As America moves toward approving same-sex marriage in more states, the pressure grows on the Federal government to accord same-sex unions the equal status to more traditional marriages. Despite this move toward acceptance, same-sex couples still face some unique challenges in their personal finances. Here are a few tips that may help.
The first tip is protecting property rights. If one partner owns property and adds the other to the title, the new owner will face a gift tax for half of the value of the property. Such gifts of less than $13,000 are tax free. Try gifting $12,500 of the property’s value each year until you are equal partners. Also, only 13 states recognize title transfer upon death for same-sex couples. A real estate trust or titling the property as joint tenants are other options.
Estate planning can be particularly intricate. Other than property issues, there could be a 401(k) and pension to address. In a traditional marriage, your spouse can do a 401(k) rollover and it’s not taxable, but in a same-sex partnership, death is going to force a lump-sum distribution that’s all taxable. Partners named as beneficiary on a retirement account would have to begin taking distributions immediately, whereas a recognized surviving spouse has more flexibility.
The only real lesson that a same-sex couple can take form this post is that you need to consult experts. Trusting that you will is sufficient is a bit narrow-sighted. You have to keep in mind that laws may change, so you have to review your plans from time to time.