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July 6, 2015

Financial Implications Of Same-Sex Ruling For Older Couples

IPI expert referenced: Merrill Matthews | In The News | Media Hit
  Chicago Tribune

By Janet Kidd Stewart

Caution was the watchword financial planners had for same-sex couples contemplating marriage in the wake of the Supreme Court decision making those unions legal nationwide.

"We say to people, 'Walk, don't run, down the aisle,'" said Steve Branton, senior financial planner with Mosaic Financial Partners Inc. in San Francisco, referring to the maze of tax and retirement implications that accompany marriage.

And, just as often happens in the straight world, many couples promptly ignored that advice and started running — or at least biking.

Thrilled by news of the decision while on an extended vacation in Oregon, Audrey Block and Carol Farr, who live in Arizona, jumped on a couple of bikes and rode straight to a county licensing bureau.

"There's a three-day waiting period, but our marriage license will have today's date on it," said Block, 63.

It wasn't exactly an impromptu, Vegas-style wedding. The couple has been together for 21 years.

Likewise, longtime partners Graham McReynolds and Clay France sent out wedding invitations in April for an early July wedding on the hope that it would be right after a favorable ruling. They live in Idaho, where a same-sex marriage ban had already been struck down, but they were waiting for assurance from the high court.

Both couples acknowledged they'll have some financial issues to sort out along the way, but those are the cart, not the horse.

"We'll end up paying more in taxes, and we talked about that," said McReynolds, 55, a semiretired nonprofit executive who is now farming organic alfalfa and barley in Idaho with France, 50.

Their largest asset is their 900-acre farm, McReynolds said, so having survivorship rights to the property is more important than any potential dings from the so-called marriage penalty, under which some couples pay higher income taxes than they would as singles.

Recognition on other estate-planning documents was also essential, he said.

"Many years ago, Clay was hit by a car, and I wasn't allowed in the emergency room," McReynolds said, an experience that left them craving a sense of security about legal and financial matters. "It's important that we know without any worries that we have shared assets."

With many couples today deciding not to marry later in life because of complex financial lives, the sentiment is worth noting. Experts also say they'll be watching for a potential scaling back of benefits commonly afforded to unmarried couples now that everyone has the legal right to marry.

"There are enough complications that people need to be thoughtful about this, particularly later in life," Branton said.

Here are a few issues that experts said older couples should discuss:

Medicare. Means-testing rules for Medicare could mean higher premiums for some same-sex couples on two levels, said Merrill Matthews, resident scholar with the Institute for Policy Innovation in Dallas. Fewer same-sex couples have a stay-at-home spouse, so as a group they tend toward higher incomes, meaning more may be caught up in means testing, Matthews said. (Higher premiums for Parts B and D kick in at $85,000 for individuals and $170,000 for couples).

And in couples with substantially different income levels, the lower-earning spouse who might otherwise not be subject to higher rates could be pulled into that category, experts said.

Also keep in mind that remarriage can terminate spousal benefits for some divorced recipients.

Debt. Marrying into a partner's past debt is obviously something for discussion, but so are future debts. Figure out how you'll handle a lengthy nursing home stay, for example.

IRAs. Widows and widowers can roll their deceased spouses' IRAs directly into their own, allowing the money to continue to grow inside the accounts, notes Holly Hanson, founder of Harmony Financial Strategies in Los Angeles.

Estate planning. In addition to survivorship issues on property transfers, the ability for couples to care for their spouses as they age is critical, even putting the financial cart before the horse, said Stuart Armstrong, a financial planner in Needham Heights, Mass.

"I have one client couple in their 70s who had no intention of getting married until (the recent ruling)," he said. "They're doing it now not only for the unlimited marital deduction but also because one of them is potentially facing some declining memory issues."


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