Welcome to Financial Advisor IQ
Follow

Financial Planning for the New Realities of Marriage

By Miriam Rozen July 21, 2015

In describing the Supreme Court’s recent ruling barring bans on same-sex marriage, U.S. president Barack Obama called it “justice that arrives like a thunderbolt.”

Based on their comments to us about the decision’s implications for their profession, financial advisors and estate-planning attorneys agree the decision is a sudden game-changer.

“I don’t think anybody anticipated this,” says Susan Wetzel, a partner in the Dallas office of the law firm Haynes and Boone. Based on her conversations with her employer clients, she believes some employers may seize an opportunity with the ruling to reduce their benefits budgets. They will save money by chopping off benefits.

After all, say experts, some employers and governments — federal, state and local — enacted legal and financial benefits in response to some states’ bans on same-sex marriages. In light of the ruling, some employers may now start asking, “Why are we doing this if everybody can get married?” according to Wetzel.

Ross Gerber of Gerber Kawasaki Wealth & Investment Management in Santa Monica, Calif., says they already are. He’s been getting calls from clients who say their employers plan to strip domestic-partner benefits as a result of the Supreme Court ruling.

Sheryl Rowling

From a planning perspective, however, Gerber thinks there’s no universally correct response.

Each client has to weigh the personal, tax, and other general financial benefits of maintaining a domestic partnership versus the cost of losing concomitant benefits. “If you get married, you are going to pay more in taxes — unless one spouse isn’t working,” says Gerber, whose firm manages $375 million. The question to ask clients, he says, is, “Do those increased taxes trump the loss in value of domestic-partner benefits for the spouse?”

Sheryl Rowling of Rowling & Associates, a San Diego-based wealth firm with $260 million under management, says there are other implications for couples in the Supreme Court’s decision. In this view, they stand to lose more than just tax savings if they get married to preserve a partner’s benefits under new policies spawned by the high court’s ruling. “They might be collecting Social Security benefits based on a deceased or divorced spouse,” she says. “They will lose those if they get married.”

But there are “personal reasons beyond economics” that keep some couples from getting officially hitched, no matter what the nation’s highest court permits, says Rowling. “I have clients that don’t want to mess with any kind of commingling of assets.”

But the ruling and its potential consequences give advisors opportunities to help clients reevaluate the marriage question in light of changed employer and government policies, Rowling and Gerber say.

Putting It Mildly

But advisors should undertake such reviews carefully. “You have to look at a lot of things — not just taxes, but also the additional rights and duties of becoming a legally married spouse,” says Rowling. For instance, a married spouse “ends up being responsible for a partner’s debts,” she warns.

Advisors should also anticipate that employers will test waters on proposals to drop domestic-partner benefits, while others may embrace the status quo because they don’t want to risk irking and losing employees, Rowling predicts.

“I think we don’t know what is going to happen entirely in this area,” says Rowling. “Getting married simplifies some things and complicates others.”