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Category Archives: Marriage

Now That You are Legally Married, Is it Still Important to Have a Will?

15 Sunday Jun 2014

Posted by Eleanor Doermann, J.D. - Pathway Law P.C. in Estate Planning, Financial Planning, Marriage

≈ Comments Off on Now That You are Legally Married, Is it Still Important to Have a Will?

The short answer is yes.

The long answer is that for many years, LGBT folks have been told how important it is to have a will because we had none of the legal protections of marriage or registered domestic partnership, and the state laws of intestacy (inheritance without a will) left same sex partners high and dry. This lack of any formal legal status in Washington prior to 2007 coupled with a higher likelihood of family members disapproving of an LGBT person’s choice of partner resulted in heart wrenching scenarios. A gay man whose partner died in the 1980’s recently shared with me that right after his partner’s funeral, his partner’s family arrived with a moving van and emptied their house of anything that he could not produce a receipt for, and without a will in place there was nothing he could do about it.

Is having a will any less important now that same-sex couples can be legally married? In essence a will is your set of instructions about who should get your property when you die, and it is often part of a larger overall estate plan which might also include non-probate assets such as life insurance policies, retirement accounts, or trusts. Today, if you are legally married or partnered and you die without a will or other estate plan in place, your surviving spouse or partner will not be as badly off as before. However without a will, the State of Washington still might not distribute your property in a way that either of you would have wanted. It is not as simple as your spouse getting everything. Exactly how your property will be distributed will depend on who all your surviving legal family members are.
Here are the basic intestacy rules:

  • If you have a spouse or registered domestic partner and
    • You have children: When you die, your spouse or partner will get your share of your community property, with the result that all of what you owned together now belongs to him or her. (For more discussion of what constitutes community and separate property, see my last post: http://equality365.com/2014/05/how-does-legality-of-marriage-change-things/ .) In addition, your spouse or partner will get half of your separate property, with the other half getting divided amongst your children.
    • You do not have children (or do not have a legal parent relationship to the children in your life): Besides receiving your share of community property, your spouse or partner will get three quarters of your separate property, and the remaining quarter will go your surviving parent(s). If there is no parent, the remaining quarter goes to your surviving sibling(s). If there is no sibling, all of your separate property goes to your spouse or partner.
  • If you do not have a legal spouse or registered domestic partner and
    • You have children: All of your property will be divided amongst your children.
    • You do not have children (or do not have a legal parenting relationship to the children in your life): All of your property will go to your surviving parent(s). If there is no parent, all will go to your surviving sibling(s), then to grandparents, then aunts/uncles, in that order.
  • You are in a long-term committed relationship but do not have a legal status together.
    • The rules under #2 apply. When it comes to intestacy, the law does not recognize the family roles and relationships that members of the LGBT community have claimed and created in all the years before legal recognition of those relationships became available. Without a will or some other non-probate beneficiary designation naming your partner, he or she will get nothing.

How this might work is best illustrated by an example. Let’s say you are married without children and your primary asset is your house which you bought before you got married. Under community property law, the house would be presumed to be your separate property. Applying the rules of intestacy outlined above, your spouse would receive three quarters of the house, and the remaining quarter might go to your mother or brother, depending on who is alive. This could become complicated for your surviving spouse!

Drafting a will is one of those tasks that almost everyone finds a way to avoid and put off for another day. Especially if you are in reasonably good health, there is almost always something else to take care of that seems more urgent and pressing. Most of us do not like to dwell on it, but one certainty in life is that none of us know what tomorrow may bring, and sometimes what tomorrow brings does not give us the chance to go back and take care of after the fact. The good news is you can create greater peace of mind for both you and your loved ones now by taking care of your estate plan now. You can do this by consulting with an estate planning attorney, and you can also learn more here.
Disclaimer: This information is for educational purposes only and is not a substitute for competent legal advice from a licensed, professional attorney regarding your specific situation.
Eleanor Doermann is an attorney providing estate and life planning services for all ages and stages of life, as well as public benefits advocacy. As a long-time member of the Seattle LGBT community, she has a special interest in and passion for educating individuals and couples about the ramifications of post-DOMA marriage equality laws. Eleanor came to the practice of law after a 25-year-career as a physical therapist and opened Pathway Law, PC in south King County in 2013. Learn more at www.pathwaylaw.net, www.facebook.com/pathwaylaw, or by calling 206-499-3289.

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Same-Sex Couples in Non-Recogntion States Required to Prepare Multiple Federal Tax Returns

24 Friday Jan 2014

Posted by Erin Louis CPA, Advocate Accounting LLC in Marriage, RDP Tax Returns, Taxes

≈ Comments Off on Same-Sex Couples in Non-Recogntion States Required to Prepare Multiple Federal Tax Returns

I haven’t posted in a while, as is usual for this time of year.  The New Year signifies many things for many people.  For me, it mostly signifies the beginning of tax season.  This year, there are also significant changes for me personally.  I have moved on from my previous firm and started my own.  I am now offering services through Advocate Accounting, LLC.  This is an exciting new change for me and I hope the New Year is just as promising for you.

When it comes to taxes, as always, there are important year-end changes of which you should all be aware.  The media coverage of the recent Supreme Court (SCOTUS) decision on DOMA has been widespread.  I posted about it when it occurred back in ­­­­­August.   An avalanche of rights have since been awarded to same-sex couples.  Among these is the right, and requirement, to file your Federal income taxes as Married Filing Joint (MFJ) or Married Filing Separately (MFS).

The IRS’ decision to use the “place of celebration” definition of marriage was a big win for the community.  It means that same-sex married couples (SSMCs) will be recognized as married if they have a marriage license from any marriage state, regardless of where they live.  This has both positive and negative tax effects at the federal level. Luckily, there are accessible resources explaining both.

At the state level, however, the effects are less known and highly variable. If you are a SSMC living in a state that recognizes your marriage (or you live in a non income-tax state) you have nothing to worry about. Those who have a legal marriage but reside in a non-marriage or non-recognition state are in a different boat, though, and are subject to yet another tax inequity.

Most income-tax states require that a taxpayer submit a copy of their federal tax return along with their state return.  The numbers from the state-submitted 1040 are used to calculate the state tax. Before the DOMA decision, SSMCs in marriage/recognition-states had to prepare three 1040s – two Single returns to be submitted to the IRS and another “dummy” Joint return to be submitted to the state. This was the case in states such as Oregon and California where joint filing was available with the state, but not with the IRS. A reverse situation now applies to a far greater number of taxpayers.

If you are married, but live in a non-recognition state, you may now be faced with the burden of preparing three Form 1040s. You will need to file one MFJ return, to be filed with the IRS, and two Single “dummy” 1040s to be filed with the state. Lambda Legal has an excellent list of marriage rights by state that can be found here.

Despite the enormous progress that has been made, inequity still abounds. Many attorneys speculate that a new SCOTUS case will emerge within the next 18 months.  The clear deficiency of the decision is an issue that people will not ignore.  Brace yourself, the marriage equality fight is far from over.

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Same-Sex Married Couples to Get Refunds from the IRS for Taxes Withheld on Health Benefits

29 Sunday Sep 2013

Posted by Erin Louis CPA, Advocate Accounting LLC in Marriage, Social Security, Taxes

≈ Comments Off on Same-Sex Married Couples to Get Refunds from the IRS for Taxes Withheld on Health Benefits

Tags

941-X, FICA Taxes, Fringe Benefits, W2-C

The IRS’ announcement that they will recognize all same-sex married couples became effective on September 16th.   While filing status is the change that is getting the most attention it is not the only significant tax consequence. The effects are far-reaching and provide several avenues for same-sex married couples to get money back from the IRS.

For years, same-sex couples have paid taxes on health benefits that their opposite-sex counterparts have received tax-free.  The Windsor decision has put a stop to this, thankfully, and the IRS is now allowing employers and employees to seek refunds of these taxes.  Last week, the IRS issued guidance on how to claim refunds of both FICA (Social Security and Medicare) and Federal Income Tax Withholding.

Since FICA taxes are reported and remitted by your employer, you will have to rely on them to get your money back.  Unless they are willing to reimburse you out-of-pocket, they will need to amend their payroll tax returns. You will want to discuss this with your employer; they may not know they are also eligible for a refund.

Luckily, the IRS has created special administrative procedures simplifying this process.  Employers typically must amend each quarter individually.  Under these circumstances, the IRS is allowing employers to amend all four quarters with one amended form.  The procedures also require that the employer file corrected W2s.

If your employer does amend their payroll returns it will only get the FICA taxes back to you.  To claim a refund for any income tax withholding, you will have to file an amended income tax return using the corrected W2. This will be a significant benefit to some but it is worth noting that the benefit is not necessarily greater than any negative consequences amending may have. If you are a taxpayer that would have paid more taxes as married filing jointly, amending to claim a refund of payroll taxes may not be worth it.

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IRS Will Recognize All Legal Same-Sex Marriages – Regardless of State of Residence

29 Thursday Aug 2013

Posted by Erin Louis CPA, Advocate Accounting LLC in Financial Planning, Marriage, RDP Tax Returns, Taxes

≈ 4 Comments

Tags

Amended Tax Returns, DOMA, IRS, Married Filing Joint

The IRS announced today that all legal same-sex marriages will be recognized for Federal Tax purposes.  The looming question about whether the IRS would use the state of domicile or the state of celebration to define “legal marriage” has been answered.  They have chosen the state of celebration which means IRS marriage recognition will be based on where the marriage license came from, not where you live.  This isn’t surprising since it makes the most sense for all parties and lessens the burden to both taxpayers and the IRS. Additionally, it ensures consistent federal taxation to all same-sex married couples (SSMCs)

If you are a SSMC, you are now able, and required, to file as Married Filing Joint (MFJ) or Married Filing Separately (MFS) for tax year 2013. The IRS is also allowing, but not requiring, SSMCs to amend prior year returns to MFJ/MFS.[i]  The change in tax status will have varying impacts on taxpayers.  Those couples in which one spouse earns a majority of the income will likely see a benefit while those couples in which both spouses are high earners may see an increase in tax.

For tax purposes, you will be treated as married for the entire year regardless of what date you were married.   Here are some of the things that should be considered in your tax planning:

W-2 Withholdings

Now that you can file MFJ, adjustments to your W-2 withholding for federal income tax may be needed. Whether and how to adjust your withholding will depend on your particular tax situation. You can use the IRS withholding tables to estimate what your withholding should be as a MFJ taxpayer.  Comparing these amounts with your year-to-date withholding from your pay-stub will help you to determine what withholding is needed for the rest of the year.  Wage withholding is only one piece to the puzzle, though. Talk to your tax preparer to plan for your overall tax picture.

Employer Provided Health and Other Benefits Covering Your Spouse

Before the DOMA decision, and today’s IRS announcement, certain employer-provided benefits covering same-sex spouses have been included in taxable income.  Thankfully, this is no longer a correct treatment of these benefits.  If this situation applies to you, a conversation with your employer may be warranted.  Find out if and when they will stop withholding tax on these benefits.  Make sure to ask them whether you can take advantage of any available benefits immediately or if you’ll have to wait until the next open enrollment period.

IRA Contributions

Now that same-sex spouses are actually considered spouses by the IRS you may be newly eligible to make tax-deductible contributions to a Traditional IRA.  Late last year I posted about your prior inability to do this.  If you have no earned income (taxable compensation) and have thus been ineligible to contribute, you can now use your spouse’s earned income to qualify you for this benefit.  There are other applicable restrictions, however.  Here is a link to more information on Traditional IRA contributions.

Amended Returns

Those couples who will benefit from filing as MFJ should consider amending their prior open-year returns.  An “open-year” return is a return for a year that has not yet passed the  three-year statute of limitations for amending. The three years begins on the date the return was filed.  For most taxpayers this means that 2010 will be as far back as you can go. Luckily, those who will not benefit from MFJ status are not required to amend prior year returns at all.


[i] If you have a legal marriage and your 2012 return is still on extension, you can file MFJ/MFS for tax year 2012.

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DOMA is Dead – To Wed or Not to Wed; that is the Question

28 Sunday Jul 2013

Posted by Erin Louis CPA, Advocate Accounting LLC in Legislation, Marriage, RDP Tax Returns, Taxes

≈ Comments Off on DOMA is Dead – To Wed or Not to Wed; that is the Question

Tags

adoption tax credit, DOMA, Filing Status

With the fall of DOMA has come a rush of same-sex couples (SSCs) converting their partnerships into marriages.   It is an emotional time, especially for those who have waited for over thirty years to make that change.  I have been to three weddings since the fall of DOMA and have five more between now and the first week of September. Put simply, it is inspiring and I am proud of these couples.  Despite the pride and emotion we are all feeling, though, I urge all couples to proceed with caution.  The right to marry, and to be recognized as a spouse, comes with changes that are worth consideration.

The media has been quick to discuss a few of the enormous benefits of marriage, particularly in the context of health, retirement and Social Security benefits.  There has even been the occasional reference to the presumed right to file as married filing jointly (MFJ) in 2013. However, there are still questions on how, and to whom, these changes will be applied.

Despite the IRS’ immediate promise to “move swiftly,” they have not yet issued any statements about how they will implement the Supreme Court decision. We can be confident that the IRS will allow SSCs to file jointly if they have a valid marriage license by the end of 2013. The question then is what will be considered a valid marriage license. The answer hinges on whether the IRS will use the state of domicile or the state of marriage in determining who has a valid marriage license. While we wait for the IRS to make an official statement, the more pressing question for many is whether or not to get married at all, and if so, when.  Emotion and celebration aside, the tax implications of marrying in 2013 are significant.

The ability to file MFJ will not be beneficial across the board. Some couples will realize a benefit in their total income tax and others will not.  Generally, if there is only one earner, MFJ status will be financially beneficial.  Others will experience what is known as the “marriage penalty” and end up with a higher tax bill when filing MFJ. This usually occurs when each spouse is an earner and the combining of income pushes the couple into a higher tax bracket.

The combining of incomes may also push many couples to an adjusted gross income (AGI) level that excludes them from tax deductions and credits that they have been able to claim in the past. For example, in 2012, many single taxpayers were eligible for the Child Tax Credit as long as their AGI was below $75,000, the beginning phase-out amount for a single taxpayer. If in an RDP couple each partner had a child and each partner had an AGI of $60,000, it’s possible that they could each claim the credit.  The 2012 AGI phase-out for married taxpayers began at $110,000. In this example, if the couple was married, their AGI would be $120,000 and they would only be eligible for a reduced credit or, in some cases, none at all. Eligibility for many deductions and credits are determined by AGI and, unfortunately, the MFJ phase-out amounts are not equal to double the single amounts.

It is important to remember, too, that some of the discriminatory tax laws actually benefit unmarried couples. Perhaps the most significant is the adoption credit. My earlier post, The Adoption Tax Credit – One Good Thing the Defense of Marriage Act did for Registered Domestic Partners, goes into the details of why registered domestic partners benefit from the adoption credit in a way that spouses do not.    If you are planning on adopting a child, and are not yet married, you may want to consider completing the adoption in 2013. If the potential tax benefit of the adoption credit exceeds the combined benefit from other changes, it may behoove you to adopt in 2013 and marry in 2014.

No matter when you decide to tie the knot, it is important to be prepared.  A quick review of your tax situation can give you the information you need to be ready for the changes to come.  A small amount of planning can go a long way.

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Supreme Court to Hear DOMA Case on March 27th: Same-Sex Married Couples Able to File Jointly in 2013?

23 Saturday Mar 2013

Posted by Erin Louis CPA, Advocate Accounting LLC in Law Suits, Legislation, Marriage, RDP Tax Returns, Taxes

≈ Comments Off on Supreme Court to Hear DOMA Case on March 27th: Same-Sex Married Couples Able to File Jointly in 2013?

Tags

DOMA, IRS, Supreme Court

The time has finally come. On March 27th, the Supreme Court will hear a case challenging the constitutionality of DOMA. Many have come forward over the last year in support of overturning the Act. Support has ranged from progressive LGBT rights advocates to President Barack Obama himself. Most recently Bill Clinton, the man who signed DOMA into law in the first place, has come forward.

When I signed the bill, I included a statement with the admonition that “enactment of this legislation should not, despite the fierce and at times divisive rhetoric surrounding it, be understood to provide an excuse for discrimination.” Reading those words today, I know now that, even worse than providing an excuse for discrimination, the law is itself discriminatory. It should be overturned.

So, what if it is overturned? How would such a decision impact same-sex married couples’ tax position and how long will it take for those changes to take place? Frankly, I expect the implementation be slow and burdensome. The IRS made a small change for a small portion of same-sex coupled taxpayers three years ago and we still don’t have official rules.

Not only will it take time for Congress to amend laws and regulations, it will take the IRS time to amend tax forms and procedural guidelines.  Furthermore, if spouse is no longer defined to only include opposite sex partners but applies to all couples who have a valid marriage, how will “valid marriage” be defined and how will the IRS know who has one? The easy answer would be any couple married in a legal marriage state. Only it’s not that simple, is it?  Many couples hold marriage licenses from legal marriage states but live in states without same-sex marriage. The issue is further convoluted when considering the varying recognition laws in each state.

I can only hope that the fall of DOMA will lead to blanket legal marriage across all states. Until then, I truly don’t understand how the IRS will determine which couples have the right to file jointly and I fear that they are no better prepared for such a change than they were for community property income splitting. I suppose the upside of this is that the delay in implementation will provide same-sex married couple taxpayers ample time for tax planning.

Just as it is with community property income splitting, the change will benefit some taxpayers and harm others.  For those of you that will not see a tax benefit from joint filing it may behoove you to start planning now. For those that will benefit, the question of amended returns arises. If DOMA is ruled unconstitutional it means it was always unconstitutional. To me, this suggests the right to amend prior year returns with married filing jointly status in order to cash in on the refunds you should have already received.

Only time will tell how this will all unfold, but my fingers are crossed.  I am grateful to witness and be part of such inspiring and historic accomplishments in equal rights.

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LGBT Equality Cliff (Not) Averted: Highlights of 2012 LGBT Rights Accomplishments

08 Tuesday Jan 2013

Posted by Erin Louis CPA, Advocate Accounting LLC in Law Suits, Legislation, Marriage, Washington

≈ Comments Off on LGBT Equality Cliff (Not) Averted: Highlights of 2012 LGBT Rights Accomplishments

Congress may have averted the fiscal cliff but I doubt they can curb the fall of anti-LGBT legislation. In 2012 we saw monumental achievements in equality. The momentum is still growing and I do not expect it to slow in 2013. Instead, we may see a Supreme Court rule DOMA unconstitutional. Such a decision would have countless and far-reaching positive consequences; I call this potential roll out of rights the LGBT Equality Cliff.

The progress in 2012 was seen across the board, not just legislatively. Television shows had unprecedented growth in LGBT characters, actors and athletes came out as LGBT and allies, and musicians and Fortune 500 companies came out in support of marriage equality. There are positive shifts everywhere. The way that Americans think about the LGBT community is changing. Here are some of the many, many, achievements of 2012.

State Marriage

  • Maine, Maryland and Washington legalize gay-marriage
  • Rhode Island begins recognizing marriages from other states
  • Minnesota rejects a constitutional amendment denying marriage equality
  • New Hampshire blocks repeal of same-sex marriage
  • 9th Circuit Court of Appeals rules California’s Prop 8 is unconstitutional

DOMA

  • Federal District Court for the Southern District of New York rules DOMA unconstitutional
  • 1st Circuit Court of Appeals rules DOMA unconstitutional
  • Supreme Court agrees to hear two cases challenging constitutionality of DOMA

Elected Officials

  • Tammy Baldwin is elected as first openly lesbian or gay US Senator
  • Kyrsten Sinema is elected to House of Representatives and becomes the first openly bisexual member of Congress
  • Number of state legislatures with no openly LGBT members drops from 17 to 10
  • Michael Fitzgerald becomes 4th openly gay federal judge, the 1st outside of New York
  • Mark Takano becomes first openly gay person of color in US Congress

Military

  • Tammy Smith becomes first openly gay active duty general in American history
  • Sgt. Erwynn Umali and his partner Will Behrens become the first gay couple to marry on a military base
  • Pentagon hosts first-ever LGBT Pride event

Transgender Rights

  • US Citizenship and Immigration Services announces that US will recognize valid marriages for immigration purposes regardless of a spouse’s subsequent gender transition
  • U.S. Equal Employment Opportunity Commission rules unanimously that employment bias based on transgender status is tantamount to discrimination based on sex, which violates the Civil Rights Act of 1964
  • Massachusetts passes transgender anti-discrimination bill
  • American Psychiatric Association removes “gender identity disorder” from the DSM-5[i]

Media

  • Nordstrom’s, JC Penny, Microsoft, Amazon, General Mills, Macy’s, Starbucks, Viacom, Boeing, and Google announce support for marriage equality
  • NAACP announces support for marriage equality
  • President Obama and Vice President Biden announce support for marriage equality; so do Jay Z, Brad Pitt, Jason Mraz, Morgan Freeman, and Bruce Springstein
  • Anderson Cooper, Wade Davis, Orlando Cruz, Frank Ocean, and Sally Ride come out
  • San Francisco 49ers become the first NFL team to join the “It Gets Better” campaign
  • Keelin Godsey becomes the first openly transgender Olympic contender

Other

  • First PTA specifically for LGBT students is created in Long Island NY
  • Department of Justice publishes final regulations creating national standards directly addressing LGBT needs in an attempt to eliminate sexual abuse in America’s prisons, jails and local detention facilitates

As great as this list is, there are still 2012 achievements not listed.  I can only imagine what 2013 will bring. We’ve already had one victory this year when the American Civil Liberties Union secured severance pay for those discharged from the military under Don’t Ask Don’t Tell.  

What to Watch For in 2013

  • January vote on gay marriage bill expected in Illinois
  • February vote on gay marriage bill expected in Rhode Island
  • Supreme Court will review two DOMA cases in March

Happy New Year everyone!

[i] Gender Dysphoria remains in the DSM.

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How Marriage Equality Affects Your Retirement: IRA Tax Loopholes Available to Opposite-Sex Married Couples Only

26 Monday Nov 2012

Posted by Erin Louis CPA, Advocate Accounting LLC in Marriage, Retirement, Taxes

≈ 1 Comment

Tags

IRA, Registered Domestic Partners, Tax Deductions

Individual Retirement Accounts (IRAs) are powerful tools for funding your future.  Putting money into an IRA can be a great way to save for your retirement because it provides tax benefits in the present.  Unlike some retirement plans, IRAs can be set up by anyone; they do not have to be set up by your employer.

One of the major benefits of an IRA is that all or a portion of your contributions may be tax deductible and some taxpayers can claim a tax credit for their contributions. Additionally, any earnings on the money you’ve put in will be tax-deferred until you take the money out.  This benefit is particularly useful if you expect your annual income to be less during retirement years.

There are, of course, eligibility requirements for participating in an IRA. First, you must be under age 70 ½, and second, you may only contribute if you have taxable compensation for the year.  Each year the IRS assigns a maximum dollar amount that can be contributed; it is currently $5,000. Anyone under age 70 ½ can contribute the lesser of that $5,000 or their taxable compensation.  As an example, if you earn $6,000 you can only contribute $5,000; if you earn $3,500 you can only contribute $3,500.

It is this “taxable compensation” rule where we come to our first loophole only available to straight married couples, i.e. “spouses” as defined by DOMA.  If you are otherwise eligible to contribute to an IRA but are not working, and therefore have no taxable compensation, you can use your spouse’s income to qualify you for contributions. When one spouse earns $10,000 and the other earns $0, both can contribute up to $5,000.  Unless of course the non-working spouse is part of a same-sex couple, in which case no contribution is allowed.

This means that if a person has enough cash to contribute the maximum every year, but isn’t allowed to because they have no taxable compensation and aren’t considered a spouse, they miss out on up to $5,000 in tax deductions every year.  This essentially results in a gay person having to pay a potential $500 to $1,400 more in taxes, per year, than their straight counterpart.

Next let’s talk about what happens when you pull the money out of these plans.  Depending on what portions of your contributions were deductible, the distributions may be fully or partially taxable as ordinary income.  Furthermore, if you pull the money out before you’ve reached age 59 ½ a 10% penalty will be imposed. Luckily, for some, there are a few ways to get out of paying this.

The IRS has provided several exceptions that allow a taxpayer to avoid the 10% penalty.  While under the right conditions most of them are available to all taxpayers, there are also circumstances in which they are not.  There are three exceptions that apply to individuals who take a distribution to pay for certain expenses for themselves or their spouse[i].

  1. The money can be pulled to pay for health insurance premiums for an unemployed taxpayer or their spouse.
  2. The money can be pulled to pay for higher education expenses for the taxpayer or their spouse.
  3. The money can be pulled to pay for the purchase of a home if the taxpayer or their spouse qualifies as a first-time home buyer.

As an example of these rules in practice, let’s imagine a $10,000 distribution used to pay for higher education expenses.  One man can pull out $10,000 to pay for his wife’s education without penalty while another man who pulls out $10,000 for his husband’s education has to pay a $1,000 penalty.

Don’t get me wrong; the rules were created with good intention.  They are theoretically providing financial incentive for people to stay insured, go to college, and purchase homes.  The problem, albeit unintended, is that in this context, the exclusion of same-sex partners from the federal definition of spouse makes health insurance, education, and homes less accessible to the LGBT community.

Until rights and laws are applied equitably, we must work to understand the consequences of our legal inequality.  The benefits of marriage are more expansive than many of us realize.  I fear that as same-sex marriage begins to feel more attainable, those fighting for it will lose their sense of urgency.  Unfortunately, when it comes to financial rights and obligations, the inequality of today can have a tremendous impact on the future. Gaining parity ten years from now will not make up for present imbalance.


[i] In many cases the funds can also be pulled for children, grandchildren and certain other family members.

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Progress in Perspective: Germany Leads in Same-Sex Tax Rights

05 Friday Oct 2012

Posted by Erin Louis CPA, Advocate Accounting LLC in International, Legislation, Marriage, Taxes

≈ 1 Comment

In just a few days I will be traveling to Europe, the land of ‘better’ rights, but, not necessarily equal ones.  I wanted to leave you with an entry before I left and that has led me to exploring German tax rights for same-sex couples.

Germany has had Civil Unions for same-sex couples since 2001. While Civil Unions are not technically marriages, Germany’s federal recognition, as early as 2001, frankly embarrasses me. Here we are, in 2012, fighting tooth and nail so that a mere portion of our states might legalize marriage or enact its state equivalent.  

It’s true that progress in the U.S. seems to be coming more rapidly, and I don’t think that federal recognition is far away, but it is only that.  My use of the word ‘recognition’, instead of ‘equality’, is quite intentional.  As illustrated by the development of same-sex rights in Germany, recognition of same-sex couples does not necessarily equalize rights.

Since 2001, Germany has had to make significant expansions to Civil Union rights in order for them to be more equal to marriages.  As with the United States, many of the rights have been granted by the courts.  In Germany, the decisions have predominately been made by the Federal Constitutional Court which is in some ways similar the U.S. Supreme Court. 

Naturally, of particular interest to me has been the extension of income and tax rights to German same-sex couples. The first such extension came in 2008 when a surviving partner was refused a Widow’s Pension Fund.  The court that heard the case ruled that the refusal violated the prohibition of discrimination on the grounds of sexual orientation; a logical argument that I wish had more clout in the United States.  We seem to have to resort to technicalities and loopholes just to prove a point of common sense and decency.  

Next, in 2010, the court ruled it unconstitutional to treat same-sex couples differently than heterosexual couples in a case related to inheritance tax.  This is similar to the famous case Windsor v United States.  Although the lower courts have ordered that Edie Windsor be given a refund of the taxes she paid, the case is still facing appeals and is likely heading to the Supreme Court.  Meanwhile, Germany’s case ruling not only relieved same-sex couples of a tax that their straight counterparts were exempt from, it also ordered that the government compensate surviving partners that had previously paid the tax; a respectful move that, dare I say, will never happen here.

There is speculation that the German government is close to making further changes that will equalize tax rights across the board.  What’s interesting about this development is who supports it and who opposes. 

The current Chancellor of Germany, Angela Merkel, is expected to support the expansion of rights.  She is part of the Christian Democratic Union (CDU), a conservative party whose members have recently released a statement calling for equal tax treatment.  The CDU is in coalition with the Free Democratic Party (FDP), a party typically supporting business interests. They are also in coalition with the Christian Social Union (CSU), a predominately Catholic party.  While the FDP has long supported equal rights for same sex couples, the CSU is, unsurprisingly, unsupportive.   What is surprising is that the other opposing party is the Social Democratic Party (SDP), a historically liberal party.

At first I found it strange that the conservative, business minded parties were in support of same-sex rights while the liberal party was in opposition.  That sort of landscape is nearly opposite of what we are used to here.  Then I remembered that it’s politics.  As it turns out, Angela Merkel is suspected of merely trying to save face for her upcoming re-election campaign.  She and her party have developed a reputation of opposing legislation only to have the Federal Constitutional Court rule against their position.  As a result, Merkel is expected to support the tax right expansion, just so she can do it before the court does.   As for the SPD, they are apparently not as liberal as they once were. An emerging liberal party, the Left Party, has recently poached many SDP members after the party supported grossly unpopular welfare cuts.

Regardless of the motivations behind these legal changes, the result is the same.  If Germany extends equal tax rights to its citizens, progress has been made, both in Germany and abroad.  I should be happy about all of this, and a part of me is, but there’s just one thing I can’t get past.  Germany’s path to providing equal rights to all couples seems to be a foreshadowing of what is to come in the US. Our road has been similarly marked with case after case arguing that there exists a discrepancy of rights when it comes to partnerships and marriages.  Well, of course there is. We as a nation have proclaimed that partnerships and marriages are not the same thing, even if the rights should be.  But, didn’t we determine, in 1954, that “separate but equal” doesn’t work?  Please, someone tell me how the marriage issue is any different.

“The impact is greater when it has the sanction of the law, for the policy of separating … is usually interpreted as denoting the inferiority of the… group.” – The Supreme Court of the United States, 1954, Brown V. Board of Education.

“The words (separate but equal)….. it is true, are prohibitory, but they contain a necessary implication of a positive immunity, or right, most valuable…..,—the right to exemption from un-friendly legislation against them distinctively,…—exemption from legal discrimination, implying inferiority in civil society, lessening the security of their enjoyment of the rights which others enjoy, and discriminations which are steps towards reducing them to the condition of a subject race.”  – The Supreme Court of the United States, 1954, Brown V. Board of Education.

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Will the Supreme Court kill DOMA in 2013?

07 Tuesday Aug 2012

Posted by Erin Louis CPA, Advocate Accounting LLC in Law Suits, Legislation, Marriage

≈ 1 Comment

Tags

DOMA, Supreme Court

Court cases challenging DOMA are popping up across the nation with increasing frequency.  Over the last two years, the legislative momentum has grown dramatically. We are now at a point where we can expect at least one of these cases to be heard by the Supreme Court.  The implications of the Supreme Court hearing such a case are enormous. We could be within a year of undefining, as opposed to redefining, marriage.  If we are successful in broadening the federal definition of spouse to include partners of the same sex, many currently unavailable federal benefits will become accessible to our partners.

There are two key cases currently making their way through the courts.

Perry v. Brown (California) 

This is the infamous Prop 8 case formerly known as Perry v Schwarzenegger.  In February of 2012 a three judge panel, in a monumental decision, held that prop 8, which amended the state constitution to disallow same-sex couples from becoming married, was unconstitutional.  The judges found that there was no “rational basis” to restrict same-sex couples from the right to marry.  Judge Reinhardt, who authored the opinion, declared that Prop 8 violated the Equal Protection Clause stating:

“Proposition 8 singles out same-sex couples for unequal treatment by taking away from them alone the right to marry… the People of California may not, consistent with the Federal Constitution, add to their state constitution a provision that has no more practical effect than to strip gays and lesbians of their right to use the official designation that the State and society give to committed relationships, thereby adversely affecting the status and dignity of a disfavored class.”

Golinski v Office of Personnel Management (California)

This case stems from a from a 19-year old woman’s complaint after her application to include her wife under her employer-provided health coverage was denied. While this case may not be as well-known as the Prop 8 case, it is widely considered to be the one with most potential for success.  In July, the Department of Justice filed a writ of certiorari, basically a request that the Supreme Court hear the case. Many expect the Supreme Court will accept despite the fact that these requests are rarely granted.  This is especially noteworthy since the request asks that the Supreme Court hear the case before it makes its way through the remaining lower court appeals.  This unusual writ also includes a request to combine the case with two others challenging DOMA’s constitutionality.

Between the two cases, there is widespread conjecture that Golinski not only has a better chance of being heard by the Supreme Court but also has a better chance of being upheld.  At a conference I recently attended[i], Oregon attorney Cynthia L Barrett speculated that a win in the Brown case could require that the court issue a blanket decision allowing same-sex marriage in all 50 states. The Golinski case may instead only require a decision allowing federal benefits on a state by state basis. The expectation is that the benefits would only be available to those holding a valid sate marriage certificate in one of the six states[ii] that allow gay marriage.

Considering the pace with which states are attempting to pass same-sex marriage legislation, perhaps a Supreme Court decision of this magnitude will serve to further that drive.  In the current environment, where it is no longer possible to stand against same-sex marriage without significant backlash, as evidenced by the recent Chik-Fil-A controversy, we can, finally, imagine an attainable and expedient move towards federal marriage equality.


[i] Barrett, C.L. Ask. Tell. LGBT Estate Planning Developments, Multnomah Athletic Center, Portland, Oregon; OHSU Foundation: June 2012

[ii] Gay marriage is also legal in Washington DC and is pending in the State of Washington.

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