As a result of the Supreme Court’s ruling in Obergefell v. Hodges, which legalized same-sex marriage throughout the United States, same-sex couples should consider reviewing their retirement benefits to ensure that their elections and beneficiary designations match their goals. Implications of this landmark decision include the following for you and your spouse:
- If either of you is in a qualified pension plan, the plan must now provide survivor benefits to your surviving same-sex spouse. Assuming the spouse who dies is vested in the retirement plan, the surviving spouse will receive a life annuity if the participating spouse elects for survivor benefits.
- If you wish to designate someone other than your same-sex spouse as the beneficiary of your retirement plan, your spouse will now need to sign a written, notarized consent allowing you to name a non-spouse beneficiary.
- In the event of a divorce, you are now eligible to receive a portion of the other spouse’s retirement plan through a QDRO (qualified domestic relations order), and the assets remain tax-deferred for your spouse until distribution.
- If you name your spouse as beneficiary of your IRA account, upon death, he or she will be able to assume the account—that is, treat it as his or her own. Until the legalization of gay marriage, a surviving same-sex partner could only establish a beneficial inherited IRA when he or she was named as a beneficiary, and he or she had to begin taking distributions the year after his or her partner died. Under current law, a surviving same-sex spouse may roll over an inherited IRA into his or her existing IRA account or into a new account in his or her name, and he or she is not required to take a distribution until he or she reaches the age of 701/2.
- Qualifying hardship distributions from a 401(k) plan will include distributions to pay for medical care, tuition, and burial costs for a same-sex spouse.
All of these changes mean that married same-sex couples should consult with their tax and legal advisors. At Geyer Law, we know that tax planning and estate planning are intertwined and that nowhere is this truer than with same sex couples.