As a financial adviser with Ameriprise in Edina, Chris Bentley is used to counseling newly married clients on the practicalities of melding their financial lives — from joint investment accounts and retirement plans to wills. When his daughter, returning from her third combat tour in Iraq, announced she was getting married, he wanted to give her the same advice he gives his own clients. And now he can.
His daughter, who had come out as a lesbian several years ago, was married in Washington, D.C., earlier this year. In the space of a few weeks in 2013, Minnesota legalized same-sex marriage and the U.S. Supreme Court extended federal recognition to legally married same-sex couples. Discussing the impact of those two developments on his financial advisory practice, Bentley confessed: “It’s extremely personal for me.”
Anticipating an uptick in interest, Bentley began advertising his services in LGBT-oriented publications. While he hasn’t seen any sharp increase in business yet, he said he is fielding “deeper and more detailed” questions.
Federal and state taxes, inheritance, health care directives and a host of other personal financial details are now simplified and harmonized for same-sex and opposite-sex couples in Minnesota, 15 other states and the District of Columbia. But many same-sex couples who have been together for years established complex domestic partner trusts or wills and now need to restructure their financial lives. An estimated 3,000 same-sex couples took out marriage licenses across Minnesota in the first few months after the law’s passage, a number that continues to grow. Adding Minnesota couples legally married in other states, there are potentially thousands who suddenly may need advice not just from wedding planners but tax, estate and financial planners as well.
“It’s been good for business,” said Lee Roehl, owner of ROR Tax Professionals, a St. Louis Park firm that markets to the LGBT community. He estimates that new and existing client billings grew about 5 percent this year directly as a result of changes in the law.
While finances are typically a minor question when his clients consider marrying, Roehl sees two potentially significant negative considerations, depending on a couple’s circumstances. The federal ‘‘marriage penalty’’ imposes “a lot more in combined taxes” on a two-earner, high-income couple than they would pay filing as unmarried individuals, Roehl explained. While most of his clients gladly pay the penalty to have their marriage recognized, federal rules also allow an already married same-sex couple to voluntarily refile tax returns as a married couple going back to 2010. Refiling past tax returns doesn’t make sense for those who would pay a penalty retroactively, he said.
In addition, the assets of one spouse can be tapped by a care provider to pay for long-term care expenses for the other. Roehl cited one client pair who decided against tying the knot for that reason.
Ann Kirchner, wealth manager at Accredited Investors in Edina, observed that some same-sex couples who have been together a long time come to marriage “with a very complicated past,” including children, financial assets and houses. With marriage recognition, they face “a whole new set of dynamics.” A significant part of her work is helping clients “unwind that past” in a way that makes financial sense, she added.
“It’s not a new, complicated scheme,” observed Shane Swanson, an estate planning attorney at Stinson Leonard Street in Minneapolis. He has not seen growth in his business so much as simply applying the familiar tax and estate planning rules to “a new class of clients.”
Tom Knabel, 60, and his partner Kent Allin, 64, who live in the Twin Cities and were married four years ago in Connecticut, are paying an estimated $15,000 ‘‘marriage penalty’’ for the first time this year. Knabel said they are glad to pay the penalty because “as a same-sex couple we wanted the responsibility as well as the benefits” of marriage.
As was true with many same-sex couples, Knabel and Allin had established a complicated trust to ensure assets passed to the surviving partner. With legal recognition for their marriage, a simple will and financial plan replace that complex and expensive-to-set-up structure, he said.
Some issues remain unresolved. Knabel, a physician, and Allin, who works for the state, have to name each other as the beneficiary in their retirement plans. In addition, Knabel was surprised at the number of choices available to married couples for receiving Social Security benefits.
“These are things we have to start thinking about, just like every married couple,” he said.
Brad Allen is a Minneapolis freelance journalist and former investor relations and corporate communications executive for technology companies including Imation Corp. and Cray Research. His On the Other Hand column will appear monthly. His e-mail is email@example.com.
It all started with taxes
United States vs. Windsor, the Supreme Court ruling that overturned the federal Defense of Marriage Act (DOMA), started as a dispute over taxes.
Edith Windsor and Thea Spyer, together four decades, wed in Canada, in 2007. The state of New York, where they lived, recognized the marriage as legal. When Spyer died in 2009, she left her estate to Windsor, who sought the federal estate-tax exemption for surviving spouses but was denied by the IRS because DOMA defined “marriage” and “spouse” as excluding same-sex partners.
Windsor paid $363,053 in estate taxes and brought suit claiming that her Fifth Amendment right to equal protection was denied. The Supreme Court decided in her favor 5-4 in June 26, 2013.