New York state passed a law a few week’s ago allowing same-sex couples to marry. New York joins several other states in the country permitting those people who love each other to make their commitment to each other official.
Just for the record, I do not plan on making this post political or religious, nor do I invite commentary for this post that is politically or religiously – based. It is merely a discussion about money.
We opposite sex couples take a lot for granted; marriage offers significant financial benefits. For one, married people are generally more healthy and live longer than their single counterparts. Although this may not be seen as a direct financial benefit, healthier people generally work more and for a longer period of time (hours as well as years), and therefore typically experience financial abundance as a result.
Further financial benefits include being covered by a spouse’s health insurance plan. It is no secret that employers everywhere are trying to reduce their internal costs in order to stay in business, and employees bear a larger share of the cost of the health insurance than previous generations did. Two single individuals will typically pay more than a married person would pay for coverage for both spouses. In addition, if the marriage dissolves, the ex-spouse may be able to continue the health care coverage under COBRA rather than having to shop private individual insurance on his/her own. Some health insurance companies do cover a partner in a domestic union, but not all. Now that same sex couples can marry in some states, more people will be covered for health insurance and will likely save money; creating more financial abundance for the couple.
Then there’s income taxes. The so-called “marriage penalty” isn’t currently in effect (some year’s ago, the federal standard deduction for married couples wasn’t twice the amount for single filers, so married couples, in effect, were “penalized” because they didn’t receive an equal share of standard deduction that single filers enjoyed. One client actually used this as an excuse not to get married, but that’s another story) but there are other benefits from filing a joint income tax return (granted, the same sex couple will only be able to file as “married filing jointly” on their state return, the federal return they’d still have to file single). These benefits include claiming certain income tax deductions-such as mortgage interest paid on property that may only be owned by one of the spouses, charitable gifts made by only one spouse, medical expenses incurred by one spouse etc…
Another financial benefit of marriage is in the area of estate planning and estate taxes. I’ll try my best to explain this as simply as possible, promise. Required disclaimer: I am not an attorney and this is not legal advice. Under most state laws, a surviving spouse is allowed a certain amount of money from the deceased spouse’s estate (called the “elective share”); this prevents the surviving spouse from being disinherited – a significant threat, especially if the couple experienced marital discord and ensures there are assets to care for any surviving dependent children. Now, same sex couples will have access to these rights in NY state.
Regarding estate taxes: Every individual has a certain amount of assets that will be exempt from estate taxation. Right now, on the federal level, that exemption is $5 million. Since most people will not have assets above this level, I’ll focus on NY. The exemption here is “only” $1 million per person (cue sarcastic violins for people who have more money than this who may have to pay estate taxes….go ahead, I know you’re thinking that.), but married people are allowed to give each other as much money as they would like without any estate taxes; mainly because the taxing government, be that state or federal, knows that the surviving spouse cannot live forever and they’ll eventually get their tax money when the second spouse dies. There are some widely used estate planning strategies to help alleviate this, however. So, back to married couples being allowed to give each other lots of money without estate taxes (upon the first death); this gives the surviving spouse and his/her advisors time (hopefully) to institute strategies to reduce the estate and therefore reduce or even eliminate estate taxation. Non-spouses do not have this option.
The last issue deals with divorce. Ex-spouses have rights to certain financial assets that non-spouses do not have, such as the right to receive alimony/maintenance and a certain amount of the marital assets.
I mentored a troubled teenager years ago whose parents never married, they just chose to live together. She defended their choice not to marry stating that they didn’t need a “piece of paper” to say they were married. Well, actually, you do. And now more people can get that piece of paper if they choose to do so. I also had a client one time that, when asked what his best investment was, listed his marriage license.
Go, live happily ever after.