Historic SCOTUS ruling highlights need for estate planning

Historic SCOTUS ruling highlights need for estate planning

In a historic ruling, ending years of public debate, the Supreme Court voted to uphold the right of same-sex couples to get married.

With a 5–4 vote, the court ruled June 26 that states must allow same-sex couples to marry and they must recognize same-sex marriages from other states.

The decision in the case, Obergefell v. Hodges, underscores the significance of marriage as a fundamental right. While the court ruled in favor of same-sex marriage, it will take some states time to implement the law. Today, 37 states recognize gay marriage.

Still, along with the right to marry, same-sex couples will also be affected by many legal and regulatory conditions that go along with marriage. Understanding and organizing a financial plan as a married couple can be complex.

Particularly in states that do not recognize same-sex marriage, couples looking to get married may want to begin planning for some important financial and tax-related considerations. Here are some areas where the rules would now change for same-sex couples.

Estate and financial planning

  • Social Security benefits. Married couples will have access to spousal and survivor benefits on both the federal and state level. Even with the previous defeat of the Defense of Marriage Act (DOMA) in 2013, federal benefits were not available to couples who lived in states that banned gay marriage as benefit distribution was based on a “place of residence” standard versus “place of celebration” of marriage.
  • Dying without a will. In light of the Supreme Court’s ruling, the surviving spouse will typically inherit the estate. Still, in the first step of estate planning, married couples should complete some key documents including a will, durable powers of attorney, and health-care proxies, and possibly a trust, to outline their wishes.
  • Spousal beneficiary rights. Same-sex married couples will now be entitled to survivor benefits involving pensions and retirement assets.
  • Filing joint federal and state tax returns. Same-sex couples will be able to file joint state tax returns and receive the same tax advantages available to married couples. After the DOMA ruling in 2013, same-sex married couples filed joint federal tax returns but may have had to file individual state returns if they moved to a state that did not recognize same-sex marriage. There may also be new planning considerations. High earners, in particular, may be subject to a higher marginal tax bracket or phase-out of deductions when filing jointly.

Health-care decision-making

  • Hospital visitation rights. With the ruling on same-sex marriage, rules will change around hospital visitation as spouses play a larger role in health-care related decision making.
  • Employer-provided health care. Prior to the decision, some companies had the option not to include the partners of employees in employer-sponsored health insurance plans. Additionally, in states that previously did not recognize same-sex marriage, employer group health benefits provided to partners were subject to income taxes.
  • Financial responsibilities and Medicaid planning. As state benefits, such as Medicaid, are income-based, Medicaid and other financial responsibilities will be viewed in the context of a married couple.

The family unit
How families of married couples are structured and viewed in legal documents and proceedings will now apply to same-sex married couples. Several areas to consider include:

  • Birth and death certificates
  • Adoption and guardianship rights
  • Spousal privileged information in legal proceedings
  • Ability to initiate divorce proceedings

Although the Supreme Court’s decision makes it illegal to ban same-sex marriage in any state, but local implementation of the law will not likely be immediate. Still, couples may want to be proactive and seek professional advice and explore the financial and estate planning implications of marriage.


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