exhaustive list - it is a starting point:
Find the Right Advisor: Seek out advisors, attorneys and other professionals who fully understand the unique planning needs of LGBT couples.
Healthcare Decisions: Consider executing a healthcare proxy and a directive to physicians or a living will to designate an agent (e.g. your partner) to make medical decisions on your behalf and to outline your specific wishes with regard to critical end-of-life decisions.
Execute a Will: Be specific in making your wishes known. Lacking a will, the identity of your heirs is determined by the law, not by you. A will and/or trust specifying your intentions can help transfer your assets to your partner if that is your choice.
Create Investment and Estate Plans Together: You and your partner should discuss financial values, priorities and goals. A plan can help with long-term financial goals, determining how to save for major purchases, and laying out your paths to retirement.
Consider a Durable Power of Attorney: A power of attorney provides one person the financial authority to act and sign on behalf of another, and therefore can be used to authorize your partner to make financial or business decisions for you if you become incapacitated.
This only scratches the surface, but it remains critical for same-sex couples to think through the complexities of planning in the midst of a legal framework that could continue to change. Do your homework, understand the laws and the issues, and engage a team of professionals to help leverage your financial planning options based on current laws. Continue to educate yourselves, have important conversations with each other, and surround yourselves with professionals to help guide you through these fast-changing times.
This material was written by Wells Fargo and Joanna Mora, Financial Advisor and First Vice President - Investment Officer, of Mora Financial Consulting, Wells Fargo Advisors, 100 Aragon Avenue, Coral Gables, FL, 305-529-5948.
Wells Fargo Advisors is not a tax or legal advisor. Wells Fargo Advisors, LLC, member SIPC, is a registered broker-dealer and separate nonbank affiliate of Wells Fargo & Company.