Arguments on tap in two cases that could mean all or nothing for same-sex marriages.
The Supreme Court will hear arguments for two cases this week that could upend financial planning for same-sex couples. The cases involve the legality of gay marriage and the federal rights that it affords.
The rulings could change everything — eventually giving same-sex partners the right to marry, and receive federal tax and other benefits — or nothing. Many believe a ruling somewhere in the middle is likely from the nine justices.
“Pensions, Social Security, survivor benefits … this has tentacles more far-reaching than I think anyone realizes,” said Cathy Pareto, a financial adviser with an eponymous firm in Miami. “With millions of additional people eligible for federal benefits, this could even have a fiscal impact on the country.”
The federal Defense of Marriage Act, which states that a marriage must be between one man and one woman, is the 1996 law that stands in the way of same-sex couples who were legally married by their state receiving marital income and estate tax deductions, as well as other benefits, such as Social Security or pensions.
Gay couples today who have been married in the nine states that allow the unions have to deal with complex planning issues, including having to file two sets of taxes — federal taxes filed separately and state taxes filed jointly. There also are health care privacy issues, spousal insurance and other benefits at stake.
“The Supreme Court could say the U.S. Constitution gives everyone the right to be married and then put it to the states that because the U.S. Constitution says so, the states should too,” said financial adviser Woody Derricks of Partnership Wealth Management LLC. “But that may be too big of a stretch for them.”
An option Mr. Derricks considers likely is that the nation's top court would overturn DOMA, but say the states still can decide whether to allow gay marriage.
The increase in support of gay marriage over the past decade is among the greatest policy shifts on any issue over that time period, according to the Pew Research Center. Its latest figures show 49% of Americans support same-sex marriage and 44% oppose it.
Gay marriage is legal in nine states: Connecticut, Iowa, Maine, Maryland, Massachusetts, New Hampshire, New York, Vermont, Washington and the District of Columbia. Most other states prohibit it in their constitutions or have passed laws against it.
The high court Tuesday will hear arguments for and against California's Proposition 8, a voter initiative which mandates that a marriage is between a man and a woman. It was struck down by a trial court judge. Weeks or months from now, when the justices rule, they could uphold the initiative and effectively leave the issue up to states, rule that no state can set such a law or something in between.
On Wednesday, arguments for and against the constitutionality of DOMA will be heard by the high court. In that case, a federal court in New York ruled DOMA was unconstitutional for blocking a same-sex couple from claiming the federal marital estate tax deduction. That judge ordered that Edith Windsor be refunded $363,000 that was taken from the estate of her late female spouse because she wasn't able to claim the marital deduction, even though New York recognized their union.
“The biggest potential Pandora's Box would be if DOMA is overturned on both federal and state levels,” Ms. Pareto said.
