With its Windsor decision on June 26, the U.S. Supreme Court ruled that the federal government can no longer discriminate against same-sex couples who are validly married. These couples are now entitled to a host of federal benefits that previously had been restricted to marriages between a man and a woman under the Defense of Marriage Act (DOMA). The Boston Foundation was one of 278 parties to an amicus brief advising the Court of DOMA’s detrimental impact and it is home to the Equality Fund, which is dedicated to advancing the equitable treatment of LGBTQ people and their families in Greater Boston.
The Windsor ruling could have a positive effect on philanthropy if gay and lesbian couples take advantage of the same tax and estate-planning tools that married couples have always used, local experts note. For instance, as legally recognized spouses, same-sex couples will now be exempt from having to pay federal taxes on gifts and estates worth less than $5.25 million per person, says accountant Lillian Gonzalez, who works with many same-sex couples as Principal of Gonzalez and Associates in Stoughton. Having the unlimited marital deduction for the estate effectively shelters $10.5 million per couple.
“The estate planning can include increased charitable giving because they don’t have to set aside money for taxes,” says Ms. Gonzalez, a CPA and accredited domestic partnership advisor. “Also, married couples filing jointly can give more dollars.” Because charitable tax deductions are limited to 50 percent of adjusted gross income (AGI), a married couple’s combined income will result in a higher AGI, greater deductions and potential increased giving. Taxes are only one of the more than 1,000 federal benefits and programs linked to marriage, and many questions will need to be settled in the months ahead.
“It’s a joyous time for everyone to finally be recognized at the federal level and to have the discrimination stop, but from a legal and tax perspective it creates more complexities and uncertainties,” notes Scott Squillace, a Boston estate-planning attorney whose firm, Squillace & Associates, counsels hundreds of LGBTQ clients. That’s because some federal agencies determine benefits based on where a couple lives—and whether their marriage is legally recognized there—rather than where they were married. The Court’s decision will affect virtually every area of a same-sex couple’s life: Social Security, Medicare, immigration status, health insurance and other workplace benefits, federal taxes, bankruptcy and more.
Workplace benefits will change
One of the most immediate changes many gay and lesbian married people will see pertains to workplace benefits. Until the Windsor decision, employers counted the value of health benefits provided to an employee’s same-sex spouse as income and withheld taxes (including Social Security and Medicare) on it. “As soon as the Supreme Court decision was delivered, employers could stop taxing that particular benefit. What remains unclear is whether it will be retroactive to the beginning of the year,” says Ms. Gonzalez.
Because federal departments and agencies have yet to issue guidance and regulations on how they will implement the Supreme Court ruling, says Mr. Squillace, professional advisors should stay tuned. “We’re going to be living with some degree of change and uncertainty for a number of years."