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ESTATE PLANNING FOR SAME SEX MARRIED COUPLES CHANGES DUE TO SUPREME COURT DECISION

Although Texas does not recognize same-sex marriages, here are a few estate planning considerations for same-sex married couples (couples who were legally married in another state) who live in Texas since the U.S. Supreme Court has struck down the Defense of Marriage Act:

  1. Federal employees and retirees have until August 26, 2013 to add their same-sex spouse to health coverage. Federal retirees have until June 26, 2015 to add their same-sex spouse or marry and then add their same-sex spouse to their federal pensions.
  2. Since income tax returns can be amended up to three (3) years, same-sex married couples should review their income tax returns since couples with disparate income usually pay less if they file jointly.
  3. Even though Texas does not recognize same-sex marriages, such married couples may now be able to claim federal marital deductions and Q-TIP elections commonly used for traditionally married (heterosexual) couples if the state of marriage becomes the IRS standard for marriage validity. So, this will need to be clarified by the IRS.
  4. The surviving spouse in a same-sex marriage can claim a spousal rollover for IRA and tax deferred qualified plan benefits. However, the definition of “spouse” in the IRA or plan custodial agreement will be paramount – as will the choice of law provision. For example, Vanguard’s custodial agreement defines spouse as defined under the owner’s state of domicile. So, that would be fine for a state such as California, but it would not if the surviving spouse of a same-sex marriage lived in Texas.  On the other hand, Fidelity’s custody agreement construes according to the laws of Massachusetts – a state that recognizes same-sex marriages.
  5. In Texas, same-sex married couples would not get the Social Security benefits and planning options of traditionally married couples. Same-sex married couples that live in states that recognize same-sex marriages will now have the same Social Security benefits that traditionally married couples have. So, for example, the surviving spouse of a same-sex marriage may now be entitled to 100% of their deceased spouse’s Social Security income (assuming it was greater than the Social Security income of the surviving spouse).
  6. Until there is guidance from the Center for Medicare and Medicaid Services, it is unclear if long-term care Medicaid spousal protections will be available for same-sex married couples who live in Texas. Federal long-term care Medicaid grants married couples some limited protection to prevent spousal impoverishment. So, traditionally married couples often can protect an amount far greater than the maximum protected resource amount without “spend-down” (since Medicaid is “means-tested”) if their income is low enough (whereas, same-sex married couples are not). So, a traditionally married couple might be able to protect hundreds of thousands of dollars while the applicant who has a same-sex marriage would have to spend down to the single person countable resource limit of $2,000 (if that applicant lived in Texas). Furthermore, there is no transfer penalty if there is a transfer from one spouse to another. Since Texas does not recognize same-sex marriages, there would presently be a transfer penalty if the married couple was of the same sex resulting in likely Medicaid ineligibility if an application was made within five (5) years (long-term care Medicaid has a five (5) year “look back” period assuming transfers made within five (5) years were done on purpose to get Medicaid benefits such as the payment of nursing home bills, drugs, etc.). Furthermore, one has to consider and plan for estate recovery (the right of the state to make a claim against the estate of the Medicaid recipient). If one is survived by a spouse, it is an exception to the state making a successful claim against non–countable resources such as a home or vehicle.  This is not available to the surviving spouse of a same-sex marriage.
  7. Those who depend on Supplemental Security Income or other public benefits know that if they marry, a spouse’s income and resources are counted in determining eligibility. So, this adversely affects same-sex married couples who live in states that do recognize same-sex marriages. Ironically, states such as Texas that have anti-homosexual laws will work to provide Supplemental Security Income benefits for same-sex married couples (since Texas doesn’t recognize such marriages) – contrary to the policy of Texas to promote traditional marriage.

These are but a few of estate planning considerations to be made by same-sex married couples in Texas in light of the Supreme Court decision to strike down the Defense of Marriage Act. It is anticipated there will be much litigation in the future as there is no doubt that there will be lawsuits seeking equal protection.

For help with Estate Planning in the Dallas are call our office for a consultation

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