Wells Fargo Advisors LGBT Insight: A Look Back at 2013

Kyle Young, First Vice President Investment Officer with the Accredited Domestic Partnership Advisor Designation, Wells Fargo Advisors, LLC, in Short Hills, N.J., addresses the unique financial challenges faced by same-gender partners. This is the 10th article in a continuing series.

2013 began with newly reelected President Obama making history as he made his thoughts very clear on the injustices facing all LGBT couples across the country. He remarked, “Our journey is not complete until our gay brothers and sisters are treated like anyone else under the lawfor if we are truly created equal, then surely the love we commit to one another must be equal as well.”

In what could only be described as the highest degree of irony, these remarks were made at a time when the federal government still had a standing law, the Defense of Marriage Act (DOMA), prohibiting access to federal benefits for all married LGBT couples. Even for couples who were legally married in the state in which they reside, the federal government simply denied any recognition of their union.

This all changed during the early days of summer when the U.S. Supreme Court found Section 2 of DOMA to be unconstitutional, opening the door to full federal recognition for many LGBT married couples.

Full federal protections are only extended to those couples who marry AND reside in a state where LGBT marriage is fully recognized.

For unmarried couples who have entered into a civil union or domestic partnership in their current state of residence, protections are restricted to state-level benefits only and do not include access to any federal protections.

For couples who reside in a non-marriage state but choose to marry in a state where marriage is an option, most federal protections will apply.

The IRS recently provided guidance on the DOMA ruling and found that all married LGBT couples will be fully recognized as such for federal tax purposes, regardless of their state of residence. This includes income-tax filing, as well as gift- and estate-tax considerations.

Based on findings from the Human Rights Campaign, the list of federal benefits now offered to LGBT married couples includes veteran spousal benefits, military spousal benefits, immigration protections, bankruptcy, and Medicare and Medicaid protections, to name just a few.

One notable exception is the Social Security Administration. As of December, the SSA bases spousal-benefit eligibility on one’s state of residence. Therefore, if a person resides in a state that does not recognize LGBT marriage, his/her spouse would be ineligible to access spousal retirement benefits and spousal inheritance benefits.

The financial- and estate-planning landscape is forever changed for LGBT married couples. We are heading into a new year with an entirely new set of planning opportunities available, and it’s critically important for all LGBT couples to take some time to educate themselves on how the events of this year have impacted them and what new planning techniques and strategies are available. As we head into 2014, my colleagues and I look forward to continuing this discussion as we navigate unchartered territory for so many LGBT couples.

Wells Fargo Advisors is not a tax or legal advisor. Wells Fargo Advisors, LLC, member SIPC, is a registered broker-dealer and separate nonbank affiliate of Wells Fargo & Company, No. 25 on the 2013 DiversityInc Top 50.

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