One Year Later: How Same-Sex Marriage Rights Have Changed LGBTs’ Financial Lives

“The IRS! Marriage penalty! AMT! Ohmygosh, these are things that the gay community – people in higher incomes for sure – are encountering,” said Young, during a press event at The Center in Manhattan. “Taxes are huge. People are surprised the first time they file taxes and they’re in a different tax bracket and they may have to pay the alternative minimum tax, which originally was a tax for millionaires.”

Krider also reiterated this point during a conversation with ThinkAdvsior.

In some cases, she said, there was a “little bit of a sticker shock” at tax time.

“Even if they were married before the [Defense of Marriage Act], they were filing their taxes separately,” she said. “Once they started filing married, they found themselves in a higher bracket so the tax bill was a little higher. We’ve always jokingly called it the marriage penalty.”

Marriage also brings many tax benefits to same-sex couples that previously would not have had. For instance, Fiduciary Trust’s Thanda Fields Brassard said one of the biggest benefits to same-sex couples can now enjoy is the unlimited marital deduction. Brassard has talked about the financial planning issues facing the LGBT community for more than 10 years.

“In federal tax law, if you are married and you transfer property to your spouse either during lifetime or at death, there’s absolutely no tax consequence to that at that point in time,” Brassard told ThinkAdvisor. “As you can imagine, before this case, if you had a situation where a couple was married for state purposes but not for federal purposes and one spouse gave another spouse a million dollars – on the state level, there might be no tax consequences. From a federal level, there were huge tax consequences.”

Brassard, an estate planner, said this is “one of the most important benefits” that same-sex couples now have.

“Think about all the possible ways you might be making a gift to your spouse – whether it’s writing a check for them, paying their taxes, paying a real estate bill for a piece of property that you both own, taking withdrawals out of a joint checking account or the other person’s checking account,” she told ThinkAdvisor. “I mean there’s so many ways in everyday life that comes into play. Before these cases, it was a real problem for same-sex couples to navigate.”

In some cases, Krider said couples may have had to unwind legal documents before being able to get married and take advantage of many of these tax benefits.

“A lot of our clients – as we used to call it ‘duplicating marriage via legal documents’ – had to unwind some of that because it became unnecessary,” she told ThinkAdvisor. “I had one older couple where the older [man] had acutally adopted the younger because that was the only way they could duplicate a family relationship. After marriage was legal, they went to a judge to have the adoption vacated.”

Struggles Remain

While marriage for same-sex couples has brought with it many benefits, the Prudential survey reveals there are still many financial struggles facing the LGBT community.

“Their dreams are coming true, but they also have lots of issues,” Sluyter said. Adding “Wage inequality, workplace insecurity, housing rights are significant overlays still. They’re causing this inability to really, truly, fundamentally address financial security in this community.”

For example, the survey finds the LGBT community faces income gaps, which may limit their ability to prepare for the future. According to the survey, lesbian women earn less than heterosexual women, reporting an average annual salary of $45,606 vs. $51,461. Gay men reported earning an average of $56,936, with heterosexual men earning $83,469.

Glennda Testone, the executive director of The Center, said that much of what she sees every day is echoed in this report.

“It’s incredible to be able to have concrete data to back up the things that people say to us on a regular basis,” she said during a press event at The Center. “People in our community are struggling to make ends meet. They are concerned about the future. They are concerned about how do I save for tomorrow when I’m trying to survive and get through today.”

— Related on ThinkAdvisor:

• Treasury, IRS Seek to Clarify Same-Sex Marriage Tax Rules