Financial Planning for same sex marriages

Same-Sex Marriages; The Financial Planning Perspective

Offered by: Total Alignment Wealth Advisors, LLC 5 Penn Plaza, Floor 19 New York, NY 10019 (212) 913-9110 [email protected]

Same-Sex Marriages; The Financial Planning Perspective

1. Who Are We?

a) Our Firm

b) Our Speakers

2. What Do We Know About Same-Sex Marriages?

a) General Financial Planning Issues for Married Couples

b) Recent History on Same-Sex Marriage Recognition

c) Current Status for Same-Sex Couples

2014 © Total Alignment Wealth Advisors, LLC. All Rights Reserved. 2

Who We Are – Total Alignment Wealth Advisors, LLC Founded by Clients, for Clients

Focus on Integrated Planning Advice, Oversight & Financial Organization

•No Commissions

•No Referral Fees or Kick-Backs

•Paid Only from the Client

Strictly “Fee-Only”

•TA Planners™ Hourly Coaching and 6-Month Financial Consultant for the Mass Affluent ($200K-$3mil)

•Total Alignment™ Annual Personal CFO services for the High Net Worth ($3-20mil)

•Total Alignment™ One-Time Plans and Private Family Office services for the Ultra High Net Worth ($20mil+)

3 Core Services

•Private Advisory Memorandums

•Private Workshops

Total Alignment™ Institute of Research and Learning

•Access to Anonymous Insights of Other Clients’ Situations / Benchmarking

•Integrated and Unbiased Advice + Expert Advisors + Advanced Technology = Informed Financial Decisions

•Savings of Time, Worry & Excess Costs

Key Benefits


Who We Are – Our Speakers

Stephanie Genkin

Producer for CNN Money

Graduate of Oxford University

Transitioning Financial Planner for TA Planners™

Frequent Speaker on Various Financial Planning Topics

Robert Hayden, JD, CFP®, CDFA™

Managing Member and Chief Wealth Advisor of Total Alignment Wealth Advisors

Adjunct Professor for NYU, Teaching its Financial Planning Capstone Course

One of 13 Board Members for Certified Financial Planner Board of Standards, Inc.

Licensed Attorney, Certified Financial Planner™ professional and Certified Divorce

Financial Analyst®


Preliminary Questions…


Question # 1 – Legal Marriage Recognition?

6 2014 © Total Alignment Wealth Advisors, LLC. All Rights Reserved.

Female Female Marriage Ceremony



Female Female Legal Marriage in

New York But Now Lives in Alabama



Female Female

- No Legal Marriage Ceremony - Resided Together for 20 years

- Held Themselves Out as “Partners”

Question # 4 – Legal Parental Rights?


Female # 1 Female # 2 - Legally Married & Residing

in Recognition State

Child

Question # 5 – Legal Parental Rights?


Female # 1 Female # 2 - NOT Legally Married but - Common Care for Child

Child

3 Key Benefits for Married Couples

1. Financial & Tax Benefits

2. Medical & Family Benefits

3. Creditor & Criminal Protections


#1 Key Marriage Benefit - Financial & Tax Benefits

1. Ability to Consolidate Income and Expenses and File a Joint Tax Return

2. Access to Social Security Spousal Retirement, Disability and Death Benefits

3. Spousal Benefits under ERISA, COBRA, Medicare, Medicaid and Employer-Provided Group Health & Retirement Plans

4. Military and Veterans Spousal Privileges

5. Unlimited Non-Taxable Lifetime Transfers and At-Death Marital Deduction Transfers

6. Ability to Claim Alimony (and Possibly Community Property) and Non-Taxable Equitable Division Transfers Incident to Divorce

7. IRA Spousal Rollover Advantages To Spread Out Income Tax Hit

8. Ability to Elect Against Spouse’s Will

9. Ability to Double Annual Gift Tax Exclusion (Gift-Split) and Exclusion of Gain upon Sale of Principal Residence

10. Ability to Claim Unused Spousal Exemption under At-Death Portability Rules 2014 © Total Alignment Wealth Advisors, LLC. All Rights Reserved. 12

“Top 10” Financial & Tax Benefits

#2 Key Marriage Benefit – Medical and Family Rights

1. Ability to Visit and Make Medical Decisions for Incapacitated or Ill Spouse

2. Entitlement of Excused Absences from work under Federal Medical Leave Act

3. Immigration Spousal Sponsorship

4. Parental Presumptions & Second Parent Adoption Privileges (Except where second parent adoptions aren’t legal in a given state.)


Medical & Family Benefits:

#3 Key Marriage Benefit – Creditor & Criminal Protections

1. Right not to testify against a spouse in a Criminal Proceeding

2. Ability to protect against creditors in Tenancy by the Entity

3. Protection under Bankruptcy Act

4. Ability to File A Claim for Wrongful Death


Creditor & Criminal Protections

Summary of Key Issues for Married Couples 1. Pure Financial Issues:

Saving & Investing vs. Spending; Tax Return Filing – Married Filing Separately vs. Married Filing Jointly

Extent of Debt Maintained

Combined Investment Allocation; General Risk Tolerance; Need for Insurance

2. Legal Issues Having Financial Implications:

Recognition – Are We Even Considered “Married”? (Most application to same-sex couples & common law marriage rules.)

If We Are “Married”, What Does That Mean?

1,138 federal statutory provisions addressing spousal benefits; 200 Internal Revenue Code tax sections

Joint vs. Sole Titling of Assets; Application of State Separate Property, Community Property Laws & Adoption Laws

What If We No Longer Wish To Be Married Or If One Spouse Dies?

Consider Pre- and Post-Nuptial Agreement Enforcement, Marital Dissolution Planning & Spousal Estate Elections

3. Lifestyle Issues Having Financial Implications:

Family Size & Whether to Adopt

Lifestyle Changes, In-Laws & Adapting; Financial Support of In-Laws

Keeping Track of Financials & Documents

Budgeting and Financial Monitoring Tax Returns Real Estate Documents Insurance Policies Estate Planning Documents


Recent History of LGBT Marriage…


Recent History for LGBT Marriage Recognition

1996

• DOMA enacted for non-recognition of same-sex marriages

2002

• District of Columbia authorizes marriage equivalency recognition

2004

• Massachusetts becomes the first of now 18 states to recognize same-sex marriages

2013

• US Supreme Court invalidates Section 3 of DOMA in Windsor case


Windsor Case Summary

Rights Confirmed

Right to federal marriage benefits for

same-sex couples who are validly married in

a recognition state

Rights Not Confirmed

Right to federal marriage benefits without prior

state recognition or with mere civil unions or

domestic partnerships

Right to full faith and credit in non-recognition

states for recognition state marriage

Right to federal marriage benefits when residing in a non-recognition state

but marrying in a recognition state


So Where is LGBT Marriage Now?


Current 18 States Recognizing Full Marriage

2004 • Massachusetts

2008 • Connecticut

2009

• Vermont

• Iowa

2010

• District of Columbia

• New Hampshire

2011 • New York

2012

• Maine

• Washington (State)

2013

• Delaware; Rhode Island; Hawaii

• New Jersey; New Mexico; Minnesota


Current 4 States Recognizing Marriage Equivalency

2008 • Oregon

2009

• Nevada

• Wisconsin - less than full equivalency

2013 • Colorado


Recent State LGBT Relationship Battles… • On December 20, 2013, a federal district court judge ruled the

Utah state amendment unconstitutional.

• The Supreme Court of the United States then issued a stay prohibiting any further same-sex couples from marrying pending a decision on the merits.

Utah

• On January 14, 2014, the United States District Court for the Northern District of Oklahoma ruled that Oklahoma’s ban on marriage equality is unconstitutional.

• The case is stayed pending appeal.

Oklahoma

• On February 11, 2014, the United States District Court for the Western District of Kentucky ruled that the state’s marriage amendment is unconstitutional.

• The state will likely appeal this decision and the Governor will seek a stay of the order pending the appeal.

Kentucky


Recent State LGBT Relationship Battles (Cont’d)

• On February 13, 2014, the United States District Court for the Eastern District of Virginia ruled that Virginia's ban is unconstitutional.

• In response, Virginia’s new attorney general indicated he will no longer defend it in federal lawsuits.

Virginia

• Legislators in Arizona attempted to pass a bill that would allow business owners with strongly held religious beliefs to deny service to gays and lesbians.

• The bill was just vetoed by Governor Jan Brewer.

Arizona

• Nicole Dimetman and her partner challenged an 11-year old law against same-sex marriage on equal protection grounds.

• A federal court judge agreed, but Texas Attorney General Greg Abbott said he would appeal.

Texas 23 2014 © Total Alignment Wealth Advisors, LLC. All Rights Reserved.

IRS Rev. Rul. 2013-17, issued on August 29, 2013

IRS will recognize a couple married in a recognition state as “married” even if that couple now resides in a non-recognition state

However, IRS will not treat as “married” domestic partnerships or civil unions

Legally married couples must file their 2013 federal tax returns using either (i) married filing jointly or (ii) married filing separately


International LGBT Marriage Recognition Argentina

Belgium Brazil

Canada

Denmark

France

Iceland

The Netherlands New

Zealand Norway

Portugal

South Africa

Spain

Sweden

United Kingdom

Uruguay


LGBT Summary Statistics…

Large and Increasingly Visible & Recognized Group…

Approx. 16,000,000 U.S. adults now identify as LGBT.

-Harris Interactive Research, 2013

$830 million in purchasing power / personal disposable income.

-Witeck Communications, 2013

Over 600,000 Self-Identifying LGBT Couples Nationwide (Approx. 10% reside in NYC).

- US Census, 2010.

22 U.S. Jurisdictions now recognize same-sex marriage or its equivalency.

23 U.S. Jurisdictions now authorize second-parent adoption by one in a same-sex couple.

A February 2014 poll by CBS News and The NY Times shows 56% of US supports recognition.

But Targeted Discrimination

Continues…

33 states currently have laws banning same-sex

marriages.

8 states currently have laws banning second-parent

adoptions.

80 countries outlaw homosexual acts, of which almost 50% are in

Africa (with particularly harsh penalties in Uganda and

Nigeria).


What Could Be Next for LGBT Marriage?


Possibilities on Future Recognition… More

Recognition

Additional States of the Remaining 32 States Grant

Marriage Recognition

US Supreme Court case Invalidates Federal Marriage Benefits without prior state

recognition

US Supreme Court case Invalidates DOMA Section 2, thereby forcing full faith

and credit

Congress repeals DOMA Section 2 by passing The Respect of Marriage Act

(H.R. 2523, S 1236)

Less Recognition

No Additional States Grant Recognition and States currently

recognizing marriage move to overturn recognition

US Supreme Court case validates exception to full faith and credit in

non-recognition states for recognition state marriage

US Supreme Court validates exception federal marriage

benefits when residing in a non-recognition state but marrying in

a recognition state


Action Plan In Anticipation of Marriage…


Pre-Marriage Planning…

• Consider Selling Assets Held at a Loss to Your Partner in Calendar Year Prior to Marriage

Make Pre-Marriage Tax Strategies

• How Does Your Partner’s Credit History, Asset and Income Levels (Current and Potential), Spending Habits and Overall Risk Tolerance Differ from Yours?

• What Expenses Can Be Shared?

• How Should Your Combined Investment Allocation Change?

Consider Your Partner’s Finances

• Needs Separate Legal Representation

• Requires Full Financial Disclosures

• Must Be Done As Far Removed In Time As Possible From The Wedding

Consider a Pre-Nuptial Agreement


Pre-Marriage Planning (Cont’d)… • Some Federal Benefits May Rely Upon State of

Residence – E.g., Social Security Benefits.

• Validity of Any Pre-Nuptial and Post-Nuptial Agreements Might Be Questioned.

State Residency Planning

• Immigration sponsoring

• Unlimited Marital Deduction Not Available

(Consider a QDOT structure)

Consider special planning issues when Spouse is a

Non-Citizen

• If guest injuries occur, or the wedding is cancelled or rescheduled, wedding insurance will be needed.

• Creating a budget for the wedding is critical.

Consider a Wedding Budget & Wedding

Insurance


Questions?


Economy & Finance

Financial Planning for same sex marriages