Client Affairs

EXCLUSIVE: Landmark DOMA Ruling Creates Complex Financial Waters For Gay Couples To Navigate

Wendy Spires, Head of Research Group Deputy Editor, July 24, 2013

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Geoff Seaman, wealth strategist at BNY Mellon, speaks exclusively to Family Wealth Report about the financial complexities for same-sex married couples thrown up by the Supreme Court’s recent ruling on the Defense of Marriage Act.

Geoff Seaman, wealth strategist at BNY Mellon, speaks exclusively to Family Wealth Report about the financial complexities for same-sex married couples thrown up by the Supreme Court’s recent ruling on the Defense of Marriage Act.

The issue of same-sex marriage continues to be a hot topic in the US (and elsewhere), with politicians, religious leaders and social commentators at both ends of the spectrum loudly banging their respective drums on the issue. But a recent Supreme Court ruling on same-sex marriage means that it is financial advisors who should really be getting hot under the collar. Those who do not risk their LGBT clients’ plans falling into disarray on a number of fronts, Geoff Seaman, wealth strategist with BNY Mellon, told Family Wealth Report in a recent interview.

By even the most conservative estimates, one in every ten people is gay. This figure underscores just how chunky the LGBT segment must necessarily be and it follows that most wealth managers will have a significant contingent of clients who are gay – many of whom might be in or considering a same-sex marriage. The recent Supreme Court ruling, which effectively struck down the Defense of Marriage Act, has wide-ranging wealth management implications which advisors ignore at their peril, Seaman explains.

First, some background: DOMA was enacted as a federal law in 1996 and prevented same-sex couples from being treated as spouses in the eyes of federal law while allowing states to treat their resident as they saw fit for state and local law purposes.  This affected the financial affairs of same-sex couples with an overlay of complexity impacting not just their income taxes, but also the gift and estate tax implications of transfers between these couples.

At the end of last month, the Supreme Court ruled, in the case of the United States vs Windsor, that Section 3 of DOMA was unconstitutional as a Fifth Amendment violation. In essence, the ruling determined that same-sex married couples are entitled to the same benefits and obligations as heterosexual married couples in jurisdictions that recognize same-sex marriages. (In the case in question, plaintiff Edie Windsor was looking to recoup approaching $400,000 in federal estate taxes she was forced to pay when her spouse, Thea Spyer, died in 2009.)

While Supreme Court recognition of this fact and the extension of federal benefits to same-sex spouses is certainly to be welcomed, and was indeed met by jubilation by the LGBT community, the ruling has however created an absolute minefield of additional complexities for advisors to navigate for their clients.

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