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How Senior Same-Sex Couples Can Take Advantage of the Dilution of DOMA


How Senior Same-Sex Couples Can Take Advantage of the Dilution of DOMA

Recently the U.S. Supreme Court ruled that a big part of the Defense of Marriage Act (DOMA) is unconstitutional. The implications for same-sex elderly couples are significant, potentially reshaping in part the retirement years.

“The ruling is a game changer. Same-sex couples will now be treated like married couples,” says Bernard Krooks, a founding partner with the law firm of Littman Krooks, LLP.

However, the change only means something for same-sex couples who live in a state where same-sex marriage is legally recognized. According to an article by elder law attorneys, Ronald Fatoullah and Debby Rosenfeld of Ronald Fatoullah & Associates, the U.S. Supreme court action opens the door for same-sex couples in those states to be able to take advantage of more than 1,000 federal benefits and protections that they could not before, such as Social Security survivor and spousal benefits, Medicare spousal benefits, and veteran's benefits.

It's a whole new world. Here's how same-sex seniors can seize the opportunities.

Give gifts

Any one can make gifts of up to $14,000 per year (in 2013), without having to pay a gift tax. Same-sex couples are now eligible to gift up to $28,000 total without incurring taxes by “splitting” the gift so that the maximum $14,000 comes from each spouse, explains Dale Terwedo, an Accredited Domestic Partnership Advisor with Terwedo Financial Services.

“This can provide an opportunity to increase annual contributions to college education funds for children and grandchildren,” he says “It is also important to note that spouses can also make unlimited gifts to each other, without incurring any taxes.”

Profit from portability

Currently, in addition to the $14,000 annual gift limitation, you cannot give more than $5.25 million to a non-spouse individual during their lifetime, or after death without tax consequences.

However, since the repeal of Section 3 of DOMA, same-sex married couples are now legally recognized as spouses and they can exceed the $5.25 million amount without paying taxes, so long as they are giving to their spouse, due to the unlimited marital deduction, says Terwedo.

Estate planning pluses

Married same-sex couples can now make unlimited transfers for assets to one another while living, or after the death of the first to die, without incurring federal gift or estate tax, making a substantial impact in estate planning decisions for many couples, says Terwedo.

Assess the impact on Social Security

Married same-sex couples can now apply for spousal Social Security benefits. Generally, this is a good thing if one spouse's benefit is significantly higher than the others. Additionally, the repeal of Section 3 of DOMA, allows for divorced same-sex couples to be eligible for divorced spouse's benefits, as well as survivor benefits, says Terwedo.

Know that there is a lot of gray area for both of these provisions if one of the ex-spouses moves into a state that doesn't recognize same-sex marriages, cautions Terwedo.

Beware of these caveats

For sure there is a lot for elderly same-sex couples to cheer about, but there are caveats. Take for example veteran's benefits, while spouses of deceased veterans will be eligible to receive veterans benefits, there's a catch. Veterans whose same-sex spouses have significant income may lose benefits for which they are now eligible because a spouse's income is counted in determining veterans' eligibility for certain benefits, points out Fatoullah and Rosenfeld in their article.

Grantor Retained Income Trusts (GRITs) have been a primary means for same-sex couples to transfer wealth. GRITs are important because they allow you to transfer appreciated assets at a reduced gift tax cost to non-family members. However, now that same-sex spouses are now considered family members, they may no longer be able to use GRITs, says Terwedo.

“However, the IRS hasn't stated whether or not couples who were using GRITs before the DOMA repeal will be able to continue using them,” he adds.

Medicaid long-term care protections will now apply to all legally married same-sex couples in any of the states where gay marriage is recognized. Wealthier healthy partners don't stand to gain much from this, as the asset and income protections primarily help lower-income seniors and, as such, income and asset limits apply. Fatoullah and Rosenfeld explain, “While same-sex couples will now be able to avail themselves of the same State benefits as other married couples, well same-sex couples will also be subject to the same liabilities.” They offer an example. Under the Medicaid rules, married couples can transfer assets to each other without penalty and qualify for Medicaid, but they are subject to recovery of their assets by Medicaid as “legally responsible” relatives. But the healthy partner is an unmarried couple can keep all of his assets without limitation/liability, and only the nursing home partner need spend down his assets on his care.

Take action

Social Security benefits saves as many as 21 million seniors from poverty, says Mark Baer, a family law attorney and founder of Mark Baer, Inc. “The average value of the shared healthcare, retirement and survivor benefits is $40,000 per year. This can amount to tens and possibly hundreds of thousands of dollars for each household. That does not even include the estate tax savings,” he says.

He warns though, “Retroactive benefits are limited and therefore, the longer people delay in applying for such benefits, the more of those benefits are lost for good.”

With so much at stake, there's much to get a handle on. Same-sex married couples should review their designated beneficiaries, as well as other estate planning documents to determine any changes that might be needed, advises Terwedo.

They should consider too, how they might benefit from changes in gift tax requirements. Be mindful of potential challenges to assets, particularly from family, and your desire to protect the future of your spouse. “The issue of children should be addressed, particularly if they are from a former marriage,” says Terwedo.

Make no assumptions, says Krooks. For example, don't assume that it is better to file your income taxes jointly. “Adding together two incomes could throw you into a higher tax bracket. Determine if you would pay less if you filed single,” he says.

“While it's nice to have this ruling, it requires thought. You can't assume that being legally married always works to your advantage for tax or other financial purposes. Meet with an advisor, an estate planning attorney to figure out what's best for you.”



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22 Comments.
Comment #1 by paoli2 posted on
paoli2
Talk about covering ALL topics.  You have to be kidding.  This is a political issue.  Do we have to rehash it on DA?  What about readers who don't agree with SSM?  I need to go find one of Shorebreak's cheerful articles after waking up to this.  This is an invasion of my religious beliefs and does not belong on DA as far as I am concerned.  If I had a church, I would need confession today! 

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Comment #2 by gbtexas posted on
gbtexas
I certainly don't feel offended in spite of my belief in what The Lord said many times about homosexuality. I don't think the poster was advocating homosexuality. If you feel so offended then don't read anything concerning homosexuals. I'm sure that there are homosexuals that go to this site and perhaps have a need to know more detailed info. We in Texas have rejected homosexual marriage, so this isn't an issue for us.

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Comment #3 by Shorebreak posted on
Shorebreak
It's a legitimate DA topic. "Advice on saving and planning and tax implications" is a forum topic and the above article by Sheryl Nance-Nash qualifies. Those that don't like it, don't have to read it.  I hope some don't attempt to start a debate on same-**** issues here because that would NOT be a "legitimate DA topic". IMHO of course. Enough said. Cheers.

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Comment #4 by paoli2 posted on
paoli2
It's a legitimate topic that could have applied to "all" married couples.  SHE made it political by pointing out it was for "Senior SAME **** Couples".  I assure you these people don't need Sheryl to tell them what their rights are in the states that accept them.  They probably know them better than she does.  IF they consider themselves MARRIED (which Webster's does not indicate) they could have still learned what Sheryl had to say under an article for Senior Married Couples.  SAME **** has no reason to be pointed out in the article.  This is NOT about homosexuals, this is about SAME **** MARRIAGES.  Maybe Sheryl needs to read the definition of Marriage in the dictionary and the Bible before she writes such articles.  I still agree with what they state.  I won't go any further into this subject to avoid additional conflicts but if Sheryl has a right to write such an article, I should have a right to disagree with it.  The article should NOT have been directed towards SAME **** Marriages since this is not the norm at this time in our entire country.   Thank you for allowing me to have my opinion.  I do not consider my post rude just because certain members disagree with me.

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Comment #5 by QED posted on
QED
Setting aside the important moral concerns of this matter, let's focus instead on the salient:

Most persons, a vast majority, are straight.  How are we to take advantage of this push by a small number of homosexual individuals for new rights?  For, you see, what's good for the goose is good for the gander.  How are we to benefit?:

First, as the article highlights, this post only applies for the minority of states which already have extended new marriage rights to ALL persons.  When you can marry virtually anyone (though not opposite-**** close family members - not for a while, anyway), there can be economic benefit.  It oftentimes is the case that spousal treatment differs, under law, from the way others in one's life are treated.  An example would be inheritance.  In my state, for instance, spouses inherit without imposition of tax.  Others, even children, get hit.  We don't have unrestricted marriage here, at least not yet.  Should it become available, a widow or widower would be advised to consider marrying her or his same-**** child.

You might argue that marriage between family members has been proscribed by law for thousands of years.  That's true, but it no longer matters.  That proscription had as its basis the danger to offspring.  Same-**** marriage, by definition, cannot produce natural children.  So the issue is off the table and will not withstand court scrutiny going forward.  You will be permitted to marry any person of the same ****, regardless familial relationship.

Another, perhaps less controversial, example is marriage to a friend.  Suppose you have a cherished same-**** friend, not a ****ual partner, whom you wish to inherit what you have.  Consider marriage and shield your estate from taxation not otherwise avoidable.

Speaking in general, same **** marriage opens a world of possiblities for monetary savings so far virtually unexplored.  Ability legally to marry anyone you want of the same **** is a new right unforeseen by existing law at all levels. Straight individuals should think about the new possibilities and take advantage.

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Comment #7 by jshannon posted on
jshannon
Everyone is a "bigot" about one topic or another..lol. The word bigot is just a five letter name-calling word for when you don't agree.

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Comment #9 by gbtexas posted on
gbtexas
I guess I'm a bigot. yet I've never considered myself on the fringe. I simply believe that the Lord's bible, His word, was inspired by the Holy Spirit and was given to us for our benefit and well being. And He simply says no to homosexuality. And to me, no means no. That said let's move beyond devisive issues and recognize that both hetero and **** alike have a need for financial planning. If a person finds it acceptable to practice with someone of the same ****, then it is he and not me that has to deal with it. As for me, it's not my cup of tea.

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Comment #10 by Shorebreak posted on
Shorebreak
Why am I not surprised where this headed to? That's why they have a cardinal rule in bars. "Regardless of how loquacious you are there are two things you should never discuss in a bar; religion and politics."  Now, back to the most important point of the article: "Meet with an advisor, an estate planning attorney to figure out what's best for you.”

 

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Comment #11 by paoli2 posted on
paoli2
Shorebreak:  Believe it or not, I agree with you.  That is why I was appalled that Ken would allow Sheryl to post such an article with a title that would catch our attention and then the words "same-****" etc. were posted all over the article.  If she was trying to make a point, imo, I think all that came across was her need to help people with same-**** marriages.  THIS made it political and to those of us who do not agree with such an arrangement, it caused us to respond.  Maybe Ken should add to his Rules, "No Political articles of any nature allowed".  Same-**** Marriages are still a hot potato politically and that is why my state and many others won't approve it.  Now I rest my case and will leave this discussion.

5
Comment #12 by lou posted on
lou
Just think, gay people are now subject to the heterosexual divorce laws. They will be able to spend years litigating their divorces and losing all their money to rapacious attorneys. Be careful what you wish for. :) 

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Comment #13 by foggy posted on
foggy
Thank you to Sheryl for bringing up a very important and timely topic.   As we human beings progress ever gradually out of the darkness of hate and into the light of equal rights for all, we must continue to help each other deal with all the financial chaos out there.   This critical discussion of financial pros and cons for gay marriages is not political nor religious, and should not be wrongly ridiculed as such.   No matter what anyone's personal beliefs are, you don't have the right to try to squelch any important financial topic that helps others who don't agree with your beliefs.

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Comment #14 by paoli2 posted on
paoli2
Foggy:  You and I both know this has nothing to do with equal rights or learning how to handle finances.  You could have it all by just getting the government to give you all the rights you need by calling yourself "partners".  No.  You had to go and destroy everything the word "marriage" stands for.  That is what I am against.  You had to destroy what the institution of MARRIAGE is supposed to be all about.  I would gladly have helped your kind fight for EQUAL RIGHTS but that was not enough for you.  You pushed it too far and now you really want those like myself to say "Great going"!   I don't care what you do in the privacy of your own bedroom.  I do care that you have taken the word "Marriage" and completely changed the definition of it.    Maybe my over 50 years of MARRIAGE has been too important for me to ever accept these new changes.   Have no fear, you are living in a new world where others will one day forget what the old marriage was supposed to be and you won't have people of my generation to be concerned with.  Maybe they can rewrite the dictionaries and the Bible so no one will ever know what a real marriage was ever meant to be.  I know when I have lost a battle so onward to better things.  Have a good evening.

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Comment #15 by Shorebreak posted on
Shorebreak
Re: paoli2 @ #11, Sunday, August 18, 2013 - 4:18 PM

"Now I rest my case and will leave this discussion." But no....

You had to take an article that honestly discussed the financial ramifications of "the U.S. Supreme Court ruling on that a big part of the Defense of Marriage Act (DOMA) is unconstitutional" and deem it religiously offensive to you, didn't you? Were you forced to read the article? Of course not. Perhaps you should deem all articles regarding Social Security, Medicare, Medicaid, Congress, the Federal Reserve, etc. as politically or religiously offensive to you also. Some people do, believe it or not. Besides, not every article posted on this blog personally applies to you. Get over it please. Thank you.

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Comment #16 by Maecl posted on
Maecl
Never thought I would see this subject here.  WE don't need same **** marriage.  Just change the tax laws.  That's all I have to say and I won't be following this thread.  Just want the government out of our lives.

4
Comment #17 by Shorebreak posted on
Shorebreak
Welcome to 'Amerika'. Where some people want to impose censorship, and even ban the posting of, on this blog site of an article. A serious article, by a nationally syndicated financial columnist, discussing the important financial impacts of a U.S. Supreme Court decision affecting a portion of our citizens. I expect this sort of thing in Iran, Yemen and Russia. But here? A country whose brave men and women, some of them not 'heterosexual', have given their lives to preserve our freedoms. You want the "government out of your life" Maeci? See how well you do without some of those hard fought for freedoms we enjoy?

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Comment #18 by paoli2 posted on
paoli2
Shorebreak:  I'm not in Yemen??  Oh dear I need to pay attention to which group I post to.  BTW, why is it ok for YOU to try to censor my replies and decide how much I can post yet if I make a negative reply or replies to an article I find offensive to my beliefs, I am not allowed to respond.  Is this how it is done in Yemen?  Are you sure "you" aren't in the wrong country and not me?  I love the way you pick and choose who you will throw a tirade at and how it seems I am always "first" on your list.  This must be the way they honor chosen ones in Yemen.   In the future, please do let me know which posts or articles I am allowed to reply to.  I would not want you to report me to Ken again.  You don't like my posts?.  "You" get over it and don't read them.  I have tried very hard to post to please certain members but I am only human so find someone else to take out your anger on.  Thank you for your consideration of my human frailty. 

5
Comment #19 by Shorebreak posted on
Shorebreak
Re: Paoli2 @ #18, Sunday, August 18, 2013 - 7:56 PM

Perhaps I've given you way too much credit in the past. Go for it. Scream how "offended" you are from the top of your lungs, and that you were "appalled that Ken would allow Sheryl to post such an article."  I find that very telling indeed. 

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Comment #20 by paoli2 posted on
paoli2
Re:  Shorebreak:  The only thing I find very "telling" is that every word I have posted to you this day seems to be true.  You are determined to keep provocating me no matter how I try to keep my peace. Why don't we make a truce to avoid each other's posts?  It will be certainly telling to see if you can do it. Have a good night. 

5
Comment #23 by foggy posted on
foggy
To paoli2 #14 - You refer to me as "your kind"....interesting how people stereotype someone they know nothing about by looking at a picture of a bridge.

Regarding financial issues - Here are some recent articles about important looming tax questions for same **** marriages that some may be interested in:

http://www.washingtonpost.com/blogs/federal-eye/wp/2013/08/19/cardin-irs-needs-to-quickly-address-tax-rules-for-same-****-couples/    

 http://www.bloomberg.com/news/2013-08-16/gay-married-couples-lacking-irs-guidance-risk-paying-more.html

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Comment #24 by paoli2 posted on
paoli2
Foggy:  It's amazing how eager some of you are to get a response from me even when I have been off of the net all day.  First, let me thank you for proving that everything I have already posted is exactly right.  IF Sheryl had just posted what the rights of all MARRIED people are and not focused on SAME **** in her article this would never have been an issue.  You could have been informed and if you are legal in your state found out what your rights are.  BUT, she, not I, turned this into a political issue by focusing on the SAME **** issue.  I have defended many of Sheryl's other articles when others have been so rude about them.  However, I cannot defend something I felt was done in the wrong manner.  The information was good and showed as usual Sheryl did her homework.  But I cannot agree with how it was presented.  So don't make ME the enemy here! 

As for my wording of "your kind".  If you found that offensive then you know in some small way how I felt seeing the words "SAME **** MARRIAGE" blasted at me in that article.  You are different from me in your thinking and your actions so we are not of the same kind.  What we both have in common is we are humans trying to exist on the same planet.  You are probably a very loving, kind human being who I would probably like if I were not being attacked for my own personal feelings.  I don't judge you by how you choose to live your life or think so don't judge me because I don't agree with it.  We all have to manage to live on this same planet together inspite of our differences and finding each other on this Forum/Blog.  My posting "your kind" was in no way meant to be insulting to you.  I was trying to make a point that in my mine we are not the same in many ways.  If I hurt your feelings, I apologize for that but you and I will always be different and as long as we are content with our own lives we should not waste time defending who we are.  

BTW, inspite of what you probably think of me, I have written letters to Washington to give you and yours all the rights you need as legal partners so that it would not have to come to "Same **** Marriages".  Unfortunately, Washington would not budge because I was told your people insisted on being married.  Now you still have to fight to get all states to accept you so don't waste your time with me.  I am not the enemy here.   Have a nice evening.

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Comment #26 by Jake posted on
Jake
Foggy, you're complaining about being stereotyped?  Yet in a previous post you describe people as "haters" just because they have a different opinion than you.

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Comment #27 by foggy posted on
foggy
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