For Richer Or Poorer: Advice for Couples Planning on a Worry-Free Future
This is a guest post from Robert A. Dienelt, a Financial Advisor and Accredited Asset Management Specialist (AAMS) from Jackson, Mississippi. While Family Fairness usually discusses the legal side of family planning, Robert will be talking about financial considerations all couples should make before marrying, registering their civil union or domestic partnership, or using legal documents to grant their partners rights.
Every spousal financial relationship is unique. Through the years, couples develop their own systems for handling financial matters. Sometimes it is one partner's responsibility to manage all finances, sometimes the other's, and sometimes a combination. Whatever the situation, certain information should be shared.
Couples should consider mutual responsibility for and knowledge of:
- Retirement plans: Take time to fully acquaint each other with employer retirement benefits. Both partners should have current knowledge of pension plans, 401(k) accounts, and IRAs. For a complete picture of expected retirement benefits, become familiar with each other's Social Security benefits as well. Understanding retirement benefit information will bring clarify and facilitate retirement planning.
- Credit card documents: This one can be scary. Some may prefer to not know how much credit card debt their spouse has accumulated. But it's wise to know where to find account numbers in case one loses his or her wallet and needs the other to help cancel the card. Also, mutual awareness of credit card debt amounts will help with developing a family's overall financial plan.
- Power of attorney: It is generally a good idea to have power of attorney on any individually owned assets, just in case one partner becomes ill or otherwise unavailable. Power of attorney can be limited to specific functions for a certain period, such as selling stocks or withdrawing money while traveling. A broad document that authorizes each partner to handle almost any situation in the other's absence is also a consideration.
- Wills, trusts, and life insurance: It's especially important to share information about wills, trusts, and life insurance if either has been married before. There could be restrictions on how some assets may be used and beneficiaries left unchanged by mistake. Most important, make sure each partner knows where to find the will and can easily access it if something were to happen.
- Health insurance policies: Most insurance companies will cover care administered in the first 24 to 48 hours of a medical emergency, even if the coverage details have not been sorted out. But the situation isn't as clear with hospital visits that are less urgent. If each partner is covered under a different insurance plan, both should be familiarized with the requirement "hoops" they may have to jump through. If one spouse had a sudden illness, would the other know which doctor to call first to get an okay for treatment? If not, they risk running up big bills at an out-of-network doctor.
- Business loans: If one spouse owns a business or is a partner in a professional firm, both should know about any personally guaranteed loans. It is critical to be aware of liabilities since household assets can be hit if the business can't repay the loan.
While many don't necessarily need to know everything about their spouse's finances, maintaining a working knowledge of the above points can help maintain proper, balanced control over a family's financial affairs.
Have a question, comment, or response? Share your thoughts.The Gay Tax: How the Estate Tax Marital Deduction Costs Same-Sex Couples $3.3 Million
The Williams Institute of UCLA School of Law has released a study [pdf] that shows that same-sex couples are assessed an average of $3.3 million more in taxes upon the death of their partner than a similarly situated opposite-sex couple. Because estate taxes are set federally, the Defense of Marriage Act prohibits even married same-sex couples from taking advantage of the marital deduction.
Says Michael D. Steinberger, the author of the study:
Even in 2010, when the estate tax is currently slated to be repealed, federal law allows different-sex married couples to shelter an additional $3 million in capital gains when a partner dies. Regardless of your views about this tax, it is a costly implication of legal discrimination against gay and lesbian couples.
The study also estimated that if the current laws are not changed, gay and lesbian couples will have lost more than $3.5 billion in the decade preceding 2011. Steinberger advises that: "As Congress turns to legislation in December to address the estate tax before it disappears in 2010, it should address these inequalities for same-sex couples and their families."
The cost to provide equal benefits to same-sex couples would be one twentieth of one percent (.05%) of the total federal government revenue.
The full study, Federal Estate Tax Disadvantages for Same-Sex Couples [pdf], is available at the Williams Institute website.
Have a question, comment, or response? Share your thoughts.National Call In: The Future of Same-Sex Marriage
The National LGBT Bar Association held a conference call today to discuss the many court and legislative battles the gay and lesbian community has won recently, and also to look at the future of the same-sex marriage movement. Executive Director D'Arcy Kemnitz (pictured left) moderated the call and was joined by Jennifer Pizer, Senior Counsel and Director of the National Marriage Project at Lambda Legal, and Mary Bonauto, Civil Rights Project Director at Gay & Lesbian Advocates & Defenders (GLAD).
Among the topics discussed were California's Proposition 8, the recent victories in Vermont, Maine, and Iowa, Washington D.C., the status of efforts in New Hampshire and New York, and GLAD's current federal court Defense of Marriage Act (DOMA) challenge.
UPDATE: A copy of the recording is now available at the National LGBT Bar Association website. You may scroll to the bottom of this post for a link to the approximately 1-hour long audio, or read some highlights of the issues that were discussed: Read More
Have a question, comment, or response? Share your thoughts.DOMA Challenge in Federal Tax Court
Charles Merrill, millionaire and cousin of the co-founder of Merrill Lynch, joined by Kevin Boyle, his partner of 16 years, is making a challenge to the Defense of Marriage Act (DOMA), according to Pam's House Blend. DOMA, the 1996 statute permitting the federal government to ignore same-sex marriages performed by states, has been challenged in federal court before, but Merrill's case marks the first time the discriminatory law has been attacked in tax court.
Merrill has not paid federal income taxes since 2004 as part of an on-going protest against DOMA and the inequalities gay and lesbian couples face in the United States tax code. Merrill, who legally married his partner in California prior to the passage of Proposition 8, argues that DOMA is unconstitutional because states, not the federal government, have the power to define marriage. According to Merrill, "the government has no business in checking out the gender of two people who want to be married."
The litigation makes two points against DOMA: First, that federal tax benefits and obligations should not be restricted solely to opposite-sex couples to the exclusion of legally married same-sex couples, and second that DOMA's definition of marriage is based on religion, which violates the Establishment Clause of the First Amendment.
Merrill's case has been referred to Washington D.C. for an en banc hearing before all 19 judges on the United States Tax Court. Though the court is formally a part of the legislative rather than judicial branch of government, it has previously resolved constitutional issues in other cases. The challenge may be appealed to the Ninth Circuit Court of Appeals and then to the US Supreme Court for final adjudication.
A court date has not yet been set.
Have a question, comment, or response? Share your thoughts.Tax Information for Married Same-Sex Couples
As tax season approaches, many same-sex couples who have married or entered into a domestic partnership face new challenges and headaches with their filings. This is because while some states permit these couples to file a joint state tax return, The Federal Defense of Marriage Act ("DOMA"), which defines marriage as between a man and a woman, prohibits the IRS from recognizing your union. As a result, couples find they often have to prepare two completely different filings -- one joint and one single -- to complete their taxes.
Further, many financial decisions married couples take for granted wind up creating tax consequences for same-sex couples. For instance, employee health insurance benefits extended to a domestic partner must be claimed by that partner as income even though heterosexual married couples have this income exempted. Keep in mind that many software packages and online tax preparers are not properly equipped to handle this unique problems. Partners in this situation and especially those with particularly complex filings should consult a tax professional with experience with same-sex clients.
Lambda Legal also recommends including a disclosure statement [pdf] in your federal returns to indicate your partnered status despite filing as a single individual. This is because your tax status as "single" may be used against you in the future, even in non-tax settings. A disclosure statement identifying that you are married or partnered and are filing "single" only because of DOMA can help to protect you.
Visit Lambda Legal for more tax considerations for same-sex couples. Remember, though, that generic advice is no substitute for the assistance of an experienced professional. Tax law is complex and changes from year to year, and every individual and couple is in a unique situation.
Have a question, comment, or response? Share your thoughts.