Prudential Explores the Advantages of Financial Planning for Same-Gender Couples

By Julissa Catalan


Prudential Financial has released an in-depth look into the financial rights LGBT couples are now entitled to in the wake of the Supreme Court’s overturning part of the Defense of Marriage Act (DOMA) last year.

“It’s important for same-sex couples who are already married or contemplating marriage to become aware of the many workplace benefits and financial-planning strategies that are now available to them as a result of the Windsor decision,” says James Mahaney, Prudential’s Vice President of Strategic Initiatives and author of the study, titled “Financial Planning Considerations for Same-Sex Couples After Windsor.” “These benefits have the potential to make a significant impact on the financial health of same-sex couples.”

In June 2013, the U.S. Supreme Court overturned Section 3 of the 1996 Defense of Marriage Act, which had banned federal benefits for same-gender married couples living in states where their unions are recognized, as part of a lawsuit brought by Edith Windsor, who was being forced to pay an estate tax after her wife, Thea Spyer, died in 2009. The couple had been legally married in Ontario, Canada, in 2007.

As a result of the new ruling, employee benefits and financial-planning strategies that were once available only to heterosexual married couples may now be available to LGBT married couples.

The Prudential research provides a summary of some suggested financial-planning opportunities, as well as workplace benefits married couples are entitled to. Included is a “Post-Windsor Checklist” with detailed information on the case ruling and financial-planning strategies.

Depending on the employer, same-gender couples could obtain access to healthcare benefits including coverage, flexible-spending accounts, and health-reimbursement and/or savings accounts.

Furthermore, Prudential advises LGBT couples to consult with a tax professional and explore the possibilities of filing an amended tax return for prior years, as it may be beneficial to claim a refund for taxes paid on credited income related to healthcare benefits previously purchased for a same-gender spouse. A same-gender spouse also has access to improved survivor benefits and defined-contribution retirement plans now. In addition, access to group-life-insurance coverage through the spouse’s employer is available as well.

The federal recognition does come with a few negative attributes from a financial perspective. Some married same-gender couples will now be required to pay higher federal taxes, while others may see their ability to qualify for a child’s college financial aid reduced—the same downfalls to filing joint returns that some heterosexual couples face.

“This decision affects the LGBT community immensely and it has really made a difference in my life,” says Debra Abbott-Walker, Manager of Agency Recruiting for Prudential. “Now I know that if something happens to me or my wife, our children will receive survivor benefits.”

Abbott-Walker says the couple expects to save around $1,500 a year by filing joint tax returns. Like Debra and her wife, Jennifer, many married LGBT couples paid more in federal taxes prior to the DOMA overturn, because they were obligated to file as individuals even though they were legally married.

Prudential also encourages same-gender couples to educate themselves on the financial-planning aspects related to estate planning, IRA, and social security, and to also update their beneficiaries on retirement accounts, as their spouses can now legally be approved for that role. Couples should also verify whether deduction contributions should now be made to a regular IRA, or whether a Roth or Spousal IRA is now an option.

Estate planning should be revisited, as same-gender spouses are now able to pass assets to a spouse without incurring estate taxes through the use of the unlimited estate tax marital deduction—which was the technical aspect of inequality measured in the Windsor lawsuit.

“It is important for the financial-services industry to be aware of the impact that the Windsor decision has on the individuals they serve,” said Brad Snyder, Director of Institutional Giving for the Lesbian, Gay, Bisexual and Transgender Community Center in New York City. “This paper is another example of Prudential’s long-standing commitment to the LGBT community and an essential tool for same-sex couples as they navigate through the many workplace benefits and financial strategies available to them as a result of the historic ruling.”

Prudential Financial is No. 8 in the DiversityInc Top 50.

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