Friday’s historic decision by the Supreme Court legalizing same-sex marriage across the U.S. is certain to impact financial advisors working with same-sex couples.
Up until last Friday advisors in many states had to create workarounds to provide same-sex couples the same legal benefits and protections that married couples have such as automatically inheriting pension and Social Security benefits when a spouse dies. Now advisors will be working with clients to unwind those workarounds for married same-sex couples.
“The core planning areas are now essentially the same for gay and straight couples that decide to marry,” says Joshua Hatfield Charles, founder of Financial-360, an independent financial services firm that serves the Washington, DC area. “The work we as advisors will need to do for our LGBT clients in the future will involve unwinding many of the workarounds put in place because they existed as legal strangers in their states.”
One example of such a workaround: a life insurance policy to cover estate taxes when one partner dies. Such policies will no longer be necessary because estates for married same-sex couples will pass on to the surviving spouse tax-free, just like they do for married couples.
Same-sex couples will also have the option to file taxes jointly, which can save money if one spouse earns substantially more than the other. The high court’s decision “makes everyone’s lives easier because now we can plan for same-sex as we plan for the opposite or traditional marriages,” says Cary Carbonaro, managing director, United Capital Private Wealth Counseling, based in Huntington, Long Island, New York.
The Supreme Court decision overturned gay marriage bans in 13 states. Same-sex marriage was already legal in 37 other states plus the District of Columbia as a result of state actions or lower court actions. Justice Anthony Kennedy, referring to same-sex couples, wrote, ”They “ask for equal dignity in the eyes of the law. The constitution grants them that right.”