By Sarah Morgan
Question: I live in New York State, where the Marriage Equality Act just passed. Unlike domestic partnerships (which I currently have in order to get my partner on my company’s health plan), marriage opens up a world of financial issues that are further complicated since the federal government doesn’t recognize same-sex marriages. Would my partner’s credit history now affect mine? Would I no longer be taxed on the value of his health benefits through my job (along with post-tax deduction of benefit contributions, it cost me about $4,000 a year)? And what about filing jointly or separately? What are the other issues that this creates? I don’t even know what to ask my attorney or accountant.
-Ted Davis, Brooklyn, New York
Answer: It’s true: Being married at the state level but not the federal level comes with a lot of financial complications. To your specific questions, in order: Your partner’s credit history should only affect yours for joint accounts or assets — whether you’re married or not, says J.T. Hatfield Smith, a certified financial planner at SPC Financial in Rockville, Md. Because the tax on your partner’s health benefits is a federal tax, your state-sanctioned marriage doesn’t protect you. As for filing jointly or separately, for the most part, filing separately works in your favor. It is possible to file state taxes one way and federal another way, but the calculations are interdependent, so you’d definitely want to work with a professional to see if there’s any benefit to doing this, Hatfield Smith says.
But these issues only scratch the surface. You might want to ask a lawyer or accountant about combining assets and expenses, which can get complicated. Married couples can transfer any amount of property back and forth without paying gift tax, but unmarried couples (which same-sex spouses still are under federal law) could face gift tax consequences for something as simple as withdrawing money from a joint checking account, Smith says.
Also on the list for that legal consult: If you own property together, getting married protects joint assets from one spouse’s negligent acts, Hatfield Smith says. In other words, if one spouse racks up debt or gets sued, creditors can’t take a jointly owned home; but if one half of an unmarried couple gets into trouble, creditors could claim half of that house.
While you’re consulting a professional, it can’t hurt to go through the basic estate planning process. If you die unmarried and without a will, your assets essentially go to your next of kin. If you have a will, whether you’re married or not, your estate goes through probate court to check that assets are being disposed of properly — but if you’re married, that should strengthen your spouse’s claim to your assets if anyone challenges the will, Hatfield Smith explains. “Probate’s always a challenge. But you have better protection by being married on the state level,” he says.