Whether you reside in Massachusetts, and have the right to marry, or live in a state where you cannot, gay and lesbian couples should be aware of the financial implications of marriage (as well as domestic partnership). Generally, the objectives of financial planning should include one or more of the following:

• Retirement planning
• Estate planning (wills, taxes)
• College funding, financial aid
• Budgeting
• Asset management (investments)
• Risk management (insurance)
• Tax planning

 
Each topic can and should be covered in depth, with your financial advisor or attorney, as appropriate. Same sex couples, whether married, in domestic partner relationships, or civil unions, need to structure their relationships to maximize legal protection while achieving their financial goals.

Why the need for special planning for same sex couples?

Gay and lesbian couples In Massachusetts, and other states that afford legal recognition to same sex couples, need to know the difference between the rights granted by the states vs. those granted by federal laws. Generally speaking, the issues covered by state law include property rights, marriage, children, divorce, states taxes, and insurance. It is in these areas that gay and lesbian married couples are recognized as having the same rights and responsibilities as heterosexual married couples.

Unfortunately, there are many more areas that are governed by Federal law, such as retirement plan rules, Social Security, pension rules, federal taxation, and immigration. Because of the 1996 Defense of Marriage Act (DOMA), gay and lesbian couples are prohibited from recognition as married for federal purposes. The actual text of DOMA (Pub.L. 104-199, Section 3) reads as follows:

“In determining the meaning of any act of Congress or of any ruling, regulation, or interpretation of the various administrative bureaus or agencies of the United States, the word “marriage” means only a legal union between one man and one woman as husband and wife, and the word “spouse” refers only to a person of the opposite sex who is a husband or wife.”

Because of DOMA, same sex married couples probably cannot (for now):

• File joint Federal tax returns
• Roll over deceased spouse’s IRA
• Receive Social Security Survivor benefits
• Receive pension survivor benefits (unless specified i.e. for Massachusetts state workers)
• Receive permanent resident status via marriage to American citizen
• Enjoy the same marriage rights granted by Massachusetts in other states

 
Massachusetts benefits for married couples

Because the state controls most insurance laws, same sex married couples in Massachusetts should be able to enjoy:

• Multicar discount for auto insurance
• Spousal coverage on employer-sponsored health plans Accidental Death Benefit for State Workers’ surviving spouse
• Next of kin status under Worker’s Compensation
• Ability to transfer assets to spouse without losing eligibility for MassHealth (state sponsored health care)
• Family residence not a countable asset for spend down or reimbursement to MassHealth

 
Property Ownership Laws

Property ownership laws and regulations are also the province of state governments. Massachusetts married couples can avail themselves of some of the property ownership rights available to heterosexual couples, including:

• Homestead Protection $300,000 applies to both spouses and children, not only one partner
• Can own property as tenants by the entirety rather than joint tenants
• One spouse can add the other to deed without Massachusetts gift tax liability

Financial planning can be a complicated task for anyone, but the special rules regarding gay and lesbian couples can make planning especially daunting. Consult your own financial advisor to see how the rules apply to your situation.

Dena Lebowitz, EA, MST provides a full range of tax and financial planning services from her office in Boston.