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Supreme Court Ruling on Gay Marriage: DOMA a Year Later

By , Money TreeFOXBusiness

It’s been one year since the Supreme Court ruled the Defense of Marriage Act (DOMA) unconstitutional, and for Holly Kylen, a Voya retirement coach and financial planner, it’s been “an amazing year” both personally and professionally.

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“If you ask any gay person today, what this feels like, it’s our Rosa Park-type moment,” says Kylen who married her wife earlier this year, and has seen an increase in same-sex couples seeking out financial advice.

In its 5-4 decision in United States v. Windsor last summer, the country’s highest court declared that gay couples married in states that recognize the union are entitled to the same federal health, tax, Social Security and other benefits that heterosexual couples receive.

“The ruling means there is one set of rules for everyone, and there are good and bad consequences on couples’ finances because of that, but it means everyone is playing the same game and allows everyone to plan for a more secure financial life,” says with Nanette Lee Miller, head of the LGBT and non-traditional family practice group at accounting firm Marcum.

Government agencies -- mainly the IRS and Social Security Administration -- have been working to comply with the ruling. Last week, the Obama administration announced that more benefits will be extended to all same-sex couples, no matter where they.

“If you ask any gay person today, what this feels like, it’s our Rosa Park-type moment,”

Holly Kylen, a retirement coach and financial planner,

Last year’s historic ruling has “uncomplicated” financial planning for gay couples, according to Justin Sinnott, a senior financial consultant at Charles Schwab.

We are seeing a lot of same-sex couples seeking out financial advice since the ruling, and they have the same type of questions every married couple has: how do we maximize our benefits and savings and reduce our tax liabilities.”

Here’s a look at what the court’s ruling has meant for same-sex couples:

Determine the Most Advantageous Tax Status. Married same-sax couples can now file their taxes jointly at the federal level. Before the undoing of DOMA, many gay couples were filing multiple state and federal tax returns.

“This simplifies the tax-filing process for so many couples,” says Lee Miller. “And means they are eligible for more deductions.”

However, Sinnott explains that it doesn’t always make sense for couples to file a joint return. "If there is a large discrepancy in income, then it’s usually a good move to file jointly,” he explains. But if both people bring in similar paychecks, filing together could result in higher taxes. “It requires a thorough run through of both scenarios. A lot of the decision will depend on deductions.”

What’s more, couples can amend their tax returns for the past three years (as long as they were legally married) to claim the extra income tax they paid as a result of DOMA.

The court’s decision also means gay couples in state-recognized marriages no longer have to pay federal income tax on employer contribution to a partner's health insurance premium.

Social Security Benefits. So many of us will rely on Social Security benefits to fund a portion of our retirement, and now, same-sex couples are eligible for the same federal tax treatment and benefits in the event that a spouse passes away.

“Now gay couples can rest assured that if one of them dies, they will be entitled to half their benefits -- that’s huge. We're so excited about this, we’re used to buying a lot of life insurance, which still makes sense in some cases, but this is just an added amount of security,” says Kylen.Estate Planning is Much Easier. Experts expect to see fewer families contesting wills as a result of the DOMA ruling.

“Now, same-sex couples can say ‘I want this money to go to this person’ in a will and it can’t be contested by the family,” says Sinnott.

Same-sex couples can transfer assets more easily to each other since they’re now exempt from the gift tax. In the past, gifts above $14,000 added to a lifetime limit of $5 million—after that point a hefty 40% tax was assessed. “Married couples aren’t hit with this, they can double gift,” explains Kylen.

She adds gay couples now have the ability to “stretch their IRAs.” Before the ruling, if a couple was not married and one spouse died and left a $500,000 IRA behind and named the partner beneficiary, the account would take a significant tax hit.

“That means that the surviving spouse would have taken a 30% tax hit on the account. Now, you can open a spousal IRA and stretch it cover a lifetime and all the money transfers are tax free.”

It’s now easier for same-sex couples to pass on their 401(k)s as they can select “spouse” as the beneficiary instead of “other.”

“We tell all newly-married couples to do this,” says Lee Miller. “If the person named as beneficiary isn’t your spouse, the funds would be 100% taxable. If that account had $1 million in it, that would mean $300,00 would just go to taxes.”

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