Financial Implications of SCOTUS Ruling for Same-Sex Couples

The Supreme Court ruled last month that the ban on same-sex marriages in 13 states was unconstitutional. With the removal of the ban, same-sex couples may want to consider the financial implications of being legally married.

For most same-sex couples, the financial impact will be overwhelmingly positive. Legally recognized marriages allow couples to file taxes jointly. Married individuals can also include their spouse on their healthcare insurance without additional tax liability and, as a married couple; they are entitled to spousal social security benefits. Same-sex couples previously committed to domestic partnerships or civil unions, which are legal in eight states including California, may see less of an impact on their finances because of their existing right to file taxes jointly.

Same-sex couples in states such as Texas and Ohio, where the ban remained legal until June 26, will now have their first opportunity to file joint tax returns. This can mean an increase or decrease in the couple’s annual tax bill – some couples will be pushed into a higher tax bracket and pay more than they would have filing separately. Others, usually those with more disparate incomes may pay less as a married couple than they would as two individuals.

Legally recognized marriages also afford the opportunity for same-sex couples to list one another as beneficiaries on their retirement accounts and insurance policies. This has a direct effect on both pension planning and estate planning – the ability to transfer wealth or property to a partner makes planning for the future easier. Other advantages of committing to a legally recognized marriage include greater eligibility to receive health insurance from a spouse’s employer and the avoidance of imputed taxes incurred by purchasing one’s own healthcare insurance.

Other financial benefits of the ruling include retirement security. Individuals in same-sex marriages will now be able to access their partner’s Social Security retirement benefits. These benefits comprise an estimated 38 % of income for many senior Americans, and will likely have a significant financial impact on some couples. Spousal benefits alone can amount to an extra $780 a month on average, according to the Human Rights Campaign.

While many couples may see an immediate effect on their wallet during next tax season, others will reclaim the benefits later on in life. Financial planning depends on both a long-term and a short-term commitment to understanding one’s own finances to spend and save in a responsible way.

Though not ideal, it is also important to be financially knowledgeable in the event of a possible separation of assets should a divorce be in your future. While this process can be tough for any couple, the financial strain of a divorce can be especially difficult if a couple is not legally married. Now, same-sex couples can decide if they want a prenuptial agreement that can help both parties understand how the family business, inheritance or other substantial assets may be divided.

Although many couples may be eager to take advantage of new opportunities afforded by the recent SCOTUS decision, it is important to take time to prepare for the financial impacts of marriage. All couples should plan for a financial future by building a budget and by working with a financial advisor to understand the details.

Alan Whitman is a Financial Advisor with the Global Wealth Management Division of Morgan Stanley in Pasadena. The information contained in this interview is not a solicitation to purchase or sell investments. Any information presented is general in nature and not intended to provide individually tailored investment advice. The strategies and/or investments referenced may not be suitable for all investors as the appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives. Investing involves risks and there is always the potential of losing money when you invest. Morgan Stanley Smith Barney LLC (“Morgan Stanley”), its affiliates and Morgan Stanley Financial Advisors do not provide tax or legal advice. Investors should consult their tax advisor for matters involving taxation and tax planning and their attorney for matters involving trust and estate planning and other legal matters. The views expressed herein are those of the author and may not necessarily reflect the views of Morgan Stanley Wealth Management, or its affiliates. Morgan Stanley Smith Barney, LLC, member SIPC.

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