Same-Sex-Marriage

Implications of the Supreme Court Decision on Same-Sex Marriage

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In a 5-4 decision, the U.S. Supreme Court ruled that the principles of due process and equal protection of the U.S. Constitution’s 14th Amendment require all states to recognize the legal validity of same-sex marriage. As a result, all states must immediately allow same-sex couples to marry. In addition, all states must recognize the validity of same-sex marriages performed in other states (Obergefell v. Hodges, 135 S.Ct. 1039 – June 26, 2015).

 

The decision has far reaching implications for life insurance and financial service professionals. Here is a list of the potential benefits and consequences of a state sanctioned legal marriage:

 

  1. Unlimited marital deduction for Federal estate tax planning
  2. Marital-Credit Shelter trust planning to utilize part or all of the estate tax exemption at the first death
  3. Portability planning to carry over any unused estate tax exemption from the estate of the first spouse to the surviving spouse
  4. Spousal retirement benefits and survivor benefits for Social Security
  5. Married filing joint status for federal income tax planning
  6. State spousal property rights during lifetime such as 50-50 community property rights in the ten states that recognize community property (AK, AZ, CA, ID, LA, NM, NV, TX, WA, WI)
  7. State spousal property rights in probate property where a decedent has no will (intestate) and the surviving spouse is entitled to at least their intestate share
  8. State spousal property rights in probate property to elect against a will for at least their intestate share.
  9. Split gift election ($14,000 / $28,000) for gift tax annual exclusions
  10. Split gift election ($5,430,000 / $10,860,000) for lifetime gift exemptions
  11. ERISA protection as a spouse under an employer provided qualified retirement plan    (i.e. defined benefit, 401(k), 403(b), 457(b), profit sharing, etc.)
  12. Spousal rights under employer sponsored medical insurance plans
  13. Spousal rights under employer sponsored long term care benefit plans
  14. Surviving spouse rollover rights for IRAs and Roth IRAs at the death of the first spouse
  15. Surviving spouse non-qualified annuity continuation rights at the death of the first spouse
  16. Upon divorce, the right to negotiate a Qualified Domestic Relations Order (QDRO) for a tax free transfer of employer provided qualified retirement plans
  17. Upon divorce, the right to negotiate a Transfer Incident to Divorce for a tax free transfer of an IRA from one spouse to the other
  18. Upon divorce, the right to negotiate a tax free transfer of a non-qualified annuity from one spouse to the other

 

 

Life insurance carriers may need to adjust their financial underwriting and insurable interest guidelines to treat same-sex marriages similar to the standards and guidelines used for traditional marriages.

 

In summary, for financial planning, same-sex marriages should be treated the same as traditional marriages for any financial, estate, retirement, tax, or employer benefit plan related purpose.

 

Russell E. Towers  JD, CLU, ChFC    
Vice President – Business & Estate Planning    
Brokers’ Service Marketing Group
russ@bsmg.net