Suze Orman: 4 Financial Benefits of Tying the Knot
Fast-forward to last summer, when the Supreme Court overturned the Defense of Marriage Act. It's been nearly a year since that momentous decision extending federal benefits to same-sex couples, but KT and I are still ecstatic every time we return as a family from a trip abroad. And I'm just as excited that gay spouses now have access to the financial benefits heterosexual couples can and should take advantage of. Here are a few:
Less Taxing Taxes
As soon as gay marriage was legal, KT and I refiled a joint return. We received a refund, one we split right down the middle.
Depending on your family's earnings, you and your spouse could save money by filing jointly. If one person brings in the bulk of your household income, your combined tax bracket may be lower than the higher earner's bracket would be if he or she filed as an individual. That's the marriage bonus, and it can save you hundreds of dollars. If you and your spouse have nearly equal salaries, your combined income as joint filers might bump you into a higher tax bracket than either of you would fall into as individuals (that's known as the marriage tax penalty), but it's a small price to pay to simplify the filing process: You'll have a lot less paperwork if you submit only one return. File separately, and you could also forfeit deductions for student loan interest, college tuition, or credits such as those for child and dependent care.
A Healthier Retirement
Even if only one member of a married couple brings home a paycheck, both spouses can fund their own individual retirement accounts. Nonearners can tuck away up to $5,500 in a spousal IRA. (For spouses 50 and older, the limit is $6,500.) If your combined adjusted gross income is $181,000 or less, you can deduct your contributions.
Increased Social Security
Married people really do get the best slice of the Social Security pie. Upon retirement, you can choose to receive 100 percent of your own benefit or half the value of your spouse's, whichever amount is greater. Check out the calculators at aarp.org/work/social-security to determine which strategies you should follow to guarantee access to the highest possible benefit.
Freedom from Inheritance Taxes
If you followed the court case that led the U.S. government to sanction gay marriage, you'll recall New Yorker Edith Windsor, who had married her longtime partner, Thea Spyer, in Canada. When Spyer died in 2009, Windsor received a federal estate tax bill for $363,053, because their union wasn't legally recognized. That's discrimination she fought to end.
With the federal estate tax exemption now above $5 million, few couples will ever hit this limit. But for those who do, surviving spouses who are U.S. citizens are exempt from any charges. Bear in mind, though, that some states impose separate estate taxes at much lower levels (for example, New Jersey taxes estates valued at more than $675,000).
Upon a partner's death, the widow or widower also takes possession of any 401(k) accounts automatically, without tax consequences. (To claim IRA assets tax-free, a spouse must be named the beneficiary.) If you're eligible for a pension and choose the joint-and-survivor annuity option, your spouse will also be entitled to regular payments. Giving your nearest and dearest a little peace of mind—now that's true love.
Suze Orman's latest book is The Money Class: How to Stand in Your Truth and Create the Future You Deserve (Spiegel & Grau)