TAX PLANNING
There will be a tremendous amount of income tax planning that must be analyzed for same-sex married couples in Florida and the 13 states that did not recognize same-sex marriages (Arkansas, Georgia, Kentucky, Louisiana, Mississippi, Massachusetts, Missouri, Nebraska, North Dakota, Ohio, South Dakota, Tennessee and Texas).
Advisors should help clients:
- Analyze prior year federal and state income tax returns to determine if there is a positive tax arbitrage worth the time and costs associated with amending prior year returns. Consider the impact of the change in the adjusted gross income limitations, which may prevent a same-sex married couple from making Roth IRA contributions or receiving tax deductions and/or credits during this period of time.
- Analyze current year federal and state income tax planning opportunities to ensure that there is enough tax withholding done to mitigate tax withholding penalties. This may require updating 2015 Form W-4 with the employer to decrease the number of personal allowances (line 5) and/or withhold an additional amount from each paycheck (line 6).
- Analyze Roth conversion strategies, financial aid assistance for children going to college, HSA contributions and employee benefit programs to determine the most tax efficient strategy to achieve the stated goal/objective.
- Analyze worker compensation benefits, child support payments and spousal support payments.
ESTATE PLANNING
For same-sex married couples in the 13 states that did not recognize same-sex marriages and Florida, there will be estate tax planning opportunities that must be considered as well. Advisors should pay attention to the following issues and opportunities:
- Spousal elective share, which provides a surviving spouse with the right to receive a fraction of the deceased spouse’s probate estate in “separate” property states like Florida.
- Prior year wealth transfer to a surviving spouse in states that have an estate tax or inheritance tax (such as Kentucky, Nebraska and Tennessee) may result in a refund. Current and future wealth transfer to a surviving spouse in these states will not be subject to inheritance taxes.
- Asset titling and beneficiary designation coordination within the updated estate plan that is reflective of current law will be paramount.
- Same-sex married couples will now have child custody rights, hospital visitation rights, adoption rights and access to a spouse’s birth certificate and death certificate.
Smart Tax and Estate Planning Tips for LGBT Couples | IAG Blogs