Marriage EQUALITY AND TAX PENALTIES - PowerPoint Presentation

Marriage EQUALITYAND TAX PENALTIES -a NEW REALITY for same sex couples A presentation by Charles M. Sprock, Jr. Baldwin & Sutphen, LLP Based upon the article “The Financial and Legal Implications of Same Sex Marriage” in the August 2015 edition of DM for Individuals – Dannible & McKee, LLP newsletter, by Deborah E. Finch, CPA, CVA, CDA and Charles M. Sprock, Jr. FPA of CNY December 17, 2014

Goals for today’s presentationUnderstand how the United States Supreme Court changed m arriage l aws throughout the nation Explore the benefits and burdens for couples being unmarried, married and divorced Look at the marriage trends among opposite sex couples Discuss issues facing financial and legal professionals in advising same sex couples Learn some terms relative to the LGBT community and some Supreme Court trivia

TermsLGBT – lesbian, gay, bisexual & transgender*LGBTQ – lesbian, gay, bisexual, transgender & queer LGBTQ – lesbian, gay, bisexual, transgender & questioning LGBTQI – lesbian, gay, bisexual, transgender, queer & intersex *Surgery is not a requirement for being transgender. Simply knowing that one’s biological sex does not match his/her gender identity makes someone transgender. Gender identity is not always a binary male/female construct. It exists on a spectrum.

THE SUPREME COURT and lgbt issuesOf the nine Supreme Court Justices, three are often mentioned in relation to LGBT issues: Ruth Bader Ginsburg, Anthony Kennedy and Antonin Scalia. While many see Justice Scalia as an obstacle in the struggle for LGBT equality, I argue that his harsh critiques of majority decisions from which he dissented pushed LGBT advocates and the Supreme Court to work harder at achieving broad equality for LGBT people. His first critique that spurred LGBT rights forward was his dissent in Romer v. Evans .

THE SUPREME COURT and lgbt issuesIn Romer v. Evans (1996) the Court struck down a Colorado state constitutional amendment which would have allowed discrimination against LGBT people. This was the first Supreme Court decision that recognized LGBT individuals as an identifiable class of people.

THE SUPREME COURT and lgbt issuesIn his dissent, Justice Scalia stated that the Court’s decision was not congruent with Bowers v. Hardwick , a 1986 decision in which the Court upheld Georgia’s sodomy laws. (Scalia was not a member of the Court when Bowers was decided.) He argued that because Bowers held that public disapproval of homosexuals justified the Georgia sodomy law, moral disapproval should be sufficient to uphold the Colorado amendment. He added that the Court’s reasoning required overturning Bowers, which the Court did not do. The Supreme Court overturned Bowers nine years later in Lawrence v. Texas, a case which serves as the first chapter in the story of how the Supreme Court made marriage an option for same sex couples.

HOW THE SUPREME COURT MADE MARRIAGE AN OPTION FOR LGBT COUPLES O n June 26, 2003, the Court struck down a Texas sodomy law that barred intimate relations between same sex couples in Lawrence v. Texas . As a result all sodomy laws in the United States were declared unconstitutional. In his dissent, Justice Scalia predicted that Justice O’Connor’s concurring opinion, grounded in equal protection principles, would lead judges across the country to find traditional marriage laws unconstitutional. On November 18, 2003, Chief Justice Margaret Marshall of the Massachusetts Supreme Judicial Court became the first judge to prove the truth in Justice Scalia’s prediction. Her ruling in Goodridge v. Department of Health effectively struck down Massachusetts’ traditional marriage law

HOW THE SUPREME COURT MADE MARRIAGE AN OPTION FOR LGBT COUPLES On June 26, 2013 , in U.S.v.Windsor . the Court struck down Section 3 of the Defense of Marriage Act (DOMA) which barred the Federal Government from recognizing any marriage that was not a legal union between one man and one woman. As a result the federal government eventually recognized all validly performed same sex marriages, even if a couple’s state of residence would not. In his dissent, Justice Scalia accused the majority of using faulty logic, stating that it made no sense that the federal government had to recognize same sex marriages, but the states did not. Justice Scalia was again proven right when the Supreme Court issued it’s ruling in Obergefell v. Hodges. .

HOW THE SUPREME COURT MADE MARRIAGE AN OPTION FOR LGBT COUPLES On June 26, 2015 , the Court in Obergefell v. Hodges struck down state laws barring recognition of same sex marriages in Michigan, Kentucky, Ohio and Tennessee. As a result all state laws barring same sex marriage were deemed unconstitutional, along with the rest of the Defense of Marriage Act (DOMA ). In his dissent, Justice Scalia expressed concern over the legal reality that nationwide same sex marriage recognition came from a body of nine judges with similar backgrounds and ideals, rather than from legislative bodies which represent a much more diverse American population.

June 26The last week of June is when the Supreme Court releases its most controversial decisions. June is also Gay Pride month, in recognition of the Stonewall Riots in June 1969 . The Supreme Court intentionally released Obergefell and Windsor on the same day as Lawrence , in recognition of advances the LGBT community has made in its civil rights struggles.

there are three marriage options for all couples in 2015No Marriage Full Marriage Divorce

No MarriageMake your own rules on every aspect of the relationship, decide what’s shared and what’s individually ownedBreak up without divorcing Live as two separate legal beings Enjoy no obligations of marriage Enjoy no benefits of marriage File income tax returns separately and maximize the use of the standard deduction and itemized deductions over the two returns Transfers between partners may be taxable

marriageAll the rights, privileges and burdens that opposite sex couples experiencePreferential tax treatment for inherited assets and tax deferred assets (like Federal Recognition only Marriages) The marriage tax penalty Children born to a couple during their marriage are the presumptive legal children of both parents, even when the parents are a same sex couple. The fianacial value of marriage may change as the couple’s relationship evolves.

divorcePainful, expensive and can often lead to bankruptcySometimes a necessary optionProvides maintenance, alimony and in some cases social security benefits Health Insurance and certain Federal Employee benefits may also be available Rights to retirement assets

Learning from married opposite sex couplesIn the 1950s 78% of households included a married couple. In 2010 the number fell to 48%. Married couples with children comprised 43% of all households in the 1950s but only 20% in 2010 The total number of households increased 11% from 2000 to 2010, the number of unmarried opposite sex households grew 40%, same sex households grew 80% but married households grew only 4% The median ages at which people marry has increased by more than 2 years Unmarried opposite sex couples with children make up 40% of all households The divorce is down, in fact lower than the divorce rate in the 1980s.

Conclusions about marriageAlong with the right to choose marriage comes the right not to choose marriage, and both are valid choices. No option is perfect, each one has its own burdens. Opposite sex couples are opting for marriage less often than ever before. The number of unmarried family units and single parents households are up. These facts show that marriage is no longer the only socially acceptable option. The divorce rate is down indicating that people choosing to marry are staying married. This may be the result of making better choices and having less societal pressure to marry today then in the past. Individual couples which explore marriage options as they apply to their unique situation will make better decisions and hopefully avoid divorce.

Observations about same sex couples in this new realityMarriage recognition across the United States has only been an option for less than 6 months. Couples are often not familiar with the rights, privileges and burdens of marriage because it’s not part of their experience. Couples often look at their income, assets and taxes as separate and their existing estate plans probably reflect this. Couples may be very excited about getting married because it is something that they never imagined would be possible in their lifetimes.

Suggestions for advisors and attorneysAsk your clients what their goals and needs are. Every couple has a unique situation, so listen closely. Educate them as to what comes with the various Marriage Options, and keep up to date on changes in the law. Encourage them to explore the options and reaffirm that all options are valid. Understand that some couples will opt for a choice that isn’t the most financially beneficial, but if they believe it will keep them together, then be supportive.