The Independent Investor: Gay Marriage Comes of Age

This week’s historic Supreme Court ruling could be a windfall for gays married and living in at least 13 states and the District of Columbia. That accounts for about two-thirds of same-sex marriages in this country. For the rest, things are not so clear.

The high court's decision to lift bans on federal same-sex benefits will have repercussions throughout this country and will send corporations scrambling to reassess everything from withholding taxes to fringe benefits.

For those living in the 13 "Free" states where gay marriage has been legalized, they will immediately gain access to more than 1,000 federal benefits, including Social Security and tax law changes. The income tax benefits for "married, filing jointly" will be beneficial, especially for couples with very different income levels. However, wealthier couples will probably pay more in taxes. That will be a small price to pay for many of the 114,100 same-sex couples living together nationally. Other economic benefits, in my opinion, will outweigh the costs.

For example, Social Security benefits for same-sex spouses will now be a reality. Until Wednesday, the Defense of Marriage Act denied them those benefits, which could cost a retired couple $14,484 a year and a surviving same-sex spouse up to $28,968 per year, according to the Center for American Progress, a human rights project.

Additional good news for gay couples is in the estate tax arena. Upon the passing of a spouse, the unlimited marital deduction now applies so all assets can pass to a same-sex spouse tax-free. Gift tax deductions will be legal as well.

Tax-deferred savings plans, such as IRAs and 401(k)s, will no longer be taxed (as they are now) before they are rolled over to a surviving spouse's accounts. Pensions can also be left to same-sex spouses. As such, gay couples will be entitled to survivor benefits under the Employee Retirement Income Security Act, a federal law that governs most retirement plans.

Companies are going to need to re-examine and overhaul many employee benefits such as health insurance coverage and taxes. Until now, the value of a gay spouse's health benefits was treated as taxable income, whereas heterosexual couples paid for spousal benefits from pretax earnings. The ruling could save gay couples thousands of dollars per year. Other benefits, such as flexible spending plans and medical leave, will need to be adjusted in favor of the same-sex couple.

Where uncertainty remains are in 37 states in which gay marriage is not recognized. Generally, federal agencies usually defer to the states in determining marital status. The devil is in the details and that’s where it gets really murky. Let’s say, for example, you were married in a same-sex ceremony in Massachusetts or New York but then moved with your spouse to New Jersey. Some federal agencies will recognize your marriage as legal, while others will defer to the laws of New Jersey where same-sex marriages have still not passed the legislature.

Divorce or establishing legal ties with children may also be dicey in states that do not recognize same-sex marriage. Unfortunately, if you are married, gay and happen to live in a non-Free State, the battles for you will go on. You will continue to face opposition, roadblocks and political obstruction. It will all be perfectly legal, protected by a patchwork of state laws, which will vary from state to state. Unless all 650,000 same-sex couples in this nation move to the Free States, I see years of litigation ahead.

Yet, I am confident that the end result will be as inevitable as that of the Civil Rights movement of the 1960s. To all of my same-sex readers out there, I offer my congratulations for a job well done.

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquires to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.