The financial side of marriage equality

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Any couple has a constitutional right to be married in any state and to receive all benefits of marriage in that state, the United States Supreme Court has held in a series of decisions. These decisions — primarily United States vs. Windsor and Obergefell vs. Hodges — effectively put financial planning for same-sex married couples on the same legal footing as financial planning for dual-sex married couples. And in late 2022, the Respect for Marriage Act was signed into law, requiring all states to recognize same-sex marriages.
Equality in financial treatment is mandated for any couple with a marriage license issued in any U.S. state, or in any recognized foreign jurisdiction. As a result, all married couples should have the same rights and responsibilities in state and federal tax filing, inheritance and property rights, insurance, and Social Security and retirement benefits. Here is a review that can help you understand the current circumstances for your spouse and you.

The Big Picture

The federal government now recognizes all valid marriages licenses for all federal income tax, estate tax, retirement, Social Security, and healthcare purposes, and all U.S. states are required to give equal treatment to all couples with valid marriage licenses and to issue marriage licenses to all couples who request them. They are also generally required to give all marriages equal treatment under trust, estate, property, and tax rules.

The income tax and married couples

At the federal level, all couples with valid marriage licenses from any jurisdiction are considered married for federal income tax purposes and are expected to file under the "married" tax status no matter where they live. Married couples can file either jointly or separately, but not singly or as heads of households.
For state income tax purposes, the principles of equal treatment apply but implementation practices may be in flux. You should consult with a qualified tax professional to determine your local filing obligations.

Social Security and retirement

Marital status plays no role in determining Social Security and "regular" Medicare tax withholding. The 0.9% Additional Medicare Tax may be withheld from any individual whose covered wages exceed $200,000 per year without regard to that individual's filing status. However, the actual liability for the 0.9% additional tax is determined at the time of tax filing, when the tax is applied to individuals filing singly whose income generally exceeds $200,000 and couples filing jointly whose income generally exceeds $250,000. Additional calculations may be needed to determine final tax liability for single or married taxpayers whose income is divided between wages and self-employment income.
As for benefits, Social Security provides full spousal benefits to all couples with recognized marriage licenses from any state or foreign jurisdiction. In some cases, Social Security may also award spousal benefits to couples having recognized civil unions, foreign or domestic.
Employer-sponsored retirement plans and IRAs are governed by different laws. As a result, all married couples are entitled to the same rights for joint and survivor annuities, qualified domestic relations orders, beneficiary designations, and required minimum distributions, regardless of where they, their employers, or their financial institutions are based.
Joint and community property rights, health care proxies, spousal trust privileges, powers of attorney, living wills, and other nonmonetary elements of your financial strategy rest on combinations of state and federal law. Couples should seek qualified advice to determine how their arrangements fit with current practices in the state where they live.

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The material was authored by a third party, DST Retirement Solutions, LLC, an SS&C company ("SS&C"), not affiliated with Merrill or any of its affiliates and is for information and educational purposes only. The opinions and views expressed do not necessarily reflect the opinions and views of Merrill or any of its affiliates. Any assumptions, opinions and estimates are as of the date of this material and are subject to change without notice. Past performance does not guarantee future results. The information contained in this material does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation, offer or solicitation for the purchase or sale of any security, financial instrument, or strategy. Before acting on any recommendation in this material, you should consider whether it is in your best interest based on your particular circumstances and, if necessary, seek professional advice.

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