U.S. Supreme Court Ruling Changes Estate Planning for Same Sex Couples

The recent U.S. Supreme Court decision in Obergefell v Hodges legalizing same sex marriage throughout the country will have profound ramifications for financial planning. It will, among many things, introduce several changes to estate planning laws that will affect same-sex couples. Understanding these changes will help you to prepare for the future and protect your interests.

About the Decision

Obergefell reconciled a great legal and political tension in the country regarding the status of same sex partnerships. Prior to the ruling, same sex couples could get married in some states but not others, and this arrangement created a complex patchwork that made estate planning (among other tasks) quite challenging for same sex couples and restricted their rights in many states. Obergefell clarified the situation and in many senses vastly simplified the planning landscape while hearteningly expanding rights. However, this “jolt” to the system has several implications with regard to estate planning issues for same-sex couples, including:

  • Retirement plan rollovers - The decision implements special withdrawal requirements for same-sex spouses who inherit IRAs or qualified plans.
  • Retirement plan beneficiary rules - Under the new law, an individual must name his or her same-sex spouse as the sole primary beneficiary of any qualified retirement plan, unless the spouse releases this right in writing.
  • Gift-splitting rules - The recent Supreme Court decision gives same-sex spouses the right to participate in gift-splitting, which allows them to combine their annual gift tax exclusion.
  • Estate tax exemption portability - A same-sex widow or widower can now add any unused estate tax exemptions left behind by a deceased spouse to his or her own estate tax exemption.
  • Marital deduction - Thanks to the Supreme Court's ruling, same-sex spouses can now transfer any amount of property or money to each other during life or after death without incurring any gift or estate taxes.

In light of these changes, same-sex couples who choose to marry should consider altering their estate plans in order to take advantage of their new rights. Please consider calling Gudorf Law Group at 1- 937-898-5583 to understand and explore your options.