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Federal rules synch up with New York laws for gay couples

The U.S. Supreme Court delivered a jolt to the legal system when it struck down DOMA, the Defense of Marriage Act limiting legal marriage to opposite-sex spouses. New York is one of several states where gay marriage is acknowledged and permitted. State and federal laws are now aligned to treat all married couples the same way.

Gay spouses gained previously-denied marital benefits when DOMA was invalidated. Same-gender couples can file joint tax returns and take advantage of the same deductions, exemptions and credits as traditional couples. In the event of divorce, gay spouses can divide assets without extraordinary financial consequences.

New York's equitable distribution laws require spouses to share fairly in assets and liabilities. Until DOMA was shot down, divorced gay spouses were liable for taxes on split property, unlike opposite-sex couples who could divide marital assets free of income tax consequences.

Under DOMA, gay spouses were treated the same as unmarried couples -- minus all federal legal privileges during marriage or divorce.

The end of the Defense of Marriage Act will not affect asset division between unmarried couples, whether partners are heterosexual or gay. Tax benefits are reserved for spouses. Partners involved in unmarried relationships have the same income, transfer or gift tax burdens as non-family members to the Internal Revenue Service.

Attorneys and financial advisers can help unmarried couples find legal, creative ways around punishing tax laws. Some former couples divide assets as gifts. Unfortunately, the IRS only allows tax-free gift transfers up to $14,000 per year, which frequently falls far short of the value of the couple's assets to be split.

Unhappy, unmarried partners with deeply entwined property sometimes find it easier just to get married before breaking up. An extreme decision like this could challenge the partners' principles but, as long as the marriage is valid even for a short time, the temporary marital union can be a big money saver.


Source: 
forbes.com, "Supreme Court Upholds Gay Marriage (Divorce Too)" Robert W. Wood, Jun. 26, 2013

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