A financial benefit of same-sex marriage? Divorce.

    Same-sex brides and grooms can take advantage of prenups, postnups, and the right to divide property tax-free

    Published: June 05, 2014 05:15 PM

    Like any couple, same-sex brides and grooms hearing June wedding bells aren't focused on an eventual split. But their rights in divorce are among the major benefits of legal, same-sex marriage, experts told Consumer Reports today.  

    "When a single-sex couple broke up in the past, there was no law as to what to do with their property," Judith Turkel, a partner with the law firm Turkel Forman of New York City, told a group of Consumer Reports employees gathered at the organization's Yonkers, N.Y., headquarters. "Now, if a couple is married, they can get divorced just like any other married couple."

    In the District of Columbia and in 19 states that give single-sex couples the freedom to marry, that means couples can transfer property as heterosexual couples do, without worrying about income or gift tax. Before the Supreme Court decision last June that struck down portions of the federal Defense of Marriage Act, those transfers were taxable events. Some other benefits of legal same-sex marriage:

    • Couples in states that recognize their marriages can sign prenuptial and postnuptial contracts. 

    • Spouses who pay alimony can deduct that spousal support on their federal income tax returns. 

    • Some retirement assets owned by one spouse may be viewed as martial property and divided in divorce. Same-sex spouses who divorce are entitled to receive qualified domestic relations orders. That aids them in properly splitting and avoiding federal taxation on some workplace retirement plans such as 401(k)s.

    • Transfers of all or part of an IRA can be done between divorcing spouses without incurring federal tax. 

    "Financially that is a huge win," said another participant, Nan Bailey, CFP, chief executive of NPB Wealth Managment in Larchmont, N.Y. "Before, if a same-sex couple was together 20 years and spit up, the IRA of partner A could not be transferred to partner B without having income taxes paid to do the transfer. Now a QDRO can be issued so the IRA can be split without the taxes. It's the same with property transfers. It is a blessing in many cases."

    Because the Supreme Court did not strike down states' ability to outlaw same-sex marriage, couples considering marriage face a minefield of contradictory state laws that can affect their legal and financial situations, said Howard Forman, Turkel's business partner. Even federal departments and agencies differ on whether a couple is considered married based on where they live or where they held their ceremony.

    The experts recommended couples seek information through a number of organizations. They include Gay and Lesbian Advocates & Defenders, Lambda Legal, American Civil Liberties Union, and the National Center for Lesbian Rights.

    —Tobie Stanger




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