Prudential white paper examines key financial planning considerations for same-sex couples in wake of Windsor decision
White paper takes in-depth look at implications of Windsor on workplace benefits, financial planning for the Lesbian, Gay, Bisexual, and Transgender (LGBT) community
A new Prudential white paper, “Financial Planning Considerations for Same-Sex Couples After Windsor,” explores how this past year’s landmark decision to overturn Section 3 of the Defense of Marriage Act (DOMA) has helped level the playing field for legally married same-sex couples. As a result of the Windsor decision, same-sex marriages lawful under state or a foreign jurisdiction are now recognized for federal tax purposes. The white paper provides an overview of workplace benefits and financial planning strategies that same-sex couples may want to consider post-Windsor.
“It’s important for same-sex couples who are already married or contemplating marriage to become aware of the many workplace benefits and financial planning strategies that are now available to them as a result of the Windsor decision,” says James Mahaney, author of the paper and Vice President, Strategic Initiatives at Prudential. “These benefits have the potential to make a significant impact on the financial health of same-sex couples.”
The Windsor decision is named after Edith Windsor, the plaintiff in United States v. Windsor, a federal case that resulted in the overturning of DOMA, the law that required the federal government to deny marital benefits to gay and lesbian couples who live in states that allow such unions.
According to the white paper, depending on the employer, same-sex married couples might now gain access to spousal healthcare benefits, including health coverage, Flexible Spending Accounts, Health Reimbursement Accounts, and/or Health Savings Accounts. The white paper also encourages same-sex married couples to meet with a tax professional to review whether filing amended federal tax returns for prior years is beneficial, as they may be able to claim a refund for federal taxes paid on imputed income related to healthcare benefits previously purchased for a same-sex spouse. A spouse in a same-sex marriage now has improved survivor benefits for defined benefit and defined contribution retirement plans. In addition, they may gain access to group life insurance coverage through a spouse’s employer.
The paper points out that the federal recognition of same-sex marriages isn’t all positive from a financial perspective, as some married couples will pay higher federal taxes, while others may see their ability to qualify for a child’s college financial aid reduced.
“This decision affects the LGBT community immensely and it has really made a difference in my life,” says Debra Abbott-Walker, a manager of Agency Recruiting for Prudential. “Now I know that if something happens to me or my wife, our children will receive survivor benefits.” According to Abbott-Walker, she and her wife, Jennifer expect to save about $1,500 a year by filing their federal taxes jointly. Like Abbott-Walker and Jennifer, many same-sex married couples paid more in federal taxes prior to the Windsor decision because they were required to file as single, despite their marital status.
In addition, the white paper suggests that same-sex couples review their financial planning options as it relates to Social Security, IRAs, taxes and estate planning, and update their beneficiary on retirement accounts to their spouse. Couples should check to see if they can make deductible contributions to a regular IRA, or whether a Roth IRA or Spousal IRA might now be available. Same-sex married couples should revisit their estate planning, as they now are able to pass assets to a spouse without incurring federal estate taxes via use of the unlimited estate tax marital deduction.
“It is important for the financial services industry to be aware of the impact that the Windsor decision has on the individuals they serve,” explains Brad Snyder, director of Institutional Giving for The Lesbian, Gay, Bisexual & Transgender Community Center in New York City. “This paper is another example of Prudential’s long-standing commitment to the LGBT community and an essential tool for same-sex couples as they navigate through the many workplace benefits and financial strategies available to them as a result of the historic ruling"
Neither Prudential nor its representatives are authorized to provide tax or legal advice or financial advice. Any tax information provided is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code. You are encouraged to consult your tax, financial and/or legal advisors for advice regarding your particular situation.
Prudential Financial, Inc. (NYSE:PRU), a financial services leader with more than $1.1 trillion of assets under management as of December 31, 2013, has operations in the United States, Asia, Europe, and Latin America. Prudential’s diverse and talented employees are committed to helping individual and institutional customers grow and protect their wealth through a variety of products and services, including life insurance, annuities, retirement-related services, mutual funds and investment management. In the U.S., Prudential’s iconic Rock symbol has stood for strength, stability, expertise and innovation for more than a century. For more information, please visit www.news.prudential.com.
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