Post Windsor

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Post Windsor Obergefell Tax Financial
Planning for LGBT Clients

• All audio is streamed through your computer
  speakers.
• There will be several attendance verification
  questions during the LIVE webinar that must be
  answered via the online quiz at the conclusion to
  qualify for CPE.
• Todays webinar will begin at 200pm EDT
• Please note You will not hear any sound until
  the webinar begins.

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Post Windsor Obergefell Tax Financial
Planning for LGBT Clients

• Rosalind W. Sutch, CPA, MT
• Shareholder LGBT Tax Consulting Practice
  Leader
• Drucker Scaccetti, P.C.

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Learning Objectives

• Upon completion of this course, you will be able
  to
• Identify refund opportunities from prior state
  and federal non-recognition of same-sex marriage
  post Windsor and Obergefell 
• Identify Tax and Economic issues specific to the
  LGBT Community (or any unmarried couples choosing
  to live together and share assets) 
• Quantify the economic impact of marriage for
  same-sex couples 
• Identify tax and economic issues specific to the
  LGBT community (or any unmarried couples choosing
  to live together and share assets) so
  participants can assist LGBT couples in
  quantifying the economic impact of marriage.

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United States v. WindsorDecided June 26,2013

• Background

• Issue

• Edie Windsor Thea Spyer
• Married in Canada May 2007 after 40 yrs together
• Resident state - NY
• Thea passed away in 2009
• IRS disallowed Edies marital deduction resulting
  in 363,053 of estate tax

• Defense Of Marriage Act (DOMA) defined marriage
  for federal purposes as between a man and woman
• Married couples enjoy an unlimited marital
  deduction for assets left to a surviving spouse

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United States v. WindsorDecided June 26,2013

• Ruling

• Impact

• Section 3 of DOMA found unconstitutional under
  principles of Equal Protection
• If state law provides equal status, federal govt
  cannot treat differently

• Federal recognition of legal same-sex marriages
• Federal agencies review definition of marriage
• 11 states with marriage equality swelled to 37
  and D.C. in 2 years

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United States v. WindsorDecided June 26,2013

• Federal Benefits

• Federal Agencies

• 1,138 Federal Benefits Granted to Married Couples

• State of Celebration vs. State of
  Residence/Domicile
• Statutory Definition of Marriage vs.
  Policy/Regulatory Definition

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United States v. WindsorDecided June 26,2013

• IRS

• State Taxing Authorities

• Revenue Ruling 2013-17
• Issued August 19, 2013
• Effective September 16, 2013
• State of Celebration Rule
• IRS Notice 2014-1
• Cafeteria Plans
• IRS Notice 2014-19
• Retirement Plans

• Guidance evolved over time
• Marriage Equality States
• Non Marriage Equality States

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Obergefell v. HodgesDecided June 26,2015

• Background

• Issue

• Consolidation of four cases from 6th Circuit
• Obergefell v. Hodges (OH)
• DeBoer v. Synder (MI)
• Tanco v. Haslam (TN)
• Bourke v. Beshear (KY)

• Does the Constitution require states to perform
  same-sex marriage?
• Does the Constitution require states to recognize
  same-sex marriages performed in other states and
  countries?

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Obergefell v. HodgesDecided June 26,2015

• Ruling

• Impact

• 14th Amendment requires states to license a
  marriage between two people of the same sex and
  to recognize a marriage between two people of the
  same sex when their marriage was lawfully
  licensed and performed out-of-State.

• Law of the land
• Uniformity
• Things will simpler for married couples

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Affect of Windsor on CouplesMarried before June
26, 2013

• Federal Income Tax

• Filing Status Change

• Revenue Ruling 2013-17
• Amended Prior Returns
• SOL may be open for 2011 until 10/15/15 2012
• Not mandatory
• Imputed income on health benefits of spouse
• Stops as of date of marriage

• Income/(Loss) Offset
• Phase Out Limitations
• Spousal IRAs
• NIIT Additional Medicare Tax
• Contributions Limits
• Hardship Withdraws
• Property Transfers
• Alimony

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Affect of Windsor on CouplesMarried before June
26, 2013

• Unanswered Questions - Federal Income Tax
• Amended Returns
• Need one or two amended returns?
• If one spouse amends and files MFS, do both need
  to amend?
• Will filing status be changed by virtue of
  examination?
• Divorce
• Alimony Do both parties need to amend?
• Can a TP make a 1041 basis adjustment without
  amending?

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Affect of Windsor on CouplesMarried before June
26, 2013

• Payroll Taxes

• Retirement Plans

• Imputed income on health benefits of spouse
• Employers v. Employees refund requests
• Some employers continued to get this wrong after
  Windsor
• Still applies to domestic partnerships and civil
  unions
• W4 should be updated

• Spousal consent
• Survivor Benefits
• QDRO

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Affect of Windsor on CouplesMarried before June
26, 2013

• Estate Tax

• Gift Tax

• Untangle previous planning
• Full marital exclusion available
• Portability of estate tax exemption

• Full marital exclusion available
• Gift splitting

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Affect of Windsor on CouplesMarried before June
26, 2013

• Unanswered Questions Estate Gift Tax
• Portability available for late filed returns?
• How to adjust for previously reported gifts made
  to spouse? (SOL issues)
• How to adjust for previously reported gifts that
  could have been split with spouse? (SOL issues)

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Affect of Obergefell on Married CouplesResiding
in Marriage Equality States

• Financial / Economic

• General

• Simplify reporting for income from source income
  from non-marriage equality states.
• Possible amended returns
• Generally no change from post-Windsor

• No longer a need for special documents when
  traveling to non-marriage equality states.

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Affect of Obergefell on Married CouplesResiding
in Non-Marriage Equality States

• Financial / Economic

• General

• Simplify reporting for state income taxes.
• Possible amended returns
• Spousal benefits now available
• Social Security
• Veterans
• Retroactive benefits may be available

• Re-titling of assets to tenancy by the entirety

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Quantifying the Economic Impact of Marriage post
Windsor Obergefell

• Financial Planning

• Family Finances
• Review Separate Joint Accounts
• Shared resources
• Agreements
• Cohabitation
• Pre-nuptial
• Post-nuptial

• Asset Titling
• Beneficiary Designations
• Retirement
• Social Security Medicare
• Prior Marriages
• Survivor Benefits
• Hardship Withdrawals

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Quantifying the Economic Impact of Marriage post
Windsor Obergefell

• Employer Benefits

• Health Insurance
• Health Savings Accounts
• H S A, H R A or F S A
• Annual limits
• Dependent Care Accounts
• Annual limits

• Spousal Group Life Insurance
• Hardship Distributions
• Employer Discounts

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Quantifying the Economic Impact of Marriage post
Windsor Obergefell

• Income Taxes

• Marriage Bonus/Penalty Calculation
• Phase Out Limitations
• NIIT Addtl Medicare Tax
• Contributions Limits
• Income Offsets
• NOL, Cap Gain/(Loss)
• Joint and Several Liability

• Adoption Credit
• Related Party Rules
• Wash Sale Rules
• Passive Activity Rules
• Sec. 121 Exclusion

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Quantifying the Economic Impact of Marriage post
Windsor Obergefell

• Estate Planning

• Untangle previous planning
• Wills, Living Wills, POA, Trusts
• Marital Deduction Portability

• Splitting Gifts
• Life Insurance

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Quantifying the Economic Impact of Marriage post
Windsor Obergefell

• Other

• Need based benefits
• SSI
• Medicaid
• Financial Aid
• Student Loans
• FMLA

• SEC Disclosure Obligations
• Attribution Rules
• Community Property States
• Bankruptcy

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LGBT Specific Issues to Consider

• Children

• Transgender Clients

• Conception
• IVF
• Surrogacy
• Adoption
• 2nd Parent Adoption
• Adoption Credit
• Dependency Exemptions

• Name on tax returns should match SS Card
• Expenses of transition considered medical
• Cosmetic Surgery Ambiguity

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The Choice to Not to Marry

• Informal, Civil Unions,

• Domestic Partnerships

• Health benefits
• Imputed Income
• Employers may discontinue coverage
• State filing status vs. federal

• Sophisticated Tax Planning
• Related party rules do not apply
• Wash sale rules do not apply
• Cohabitation Agreements

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Questions?
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and CPE quiz

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