By Attorney Suzanne Sayward
On June 26, 2013, the United States Supreme Court issued its ruling in the case of Windsor v. United States, finding the provision of the federal Defense of Marriage Act (DOMA) which defined marriage as between one man and one woman for all federal purposes to be unconstitutional. In states like Massachusetts, which recognize same-sex marriage, this means, for example, that the same-sex spouse of a federal employee will be entitled to the same spousal benefits that opposite sex couples have always enjoyed. There are over 1,000 federal rights and benefits to marriage. Here are five benefits that same-sex married couples will be entitled to following the repeal of DOMA.
1. Social Security. When the Social Security program was enacted, lawmakers recognized that death or disability can have a devastating impact on a spouse who relied on the earnings of the deceased or disabled spouse to maintain the household. A person may therefore apply for Social Security benefits based on his or her own earning history or on the earning history of the applicant’s spouse. In addition, a surviving spouse or a disabled spouse is entitled to benefits based on his or her spouse’s earnings. Until the repeal of DOMA, a disabled spouse or a surviving spouse in a same-sex marriage did not have that access to spousal Social Security benefits.
2. Spousal Rollover of IRA. Qualified retirement plans such as IRAs and 401ks allow a wage earner to contribute funds to a retirement account tax free. In addition, the funds contributed to such plans grow income tax free. Once the owner of the retirement account reaches age 70.5, he or she must start taking withdrawals from the plan and pay tax on the amount withdrawn. If a married person dies owning an IRA or other qualified retirement account, the surviving spouse as beneficiary of the account has the right to take that retirement account as her own and to defer withdrawals until she reaches age 70.5. This means the funds in the account continue to grow income tax free. This can be a tremendous tax benefit that was denied to same-sex spouses prior to this summer’s repeal of DOMA.
3. Filing a Joint Federal Income Tax Return. After the repeal of DOMA, same-sex married couples will be able to file joint federal income tax returns. Filing a joint return reduces federal income taxes when one spouse has a high income and the other has a low or no income. (Conversely, the federal income tax bite will be increased when both spouses have high income.) For example, in 2013, single taxpayers reach the 33 percent tax bracket at $184,000 of income, but married couples did not hit the highest bracket until their income reached $223,000. It may be possible for same-sex couples to amend some prior years’ tax returns and collect significant refunds.
4. Employment Benefits. Spouses of federal employees are entitled to many benefits including health insurance, dental and vision benefits, life insurance coverage, COBRA benefits and more. These benefits are described on the federal employees’ website, which now includes a statement that, following the Supreme Court’s repeal of section 3 of DOMA, the government “will now be able to extend certain benefits to federal employees and annuitants who have legally married a spouse of the same sex.” Learn more about these benefits at http://www.opm.gov/healthcare-insurance/healthcare/.
5. Estate and Gift Tax Benefits. The Windsor case is an estate tax case. Federal estate tax law allows for an unlimited deduction for assets that pass to a surviving spouse either by gift during life or at death. This means that a surviving spouse need never pay estate tax upon the death of the first spouse. However, when Edith Windsor’s spouse Thea Spyer passed away leaving her estate to Edith, the IRS denied the estate the marital deduction and assessed $363,000 of estate tax against Ms. Spyer’s estate. Ms. Windsor sued for a refund and the case made history. Same-sex married couples now have the same right to the unlimited estate and gift tax deduction as heterosexual couples.
It will take some time to sort out the changes that need to be made to federal laws and policies in order to reflect the ruling in the Windsor case. There have already been a number of lawsuits citing the Windsor case as a basis for granting same-sex married couples the same rights as opposite sex married couples in other areas of the law. In states that do not recognize same-sex marriage there may be additional hurdles. However, the Windsor decision is a significant step in providing same-sex spouses with the same security and benefits their counterparts in traditional marriages have enjoyed for decades.
Attorney Suzanne R. Sayward is certified as an Elder Law Attorney by the National Elder Law Foundation. She is a partner with the Dedham firm of Samuel, Sayward & Baler LLC. This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney. For more information visit www.ssbllc.com or call 781/461-1020.