Explore the brave new world of estate planning.

  • Planning for same sex marriage and strategies for “non-traditional” and blended families.
  • Understanding inheritance rights and posthumous birth laws.
  • Considering a loved one with special needs.

Comprehensive estate planning allows individuals and couples to maximize control over where their assets will go upon their death— while minimizing taxes so they can leave as much as possible to each other, their loved ones, and charitable causes.  While this sounds simple enough, most laws regarding how estates are handled are designed with a traditional nuclear family in mind—a husband and wife and their biological children. Although the U.S. Census Bureau’s definition of a family, “a group of two persons or more (one of whom is the householder) residing together and related by birth, marriage, or adoption,” has not changed, its definition of married-couple families now includes same-sex married couples.

The Census Bureau also recently revised its relationship categories. Historically, only two classifications were included as relationship categories: Spouse (husband/wife) and Unmarried Partner. The revised categories clearly reflect the changing definition of today’s modern family: Opposite sex Spouse (husband/wife), Opposite sex Unmarried Partner, Same sex Spouse (husband/wife), and Same sex Unmarried Partner.

As families evolve and divorce and remarriage remain common-and rapid advances in reproductive technology continue-how can today’s modern families plan for their futures?

Planning Considerations for for same sex marriage
With the dramatic ruling of the Supreme Court in June 2015 making same sex marriage legal nationwide, the principle question of marriage for many same sex couples has shifted. It is no longer “Why can’t we get married?” but “Should we get married?” The following are some of the key areas in which marriage will affect the new family’s financial situation.

When the Supreme Court invalidated the Defense of Marriage Act in 2013, married same sex couples became obligated, for the first time, to file their federal taxes jointly. However, it also subjected these couples to the so-called “marriage penalty,” which in many cases assesses married couples’ taxes at a higher rate than if the couple were filing separately. The marriage penalty hits couples who make about the same amount of money. If one spouse makes a lot more than the other, or if one spouse doesn’t work at all, a couple may actually save money by filing jointly. With the ruling overturning bans on same sex marriage, couples living in states that banned same-sex marriage no longer face the burden of filing separate state tax returns. 

Estate planning
Marriage offers some very significant estate planning benefits to high-net-worth same-sex couples. The Supreme Court’s 2013 decision extended all of the spousal benefits in federal estate tax law to same sex married couples. As a result, a surviving same sex spouse is able to inherit his or her spouse’s entire estate without paying estate or gift taxes. They can also take advantage of estate tax “portability,” where a surviving spouse retains any unused amount of the other spouse’s estate tax exemption. Same-sex couples can now use gift splitting to give up to $28,000 per year to anyone they choose without triggering gift taxes. In addition, same sex couples that live in states that once banned same sex marriage can now pass their estates to the surviving spouse without any state estate taxes just like they can for federal estate tax purposes.

Social Security
Marriage can also enable a same sex spouse to collect survivor benefits from Social Security. It no longer matters where the couple lives when applying for Social Security benefits. In the past, a couple had to live in a state that recognized same-sex marriage when applying for benefits. 

Retirement planning
Same sex marriages have the same status as opposite sex marriages under ERISA and tax laws that govern qualified retirement plans, such as 401(k) plans and IRAs. A same sex spouse has exactly the same rights to benefits and retirement savings as any married spouse. 

End-of-life care
Same sex spouses have the same rights and responsibilities over health and financial decisions as traditional opposite sex spouses. Although it is still important to have powers of attorney delegating authority over these decisions, the days of not being able to visit a spouse in the hospital or make critical choices about healthcare are past for same sex spouses. Same sex couples may now travel freely across state lines without having to worry about proving that they are recognized to make decisions for a spouse. However, it is still a good idea for all couples, same sex or opposite sex couples, to always have easy access to their healthcare decision documents when they travel. 

Download the full article to continue reading about inheritance rights and posthumous birth laws, strategies for nontraditional and blended families, and caring for a special needs loved one. 

This publication is for informational purposes only and is not intended as an offer or solicitation for the sale of any financial product or service. This publication is not designed or intended to provide financial, tax, legal, accounting, or other  professional advice since such advice always requires consideration of individual circumstances. If professional advice is needed, the services of a professional advisor should be sought. 

IRS Circular 230 disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that, while this presentation is not intended to provide tax advice, in the event that any information contained in this presentation is construed to be tax advice, the information was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax related penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any matters addressed herein.

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