Life Changes

Same-sex couples weigh financial pros, cons of wedding vows

With the Supreme Court's decision Monday to reject appeals on the issue of gay marriage in five pending same-sex marriage cases, gay men and women in Virginia, Oklahoma, Utah, Wisconsin, and Indiana will now be given the all-clear to walk down the aisle. While this unexpected decision may lead many to marry quickly, in case the issue were ever to return to court, financial advisors claim same-sex couples need to be aware of the financial implications of tying the knot.

For same-sex couples, the financial concerns have been front and center since the Supreme Court struck down key provisions of the Defense of Marriage Act, or DOMA, in June 2013 in the United States v. Windsor case. There's a whole world of financial issues to wade through now.

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"I've had many conversations in the last year that go something like this: 'I'd like to get married. What are the financial implications?'" said financial advisor Michael Wallman of Wallman Financial. The majority of Wallman's clients are high-earning gay men in their 40s and 50s.

Robyn Beck | AFP | Getty Images

Wallman, like other financial advisors, is careful to say that he doesn't offer opinions to his clients about whether or not they should marry.

Similarly, Jason McDonald, a certified financial planner with Wells Fargo who is also an accredited domestic partnership advisor, wants clients to go into marriage with "their eyes open."

"There is not one item that will say that you absolutely have to get married or absolutely do not get married," McDonald said.

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Now couples must consider taxes, estate planning, health insurance and pension benefits, not to mention Social Security and college funding.

Some couples—particularly where one partner makes significantly more than the other—might come out ahead by getting hitched. Two high earners, on the other hand, will probably end up paying more in taxes and ruin their chances for college financial aid.

Each situation is different and needs to be examined individually.

Parents and preretirees

Younger couples with children are usually best served by tying the knot. "It's probably in everyone's best interest to be married, because there are so many rights and responsibilities that are recognized when the parents are married," said certified financial planner Nan Bailey of NPB Wealth Management.

Questions of parenthood, financial support and the ability to make medical decisions are covered when couples are married. Even so, Bailey urges those couples to go one step further. Non-biological parents should still legally adopt their children.

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And couples should still pay a visit to an estate attorney to draw up health-care proxies, durable powers of attorney and wills in order to protect families, even if they travel to a state that does not recognize same-sex marriage.

"What happens if you take the kids to Disney in Florida, and Florida does not recognize gay marriage and, God forbid, someone ends up in the hospital?" asked certified financial planner Debra Neiman, principal of Neiman & Associates Financial Services and co-author of "Money Without Matrimony: The Unmarried Couple's Guide to Financial Security."

Couples must remember to bring these documents with them on any such trips, she added.

Another group that should seriously consider a walk down the aisle: preretirees. In the Boston area, where Neiman has her practice, "there are a lot of people who work at universities that have very generous retirement and health insurance benefits."

Those benefits often extend to spouses, too.

Other retirement benefits are also available only to married couples. For example, widows and widowers are entitled to receive spousal Social Security benefits starting at age 60; spouses can receive half of a higher-earning spouse's benefit beginning at 62. And a spouse with a lower benefit can "step up" to a higher amount if the main breadwinner dies first.

Read MoreGay couples: Consider finances before nuptials

Individual retirement accounts and 401(k) plans are also more favorable to married couples, who are allowed to roll over a spouse's IRA or 401(k) into their own IRA. Previously, they were forced to put the proceeds into an inherited IRA.

"You would either have to start taking the required minimum distribution within a year after death or liquidate within five years," said NPB's Bailey, adding that taxes need to be paid.

The 'marriage penalty' for same-sex couples

Finally, high-net-worth spouses can now take advantage of the $10.5 million estate-tax exemption per couple, significantly lowering their estate-tax burden. Wallman recently counseled two gay men, ages 68 and 66, who had been together for 38 years. The 68-year-old man had built significant assets during his life, but his partner had not.

"He said to his partner, 'I want to get married to make sure you're taken care of if I die,'" Wallman of Wallman Financial said. The couple is still deciding what to do.

Thinking twice

For all the benefits that marriage equality brings, there are also penalties.

The biggest applies to taxes. Federal income taxes stop being double after the 25 percent tax bracket. Two singles each making up to $89,350 would each be in the 25 percent tax bracket. But a married couple bringing in $178,700 is actually in the 28 percent bracket. The 25 percent bracket stops at $148,850 for couples who are married and filing jointly.

Another group of people who might think twice about tying the knot are lesbian women who had previously been married to a man who has since died. Those women are entitled to spousal benefits beginning at age 60. "That benefit would be lost forever if they married before age 60," Bailey said.

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Also, couples with high-school-age children who are not currently married might want to delay. If the couple has income disparity, the lower-earning spouse can claim the child as a dependent. Financial-aid awards will be based on that person's income, not the household's.

"Then they can get married in the child's senior year of college," Bailey said.

For years, advisors have honed their craft around workable financial strategies for same-sex couples. Now, with marriage equality, there is less need for these creative financial-planning strategies.

"What we have found over the years is that these workarounds were really expensive," said Neiman at Neiman & Associates. "Could some people undo some of the planning? Probably."

—By Ilana Polyak, special to