Taxes and Financial Planning Issues For Lesbian Couples
For a same-sex couple, a patchwork of rapidly changing laws and antiquated public policies make taxes and financial planning even more difficult.
Even if you are legally "married" in a state that recognizes same-sex marriages, the IRS does not allow same-sex couples to file joint tax returns.
They warn that such filings will incur fines and penalties.
When it comes to state income tax returns, whether or not you are permitted to file jointly depends upon whether or not your state recognizes your marriage.
Your accountant or tax professional can help make sure you meet necessary requirements and avoid incurring unnecessary penalties.
Another potential tax problem can occur if you place your partner's name on your property.
This may be considered a "gift", and there are annual limits on gifting, above which the gift can be taxed as high as 50% of its value.
There are also potential tax issues with estates if one of you dies, especially if you don't have a will.
Relatives can come in and legally take everything you have worked together to build.
Finally, married heterosexual couples are protected in the event of a breakup by divorce laws, which may not apply to same-sex couples.
Drafting a "living-together" agreement while things are going well can prevent disastrous misunderstandings if the relationship ends.
It is more practical to set forth guidelines for dividing property, rather than attempting to list specific possessions and maintain a list of "who gets what".
Things to consider include what each part brought into the household, financial and non-financial contributions to the household, special needs, ownership of real estate, and how joint purchases will be divided.
Another often-neglected issue in financial planning is incapacity or illness.
Who will make medical or financial decisions if you are unable? An attorney specializing in estate planning can help you address many of these issues in order to ensure that your wishes are respected no matter what the future holds.
You may want to consult an attorney who is familiar with living trusts as an alternative to wills and probate.
A living trust is generally more expensive than a will to draft, but considerably less expensive than probate at death.
A living trust also makes property transfer quicker and more private than a will.
By taking advantage of professional advisors and planning ahead, you can avoid financial problems and protect one another from unnecessary financial problems.