NEW YORK (MainStreet) While same-gender couples are fighting for equal rights in legalized marriage, they also have to deal with inequalities when their happily-ever-after comes to an end. Though same-sex marriage is legal in 19 states and Washington, D.C., the division of assets in divorce still presents specific financial challenges to gay couples.
Progress in Splitting
Since Section 3 of the Defense of Marriage Act (DOMA), a federal law that barred same-sex married couples from being recognized as spouses and from receiving federal marriage benefits, was ruled as unconstitutional by the Supreme Court last year, gay couples have received numerous financial advantages.
For starters, gay couples on the outs saw significant tax benefits.
"Because the federal government did not recognize same-sex marriage, then transfers of property incident to a divorce would be considered a gift, and there were potential income tax effects," Tracy Craig, partner at Mirick, O'Connell, LLP., a Worcester, MA-based law firm, told MainStreet. The new SCOTUS decision allowed same-sex couples in states where same-sex marriage is allowed to transfer property without paying income or gift taxes.
"Same-sex married couples had bad tax consequences before the DOMA," says Bruce Bell, public engagement and information manager at Gay & Lesbian Advocates & Defenders, "Getting divorced was a trauma for them [and] even more trauma for them to go through tax penalties."
The momentous United States v. Windsor case last March was another turning point that not only had broadened the federal definition of "marriage" and "spouse," but also has implemented financial benefits for same-sex married couples to inherit their assets by deducting estate taxes.