Same-sex marriagesBy Temma Ehrenfeld

Christel de Vries, a Dutch outsourcing manager for Accenture, sealed her love for her female partner twice: once in 2001 in Amsterdam under Dutch law and again in 2007 in a civil union in New Jersey. Yet under U.S. federal law, she isn't married -- and that is creating obstacles in her divorce.

The 1996 Defense of Marriage Act rejected federal recognition of same-sex marriages in the United States and abroad and declared that no state need recognize a same-sex marriage in another state. The conflict between state and federal law -- and between states -- creates double worlds for gay marrieds in nearly every area of their financial lives.

Last week, the U.S. Appeals Court in Boston ruled that DOMA unfairly denies federal benefits to same-sex couples married under state law. The decision would apply to couples in the First Circuit, where Massachusetts, Vermont, New Hampshire and Connecticut allow people of the same sex to marry.

However, the court put a stay on its decision until the next step in the appeals process, most likely a Supreme Court ruling.

"If this decision is upheld on appeal, it should pave the way for a wide swath of federal protections for married same-sex couples," said Susan Sommer, director of constitutional litigation for Lambda Legal in New York.

But in the meantime, and despite the broadening support from President Barack Obama and others for the rights of gay people to marry, they still face more paperwork and legal issues - and costs - than heterosexual couples.

"A lot of gay couples are getting married because they can, not because they've thought through the legal consequences," said Larry Jacobs, a Rockville, Maryland, estate and trust attorney specializing in same-sex couples. Jacobs often discusses pre- and post-nuptial agreements with clients to sidestep these knots.

Divorce Costs More

When de Vries and her partner separated in 2009, a New Jersey judge ordered de Vries to pay spousal support. But unlike a federally-recognized spouse, she cannot deduct those payments from her federal taxes -- costing her an extra $12,000 a year, she estimates.

When their civil union is finally dissolved, a New Jersey judge will issue a qualified domestic relations order that will require de Vries to give her partner a chunk of her 401(k). But federal law governs these retirement plans, and de Vries says her company cannot distribute the money unless she leaves the firm. And her former partner cannot roll any such payment into a retirement account, so it, too, would be subject to taxes.

"I guess we'll have to assume that the discriminatory law will change," de Vries said.

Filing Four Tax Returns

Gay marrieds usually prepare four tax returns. In most states, they file a joint state tax return. Because the joint state return requires certain federal numbers, "you prepare a federal joint return, pull the numbers off it and throw it away," said Jacobs.

Then they prepare two federal returns as singles. That's often a good deal: A higher earner can take more of deductions like mortgage interest and real estate or claim a child and file as "head of household," said Dana Levit, a financial planner at Paragon Financial Advisors in Newton, Massachusetts.

However, since 2010, an Internal Revenue Service ruling has required that in states with both "community property" laws and same-sex unions, gay couples must split their earnings evenly on their individual tax returns.

Los Angeles financial planner Carol Grosvenor and her spouse Marilyn, an Episcopal priest, saw a bump in taxes of $6,000 a year because of this rule, according to Grosvenor.

Confusion reigns. "It's hard to find a tax preparer in California that even understands the rules," Grosvenor said.

Karen Mateer, a Pasadena-based tax, trust and estate attorney, advised a gay couple who moved from California to Arizona at mid-year. "Their taxes were a mess because the rules were completely different in the two states," she said. In California, they were married; in Arizona they weren't.


Estates Take More Planning

Thom Johnston and Bob Gould moved from San Francisco to Fort Wayne, Ind., nine years ago, to help Johnston's mother and to cut their expenses. Selling their San Francisco home allowed them to buy a house in Fort Wayne mortgage-free.

But at the time, Indiana's estate tax law came down hard on "unrelated" heirs, and Indiana did not recognize the couple's California civil union. So they've bought two pricey life insurance policies to cover those taxes if either man dies. "We watch our expenditures carefully for several months before we make the annual payments. They are painful checks to write, knowing that we wouldn't be doing it if our marriage was recognized in Indiana," said Johnston.

That Indiana provision is now being phased out, but federal estate law still penalizes same-sex spouses who inherit property from their partners. Under federal law, a spouse can inherit an estate of any size without owing estate taxes. A same-sex partner must pay estate tax on an inheritance above $5 million, and unless Congress acts, that amount will drop to $1 million on Jan. 1, 2013.

For Mateer's gay clients, she said, "It may mean selling a home or business to raise cash to pay death taxes."

Men and women who are married can give each other money without considering taxes. Between gay spouses, gifts above the current $13,000 annual limit generally incur either a gift tax or reduce the lifetime exemptions before estate taxes apply.

Widows and Widowers Are Most Vulnerable

Gays without income and savings of their own are especially vulnerable when a partner dies. They are ineligible for the Social Security "widow benefit," which lets surviving spouses take the deceased's full Social Security payment.

And while state laws typically protect spouses from being cut out of a will, many of Jacobs' gay clients live in houses they won't inherit, he said. In one case, a client was kicked out of the house two weeks after her partner died -- by the partner's family. A Maryland probate judge ruled that she had no claim.

Wills and trusts can help clarify and ease these situations, but gay couples get busy with life and procrastinate just like their heterosexual neighbors. "Lots of people with young kids don't do estate planning and it's a nightmare. It's just worse for gay people," Jacobs said.

Hospital Challenges

Straight couples have the right to make medical and financial decisions for each other if one is incapacitated. Washington, D.C., law gives same-sex spouses these rights, but if a same-sex spouse ends up in a hospital across the river in Virginia, their partner could be powerless. So Jacobs creates healthcare and financial proxies for both his D.C. and Virginia clients.

Kat Morgan and Daena Petersen prepared proxies and wills years ago. Morgan, who directs training programs for Hostelling International, and Petersen, a doctor, entered into a civil union in 2001 in Vermont. In 2010, they legally wed.

Now the tight job market is pushing Petersen to consider residencies around the country, some in southern states that would not recognize their marriage.

"We always purposefully did not apply to southern programs," Morgan says, "but the game has changed." After waiting years for a legal marriage, it's a blow to contemplate losing that status.

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lifehub

These characters really thought they would 'have it all'.

June 07 2012 at 8:02 AM Report abuse rate up rate down Reply
petpetdonna

These people thought it would be so easy. Just get married and worry about nothing. Unfortunately all of them can't keep a relationship together. I am enjoying this. If the gays want to get married they should play by the rules of other married couples. Get divorced, pay big time. If I was a lawyer and a gay person came to me to want to get divorced I would charge them DOUBLE the going rate. They flit from relationship, especially the gay men. They really don't want to get married they really just want to play house with the benefits.

June 07 2012 at 1:47 AM Report abuse +2 rate up rate down Reply
ga

"Born Gay" Concept is UNSCIENTIFIC
Gay activist and scientist Simon LeVay said: "It's important to stress what I didn't find. I did not prove that homosexuality is genetic, or find a genetic cause for being gay. I didn't show that gay men are born that way, the most common mistake people make in interpreting my work. Nor did I locate a gay center in the brain."

"Gay activism was clearly the force that propelled the APA to declassify homosexuality".

June 07 2012 at 12:23 AM Report abuse -1 rate up rate down Reply
1 reply to ga's comment
lifehub

Agree. Being homosexual is a behavior choice, the way illicit drug use is.

June 07 2012 at 8:03 AM Report abuse +1 rate up rate down Reply
2 replies to lifehub's comment
lifehub

Add to that when gays claim 'they were born homosexual'---they're really blaming God for it.

June 07 2012 at 8:04 AM Report abuse +1 rate up rate down
Zab

I don't "blame" God for making me gay. I thank Him for it every day. I am truly blessed, because God let me be a woman without my physical body getting in the way of loving the person He created as my soul mate.

Have a blessed day, lifehub.

June 07 2012 at 8:37 AM Report abuse rate up rate down
ga

Lesbian Scientist Says 'Born Gay' Concept is UNSCIENTIFIC:
Lesbian activist and biologist Dr. Anne Fausto-Sterling, referring to the "born gay" argument, said: "It provides a legal argument that is, at the moment actually having some sway in court. For me, it's a very shaky place. It's bad science and bad politics."

June 07 2012 at 12:23 AM Report abuse -2 rate up rate down Reply
ga

Sexual Identity Confusion (Transgenderism, Homosexuality) Caused by Emotional Trauma:

Peter Dimrock (MSW) said: "Many men who were sexually abused (especially those abused by other men), are confused about their sexual/affectional preference." (The National Organization on Male Sexual Victimization (NOMSV) website)

June 07 2012 at 12:12 AM Report abuse -3 rate up rate down Reply
ga

Homosexuality NOT Fixed in All Individuals - 200 People DID Change!

"Like most psychiatrists I thought that homosexual behavior could be resisted, but sexual orientation could not be changed. I now believe that's untrue - some people can and do change."
(Archives of Sexual Behavior 2003: 200 Participants Reporting a Change from Homosexual to Heterosexual Orientation)

June 07 2012 at 12:11 AM Report abuse -2 rate up rate down Reply
ga

Homosexuality Linked to Emotional Trauma Says Medical Studies - a SEVENFOLD Increase: W.C. Holmes, MD said: "Abused [male] adolescents, particularly those victimized by males, were up to 7 times more likely to self-identify as gay or bisexual..."

June 07 2012 at 12:10 AM Report abuse -3 rate up rate down Reply
ga

Homosexuality Caused By Emotional Trauma as Early as 4 Years Old: Journal of the American Medical Association (JAMA 2009): "One half of the victims...often linked their homosexuality to their sexual victimization experiences...The age at the time of the molestation ranged from 4 to 16 with a mean age of 10."

"In homosexual men there appears to be a disconnect between them and their fathers as well as an overconnect with them and their mothers...there is the perception of the father being distant, uninvolved..."

June 07 2012 at 12:10 AM Report abuse -4 rate up rate down Reply
ga

Gay Suicides INCREASE in Gay-Friendly Nations:
Being supportive of the basic civil rights of gays and lesbians does not require a belief in the false notion that people are born gay. They are not. Homosexuality is caused by emotional trauma - from childhood neglect, abuse, or any number of traumatic causes.

If we love someone, we want to see them healed (from the emotional trauma connected to the homosexual feelings), not see them get married.

In the Netherlands where gay marriage has been accepted for quite awhile now, has seen no decrease in gay suicide - in fact, some studies show an increase.

June 07 2012 at 12:10 AM Report abuse -3 rate up rate down Reply
ga

Ex-Gay Says Homosexuality Caused by Emotional Trauma at Age 8:
"Like many who struggle with same-sex attractions, the early years of my life were filled with pain and confusion. When I was 8 years old my parents divorced. This single event was the turning point. For the next 12 years my life would be marked by rejection, estrangement, isolation, abuse, insecurity, and fear....What I did not realize for the first half of my life was that my struggle with same-sex attraction WAS BORN OUT OF A LEGITIMATE HUNGER FOR LOVE, AFFIRMATION, IDENTITY, AND SECURITY." (D. Berryessa, ex-gay)

June 07 2012 at 12:09 AM Report abuse -3 rate up rate down Reply