June 02, 2014
Article by David Glusman, Advisory Services Partner, "Tax Advice for Pennsylvania's LGBT Spouses-to-Be," Featured in Philadelphia Business Journal
Now that the federal courts have ruled that Pennsylvania’s ban on same-sex marriages is unconstitutional, and Governor Corbett has announced that the Commonwealth of Pennsylvania will not appeal the ruling, it is an appropriate time to consider the gains and losses, pluses and minuses, and financial planning challenges for LGBT and other non-traditional couples.
It has been determined that LGBT couples can file joint federal income tax returns if they are married. In fact, if they were legally married in a state or country that recognized same-sex marriages, they are required to file joint federal income tax returns or, alternately, “married filing separately.” As with traditional heterosexual couples, the decision to file either married or married filing separately can be based on a variety of financial and other considerations.
Perhaps most importantly, with the law in Pennsylvania now settled, Pennsylvania LGBT couples need to look at income tax planning, estate tax planning, gift planning and other aspects of their wills, trusts and joint decisions with essentially the same options for processes and pitfalls, as traditional married couples. Other nontraditional couples -- whether same-sex or opposite sex, living together, owning property together and considering themselves to be “life partners” -- need to continue to recognize where good planning, tax advice and legal advice are required to avoid unforeseen problems for the couple, their families, their children and other loved ones.
The writing, or rewriting, of a last will and testament ensures both that your wishes are met and, in concert with your tax planning, that your estate is able to enjoy optimal tax benefits based on federal and state law. Where appropriate, a trust may be a desired mechanism for directing how your funds are to be used (especially for minor children or younger adults who may not yet be deemed capable of properly managing substantial funds upon your death). With marriage comes the need to verify that the beneficiary designations are up-to-date for all pension-related assets. This includes an IRA account, a 401(k), a 403B or any other type of pension. In some cases, companies have other deferred compensation arrangements, and making sure, through your HR office, that these are up-to-date is imperative. It is important to remember that in the case of pension assets, the spouse routinely needs to “sign off” if a beneficiary other than the spouse is designated.