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To get married or not – Some Issues to Consider

WE NOW CAN GET MARRIED, BUT SHOULD WE?

The table below lists some of the advantages and disadvantages of marrying versus remaining unmarried. Note, however, that when any two people marry, which laws apply can be confusing. For example, many Federal statutes vary in their application depending on whether the marriage is recognized in the state where the marriage occurred (the state of “celebration”) versus the state where the married couple resides (the state of “residence”). Another example is that Social Security (including Medicare and Medicaid) is based on the state of residence whereas many other Federal laws are based on the state of celebration. These differences are important to keep in mind if the couple marries in one state where their marriage is recognized and then moves to another state where it is not recognized. In addition, it is important to keep in mind that domestic partnerships and civil unions do not enjoy the same rights under Federal and state laws that marriage does. And finally, this area of the law is changing rapidly and restrictions and opportunities today may not apply tomorrow.

The table below assumes the couple is married in a state that recognizes same sex marriages.

ADVANTAGES TO BEING MARRIED

If Married

If Not Married

Health care insurance premiums for partner’s coverage

Paid with ‘pre-tax’ dollars.

Tax-free distributions from Flexible Spending Accounts available to partner

If employer’s plan extends coverage to spouse, then it will be required to extend to same sex couples

The spouse is entitled to full COBRA rights, up to 36 months, in the event of the participant’s termination, divorce, or legal separation

Depending on the number of people in a family, Health Savings Account contribution limits, deductibles and out-of-pocket expenses may be more costly for married than non married couples

Paid with ‘after-tax’ dollars

Flexible Spending Account dollars can not be used for partner’s costs

Employer decides whether to extend coverage

COBRA is at employer’s discretion

Employer’s health care coverage of partner

Tax-free to spouse

Taxable income to partner

Death benefits under qualified retirement plans

Partner needs to consent to beneficiaries other than self

Partner may have right to limit account owner’s rights in plan during life (such as taking a loan)

Special options for partners to roll over IRAs in a tax-advantaged way

Marital deduction from Federal Estate Tax available for transfers between spouses

Partner has no right to death benefits unless named as the beneficiary

Could incur Federal Estate Tax

Employee leave under the Family Medical Leave Act (Aug 9, 2013)

Up to 12 weeks of job protected leave for specified family and medical reasons, including, the care of a spouse, child, or parent with a serious health conditions

This protection does not extend to any condition affecting the partner

Divorce

Preferential tax treatment for property transferred between spouses in exchange for a release of marital property rights

Alimony and child support is available to spouse

Community property is ownership available.

If a spouse fails to change his/her Will following a divorce, under Idaho law, the other spouse is deemed disinherited under the Will (such disinheritance does not apply to spouses named in trusts or retirement plans)

Transfers made by unmarried couples as part of a break up are treated as taxable gifts

Not available unless agreed between the parties and, if so agreed, the tax treatment differs from that applicable to married couples

Division of property is according to original ownership unless otherwise agreed. Income during the relationship is the property of the partner who earned it

A Will must be changed to remove a partner

Adoption

 

A spouse may adopt the other spouse’s child and will have certain rights and obligations in relation to that child following divorce or death of the other spouse, or if the other spouse has abandoned, or is unable to care for, the child.

An unmarried partner has no rights in relation to his/her partner’s children, though the parties may sign an agreement they desire to apply in the event of separation and a partner can name the other partner as guardian of the child in the event of his/her death

Note that the court may not enforce an agreement if the judge determines it is not in the best interests of the child and, at the time of separation, the biological parent may make a case against shared custody

US Citizenship and Immigration Services

US embassies and consulates will process visa applications for same-sex marriages.  This means the same sex spouse of a visa applicant coming to the US for any purpose will be eligible to receive a derivative visa.  In addition, eligible stepchildren acquired through same-sex marriages can also qualify as beneficiaries for derivative status

Derivative status is not available

Dying without a Will

If a spouse dies without a Will, then the surviving spouse typically will have certain rights to inherit all or a part of the deceased spouse’s property under applicable state law

An unmarried partner has no rights under state intestacy statutes to inherit a deceased partner’s property

Miscellaneous Other Issues

A spouse can elect ‘portability’ thereby doubling the available Federal estate tax exemption

Unlimited marital deduction available to defer Federal Estate Tax

Double annual gift tax exclusion available

A double ‘step up in basis’ on community property is available following the death of the 1st spouse

No taxable gains and losses on sales between spouses

Homestead protections, family allowances, and an elective share are available to spouse

Spouse has favorable standing for appointment as personal representa-tive, guardian, and conservator

Consideration is given to spouse concerning burial instructions for departed spouse

Spouse has standing to take certain legal action including initiating wrongful death lawsuits

None of these are available

DISADVANTAGES TO BEING MARRIED

If Married

If Not Married

 

There may be income tax marriage penalties on filing joint income tax returns depending on the relative income of the respective spouses

Spouses do not have the ability that  unmarried couples have to decide which person will take certain deductions to manage tax brackets

Social security benefits that may have previously been tax-free may now taxable due to income aggregation

Couples with children who previously (when unmarried) could file separately as single and head of household, may see increased taxes as a result of joint  income tax filing

Both spouses are liable for the debts of the other spouse incurred into during the marriage if benefits both parties

Medicaid eligibility: the assets of both spouses are aggregated to determine eligibility.  On the other hand, there are more planning opportunities available to married couples to maintain the standard of living of the partner following the Medicaid applicant’s receipt of Medicaid benefits

College financial assistance will look at the assets and incomes of both spouses if married, so the applicant might qualify for less financial aid than if he or she were unmarried

Social security spousal benefits are unavailable if unmarried.  This may a big issue if one partner worked and other stayed home to take care of child

A partner is not liable for the other partner’s debts

Only the Medicaid applicant’s assets are relevant in determining eligibility, but there are fewer planning opportunities to shift assets from the Medicaid applicant to the other partner and any payments to the partner may result in a penalty period for the Medicaid applicant 

College financial assistance will look at the assets and income only of the unmarried partner, so the applicant might qualify for more financial aid than if he or she were married

By: Carla Ranum and Elizabeth Mathieu
With special thanks to Kathy Stearns, https://www.arcadvisers.net

Mathieu, Ranum & Allaire, PLLC is a boutique law firm with offices in Boise and Sun Valley, Idaho focusing exclusively in the areas of estate and trust planning, probate and trust administration, asset protection, business law and charitable organization laws. We represent individuals, families, trustees, heirs and beneficiaries, entrepreneurs and closely held businesses, tax-exempt organizations, and family offices, as well as professionals and business owners potentially exposed to future creditor claims.

IMPORTANT NOTICE

The foregoing is NOT legal advice. We have prepared these materials to inform and educate. They are not, and should not be considered, legal opinions or advice to anyone, nor do they create an attorney client relationship by your reading them. These materials may not reflect the most current legal developments in the applicable area of law. Furthermore, this information should in no way be taken as an indication of future results.

©  Mathieu, Ranum & Allaire, PLLC. 2014

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