The color of money

Michelle Singletary: Gay couples should learn ruling’s benefits, pitfalls

 

Washington Post Service

The Supreme Court decision striking down the federal Defense of Marriage Act opens a lot of financial doors for same-sex couples. But if you cross that threshold, it’s important that you understand your new rights.

Tax professionals will have new business opportunities thanks to the court’s ruling. It upheld a lower court’s decision that legalized same-sex marriage in California. And in a separate case, the high court ruled unconstitutional a section of DOMA that denied federal benefits to same-sex couples legally married in states that permit such marriages. At this point, 13 states and the District of Columbia allow same-sex marriages.

In all, the Supreme Court’s ruling on DOMA opens the door to more than 1,000 federal provisions in which marital status is a factor in determining or receiving benefits, rights and privileges, according to the Government Accountability Office. Here are three major areas of interest:

•  Being married gives you significant advantages under Social Security. You qualify for benefits as a survivor if you were married to your spouse for at least nine months before the worker died. A spouse can receive one-half of a retired worker’s full benefit unless the spouse begins collecting benefits before full retirement age.

You should also know that if you remarry, your benefits could be affected. Generally, you won’t be eligible for widow or widower’s benefits if the remarriage occurs before age 60, or age 50 if you are disabled.

Down the road, you are entitled to benefits even in the event of a divorce. If you split up, but your marriage lasted 10 years or longer, you can still receive benefits based on your ex-spouse’s record. Go to Social Security’s website (www.ssa.gov) for more details about spousal benefits.

Something else to consider — while the Supreme Court’s DOMA decision may help some couples become eligible for benefits, it could hurt others who choose to get married. Benefits such as Supplemental Security Income, Medicaid and Medicare are “means tested.”

Once married, both incomes are considered in determining financial eligibility.

•  Veterans who served during wartime may be eligible for financial assistance from the Department of Veterans Affairs to help pay for assistance with everyday needs such as cooking, bathing, feeding or dressing. As it concerns DOMA, this benefit is also available to veteran spouses or surviving spouses, who could be eligible for up to about $1,000 a month.

This is a benefit that isn’t well known but is of great help to many senior veterans and their spouses. The veteran has to have been honorably discharged and served at least 90 days, with at least one day during officially declared wartime.

•  Take the time to learn all your new federal tax benefits, especially as it relates to retirement planning.

If you get married and have a nonworking spouse, you may now be able to open an individual retirement account if you file a joint tax return. You have to have earned income to contribute to an IRA. But a spousal IRA provides an exception to the rule, allowing the working spouse to contribute to an IRA for his or her spouse.

Much is being said about same-sex couples who may now face a marriage penalty, which happens when spouses who earned similar salaries are pushed into a higher tax bracket.

Nick Kasprak, an analyst for the Tax Foundation, discusses the Supreme Court’s DOMA decision in a podcast you can listen to or download at www.taxfoundation.org.

“Despite the possibility of a penalty, joint tax returns generally provide tax relief, and they’re probably one of the biggest benefits that gay couples can now take advantage of (along with the estate tax exemption, which was at the center of the Supreme Court case),” Kasprak wrote in a blog post.

One thing not clear is whether same-sex couples will continue to enjoy federal benefits if they move from a state that recognizes their relationship to one that does not, Kasprak said.

Often people balk at paying a financial planner to help with their finances. But in this new financial territory for same-sex couples, it’s worth the money to get good advice. Additionally, there are so many rules and potentially complicated financial issues to contend with if you divorce. If you split and your spouse has a retirement plan such as a 401(k) or pension plan, you’re entitled to a share of the balance.

Here’s the thing. There’s more you now need to know. So become informed so you can take full advantage of your new financial rights.

Hear Michelle Singletary’s personal finance reports on www.npr.org. Readers may write to her c/o The Washington Post, 1150 15th St., NW, Washington DC 20081.

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