Posts

Is it better to take your Social Security benefits now, or spend your retirement savings first?

I want to thank everyone for the overwhelming response to my new book, The Little Black Book of Social Security Secrets.  We’ve received an unprecedented number of phone calls and emails from readers who have read it, and who now realize that the choices that they make about Social Security can have an enormous impact on their retirement years.  Many of you want to know if you’re making the right decision about when to collect Social Security, and have written with the specifics of your situation.  Unfortunately, I just cannot answer all of your questions personally.  But what I will try to do on this blog is address some of the major issues that seem to be of the most concern to my readers.  For same-sex readers who are legally married and who have filed for Social Security benefits, the burning question seems to be, “Are they ever going to process my claim?”

What is the status of the backlog of claims that have already been filed by same-sex couples?

Social Security recently released Emergency Message EM-16013 REV, which provides their employees with long-overdue guidance on how to process the existing claims of same-sex individuals who were trapped by conflicts created when they married in one state, but lived in another.  This guidance effectively makes same-sex couples subject to the same deemed filing rule that is applied to opposite-sex couples.  And, while the Emergency Message is a good start, I’m not convinced that we will see a resolution to the backlog any time soon.  Many readers who are not even subject to the subtle interpretations of the Social Security rules that came as a result of The United States vs Windsor have told us about the backlog in processing their claims – so this is not necessarily a problem unique to same-sex couples.  We’re hearing horror stories from many traditional married couples whose applications have been in limbo for over a year!

I will devote a future blog post to some ideas that might help you move your existing claim along a little more quickly.  But for now, let’s look at some of the other questions raised by readers who are evaluating their options, but who have not yet filed.

When is the best time to apply for Social Security?  Should I take my benefits now, or spend my retirement savings and apply later?

Several readers have written and said that they are in a situation similar to this one:

My employer has just told us that the company has filed for bankruptcy and will be closing its doors later this year.  I don’t know if I will be able to get another job at my age and, even if I do, I’m  not sure I will be able to make as much money  as I am making now.  My spouse doesn’t work outside of the house.  I was thinking about signing up for my Social Security benefits once the company closes, but then I read your book.  I do have some savings in retirement plans (both traditional and Roth), and an investment account.   When is the best time for me to apply for Social Security if I can’t find another job?  Should I spend my savings now and apply for Social Security later, or should I save my money and apply now?

The loss of a job, especially at this point in your life, can be traumatic.  Before we review the options that you have, let’s go through a quick refresher on two of the points covered in The Little Black Book of Social Security Secrets.

When Should You Take Social Security?

How does the age at which you actually collect Social Security affect the amount you receive? Legally married same-sex couples are now eligible to receive the same Social Security benefits as traditional married couples.  If you are now 62, your Full Retirement Age (FRA) is 66.  If you wait until your FRA to collect your benefits, you will receive your Primary Insurance Amount (PIA).  If you collect at 62, your monthly check will be permanently reduced, by 25 percent of your PIA.  If you wait until you are 70 to collect, your check amount will be permanently increased by Delayed Retirement Credits (DRCs) of 8 percent per year (up to a maximum of 32 percent), plus Cost of Living Adjustments (COLAs).

When Should Your Spouse Take Social Security?

This next part is critical to understanding why you may have more options than you realize.  If you file for your own benefit (or, if you already filed for and then suspended your own benefit), your spouse will be permitted to file for spousal benefits based on your record as soon as he or she is eligible.   When your spouse files, though, is as important as when you file.  If your spouse waits until her FRA (for readers born between 1943 and 1954, this is 66), she’ll receive the highest spousal benefit possible – which is 50 percent of your own PIA.  She is allowed to file as soon as she turns 62 but, if she does, she will only receive 35 percent of your PIA.  In this example, we’re going to assume that your spouse is not entitled to a benefit based on her own earnings record.  I have some examples for two-income households coming up in a later post.

The answer to the above question posed by my readers, therefore, will depend on how old both of you are.  If you filed for and suspended your own benefit by the deadline of April 29, 2016, that will make it possible for your spouse, assuming that she is at least 66, to file for a spousal benefit that will be 50 percent of your own PIA.  (She can file at 62, but her benefit will be reduced.)  The spousal benefit will give your family some income from Social Security every month, while at the same time allowing your own benefit to grow by those DRCs and COLAs.  Maybe you can’t get another job that pays as well as the one you have right now, but you might be able to get one that you enjoy a lot more – like working on a golf course – because your spouse now has a source of income that can make up the difference.

Remember that, in order for your spouse to be able to claim spousal benefits based on your record without you having to collect your benefit, you had to have filed for and suspended your own benefit by April 29, 2016.  If you did, your spouse can collect spousal benefits while your own benefit continues to grow by DRCs and COLAs.  If you didn’t file and suspend by April 29, 2016, your spouse cannot collect spousal benefits unless you are also collecting your own benefit.

So what happens when you do get that pink slip?  As tempting as it might be to just throw in the towel and collect whatever Social Security you can, I’d recommend that you continue working in some capacity if you are able to do so.  Even a part-time job will provide you with some money and, if your spouse is able to claim spousal benefits based on your record, you just might have enough income to meet your expenses while still allowing your own benefit to grow to the maximum possible.

Should I Spend My 401(k) Money First?

Many of my readers have some money in retirement plans (both traditional and Roth), and also some money in non-retirement accounts.  They’ve asked me which account they should spend first, and whether it is better to take Social Security early so that they can delay spending their retirement accounts for as long as possible.  So let’s look at the alternatives.

For most people, it is better to spend your non-retirement accounts before your retirement accounts.  The graph that follows is from my book, Retire Secure!  It shows that, the longer you can leave your money in a tax-deferred (or tax-free) account, the longer it will last.

Should I spend my 401(k) money

 

Once your investment account is liquidated, the question becomes complicated. You should spend your traditional and Roth IRAs strategically, depending on your own personal tax situation. What the heck does that mean? I wish there was a one-size-fits-all answer, but there isn’t. However, Chapter 4 of my book, Retire Secure!, does contain an extensive analysis of this topic, and includes specific examples that may provide you with some additional insight. If you’d like to learn more about why it’s so important to spend the right money first, you can get a copy of the book from this website.

If you don’t want to read the book, here are some general points to consider. You’ll be required to take withdrawals from your traditional IRA when you turn 70 ½, and those withdrawals will be taxable. Income generated from non-qualified investment accounts is taxable. If you have enough taxable income from other sources, a portion of your Social Security will also be taxable. Most retirees don’t plan for unavoidable changes in their tax situations, and their failure to do so can be very expensive. What we strive to do in our practice is find the spending and tax management strategies that make your money last as long as possible. Ultimately, the solution is different for each client.

Readers, thank you for the questions and please keep them coming! I love hearing from you! And check back soon to read about some more real-life challenges that people like you are dealing with!

 

 

Live Gay, Retire Rich is Now Available on Amazon!

Live Gay Retire Rich by James Lange

I’m excited to inform you that my latest edition of Live Gay, Retire Rich, endorsed by the top IRA, Social Security, and legal experts in the country, is now available on Amazon. http://amzn.to/1LAIbAY

Live Gay, Retire Rich! is the Second Edition of Retire Secure! for Same-Sex Couples, now updated to include the positive holding of the Supreme Court Case Obergefell v. Hodges and its implications.

For example:

There were two gay couples with identical financial resources.  They each had the same amount of money, identical investments, identical taxes, and identical earnings history for Social Security purposes.   The first couple didn’t do any planning. The second couple followed the advice offered in Live Gay, Retire Rich! Using reasonable assumptions, the first couple runs out of money in 28 years while the second couple has $1.4 million and their portfolio continues to grow.

What was the difference? The first couple didn’t follow our advice; the second couple did. The first couple never got married, started receiving Social Security benefits at 62, didn’t make any Roth IRA conversions, and didn’t use key IRA and retirement plan estate planning strategies recommended in Live Gay, Retire Rich!  The second couple did get married, used our recommended apply and suspend technique for Social Security, did a series of Roth IRA conversions, and used the key IRA and retirement plan estate planning strategies we recommend.

I strongly urge you to pick up my new book on Amazon. http://amzn.to/1LAIbAY.
Regards,

LANGE1_Blue

James Lange
CPA/Attorney

P.S. Our assumptions include a Social Security technique, apply and suspend, that may not be available for much longer. Get your copy today and find out if this strategy could work for you, before it’s too late!

____________________________________________________________________________

Praise for Live Gay, Retire Rich!:

This is an exciting time to be part of the LGBTQ community in America and it also is an important moment to take advantage of the financial opportunities that are now available to us. Jim Lange’s book Live Gay, Retire Rich! is an easy-to-understand and valuable tool that will help us navigate the financial waters and successfully plan for our future.
Billie Jean King, Founder, Billie Jean King Leadership Initiative

Jim has generously pledged the proceeds from this book to Freedom to Marry and naturally, I appreciate that. But what I really appreciate is his bringing his expertise to bear on helping the couples for whom we have already won the freedom to marry.
Evan Wolfson (from the foreword), Founder and President, Freedom to Marry, A national campaign dedicated to marriage equality for same-sex couples

Jim provides a comprehensive road map to all the new retirement and estate planning strategies that were not previously available to same-sex couples. But they are now, and couples who wish to take advantage of them to enhance their options, increase their wealth, cut their taxes and live with financial security should dive into this gem.
Ed Slott, CPA, America s IRA Expert

Jim Lange has written a wonderful book for all committed couples same-sex or opposite sex who are considering marriage. Once you reach retirement age, marriage becomes the best way of preserving income and wealth for the partner who survives.
Jane Bryant Quinn, Columnist, AARP and Editorial Director, Daily Voice Author, Making the Most of Your Money NOW

Additional testimonials from Burton Malkiel, Kaye Thomas, Jan Cullinane, Mel Lindauer, Brian Tracy, and Sidney Kess and more information about Live Gay, Retire Rich available at www.outestateplanning.com. ____________________________________________________________________________

About Jim Lange

James Lange, CPA/Attorney has been helping same-sex couples since 2002.  He is a nationally recognized Roth IRA and retirement plan distribution expert and understands the best techniques for married couples to get the most out of Social Security.  The combination of his financial expertise as well as an understanding of the changing legal status of same-sex marriage makes Jim the logical person to write Live Gay, Retire Rich which can now be purchased at http://amzn.to/1LAIbAY

He’s also the best-selling author of the first and second edition of Retire Secure! with dozens of testimonials from the nation’s top IRA, investment, and estate planning experts and The Roth Revolution: Pay Taxes Once and Never Again.

Jim’s recommendations have appeared 35 times in The Wall Street Journal, 23 times in the Pittsburgh Post-Gazette, The New York Times, Newsweek, Money magazine, Smart Money and Reader’s Digest. His articles have appeared in The Journal of Retirement Planning, Financial Planning, The Tax Adviser (AICPA), and other top publications.  His article, Optimizing Social Security Benefits for Unmarried Couples, was just published in Trusts & Estates magazine.

 

Celebrate New Legal Rulings with a Free Same-Sex eBook!

LGBT Ally James Lange, an author and CPA/Attorney, Celebrates New Legal Rulings by Offering a Free E-Book for Same-Sex Couples Across the Nation.  

Retire Secure! for Same-Sex Couples: Live Gay, Retire Rich is endorsed by the top IRA, Social Security, and legal experts in the country and available as a FREE download for a limited time at www.samesex-equalrights.com

PITTSBURGH, October 13, 2014 – Last week was a historic week of victories for same-sex couples across the nation as 8 more states, West Virginia, Alaska, Utah, Virginia, Oklahoma, Wisconsin, North Carolina, and Indiana won the right to marry. The courts struck down the bans to marry in these states, expanding the rights for same-sex couples to marry in over half of the country. Within hours, county clerks in those states were issuing marriage licenses to couples who had been waiting for a decision to come down. Additionally, 4 more states in the 10th circuit and 4th circuit are on the verge of marriage equality as well. Colorado, Kansas, South Carolina, and Wyoming have cases pending verdicts and are expected to overturn their marriage bans in the near future. To celebrate these rulings attorney and CPA, James Lange is offering Retire Secure! for Same-Sex Couples: Live Gay, Retire Rich for free for a limited time on his web site, www.samesex-equalrights.com.

Pittsburgh LGBT Ally James Lange of Lange Financial Group, LLC has been working to help same-sex couples understand and take advantage of the tax and Social Security laws since 2002, but his campaign was re-energized when the Windsor case was decided in 2013. The laws and regulations for estate planning, tax planning, and Social Security planning have changed so significantly for same-sex couples over the last year that Jim has dedicated a large portion of his firm’s time and funds toward writing a book on gay retirement planning. Retire Secure! for Same Sex Couples: Live Gay, Retire Rich can be downloaded for FREE by going to www.samesex-equalrights.com before October 31st.

Along with the ability to get married, Lange suggests that there are many other points couples in states with marriage rights or on the verge of those rights should consider. “Married same-sex couples who live in states that recognize same-marriages will now be able to enjoy significant Social Security marital benefits and estate planning benefits, particularly if one member of the couples has a significant IRA or retirement plan,” says Lange, author of the book, Retire Secure! for Same-Sex Couples: Live Gay, Retire Rich. Mr. Lange offers four tips for same-sex couples:

  1. Go Into Marriage with Your Financial Eyes Wide Open. The couples who will benefit the most financially will likely be same-sex couples in their 60s or older where at least one person of the couple has a significant IRA or retirement plan. Some other couples will actually do worse financially. Finances are an important, though not exclusive, reason to get married or stay unmarried. If you are already married, speak to a tax advisor to take advantage of all the marital benefits.
  2. Consider How Marriage Affects Social Security Benefits. For many couples, one result of marriage is the opportunity to collect a much higher Social Security benefit. If you qualify and it is appropriate in your situation, apply for Social Security spousal benefits. There is a fantastic technique called “apply and suspend,” which is newly available to many same-sex couples in states that have recently changed their laws and to many residents of states that already afforded marriage rights. Most Social Security recipients, however, do not understand all of the possible spousal benefits of Social Security. There are significant advantages while both spouses are alive and after the first spouse dies.       Find out the enormous financial benefits for free by going to www.samesex-equalrights.com before October 31st.
  3. Marriage and IRA and Retirement Planning. Regardless of your state of residence, as long as you were married in a state that recognizes same-sex marriages, you and your spouse will enjoy significant tax benefits on inheriting an IRA or a retirement plan.
  4. Seek Professional Advice. As with all important financial decisions, Lange suggests that couples speak with a qualified retirement and estate advisor, preferably a CPA, as well as an attorney who works with same-sex couples. “Couples need to be sure they have all the knowledge they can to prepare for their financial lives as a married couple,” says Lange. For more information about how to get a FREE copy of Retire Secure! for Same-Sex Couples: Live Gay, Retire Rich or for information on how to schedule a meeting or media interview with James Lange visit www.samesex-equalrights.comor call 412-521-2732.

About Jim Lange

James Lange, CPA/Attorney has been helping same-sex couples since 2002. He is a nationally recognized Roth IRA and retirement plan distribution expert and understands the best techniques for married couples to get the most out of Social Security. The combination of his financial expertise as well as an understanding of the changing legal status of same-sex marriage makes Jim the logical person to write and now offer for free Retire Secure! for Same-Sex Couples: Live Gay, Retire Rich which can be downloaded at www.samesex-equalrights.com before October 31st.

He’s also the best-selling author of the first and second edition of Retire Secure! with dozens of testimonials from the nation’s top IRA, investment, and estate planning experts and The Roth Revolution: Pay Taxes Once and Never Again.

Jim’s recommendations have appeared 32 times in The Wall Street Journal, 23 times in the Pittsburgh Post Gazette, The New York Times, Newsweek, Money magazine, Smart Money and Reader’s Digest. His articles have appeared in The Journal of Retirement Planning, Financial Planning, The Tax Adviser (AICPA), and other top publications. His article, Optimizing Social Security Benefits for Unmarried Couples, was just published in Trusts & Estates magazine this August.

Media Contact: Amanda Cassady-Schweinsberg, 412-521-2732

SOURCE: James Lange, CPA/Attorney

 

Supreme Court Decision Leads to Same-Sex Marriage Wins

Gay Marriage, James Lange, Retirement, Social Security, Same Sex MarriageOn October 6, the U.S. Supreme Court denied review of five cases of same-sex marriage. This decision leaves standing marriage victories in three federal circuits, the 4th, 7th, and 10th and opens the door to the same-sex marriage in many more states.


On October 7th, the 9th Circuit Court of Appeals also ruled in favor of the freedom to marry in Nevada and Idaho.


There’s been a lot of progress and soon, same-sex couples will have the freedom to marry not only in 24 states and the District of Columbia, including today’s new additions of Indiana, Utah, Oklahoma, Wisconsin, and Virginia – but the path to marriage in 6 other states (Colorado, Kansas, North


Carolina, South Carolina, West Virginia, and Wyoming) is now paved. Despite the amazing momentum, the U.S. Supreme Court chose to defer for another day the national resolution that Freedom to Marry, businesses, elected officials, and families across the country have urged now.


To keep current with the recent events, please visit www.freedomtomarry.org.  All proceeds from my book goes to Freedom to Marry.

-James Lange


P.S. Once you get married you may be wondering what financial steps to take next. Give us a call today! We would be honored to help you through that process. 412-521-2732 (Western Pennsylvania Residents Only)

The Impact of Same-Sex Marriage on the Accumulation Years

While you are still working, you shouldn’t pass up the opportunity to contribute the maximum allowable to your retirement plans. Same-sex marriage may afford you additional possibilities to contribute that may not be available to you as an unmarried individual; on the other hand, marriage might also eliminate possibilities to contribute.

Cartoon 2 copy

One advantage of marriage comes into play if one member of the couple is not working. This is relevant because you must have earned income to contribute to any IRA, including a Roth IRA. If a couple is not married, and one partner is not working, that non-working partner will not be allowed to contribute to an IRA or a Roth IRA. However, if the couple marries, the nonworking spouse would be able to contribute to an IRA or Roth IRA based upon their working spouse’s income. Marriage makes it possible for the couple to put more money in the tax-deferred or tax-free environment. For example, consider the couple Anne and Susan. In 2014, Anne earns $150,000 per year and is not covered by a retirement plan at work. Susan is not working outside the home. If they are unmarried, Anne can contribute to an IRA, but Susan has no earned income and cannot. If they marry, then both Anne and Susan can each contribute $5,500 ($6,500 if they are age 50 or older) to their respective IRAs.

 

When it comes to Roth IRAs, there is a potential benefit if your income is too high for you to be eligible to make a full Roth IRA contribution. These income limits are different for married and unmarried individuals (refer to table below). You may find that your income is too high for you to make a Roth IRA contribution as an unmarried taxpayer, but you are able to make a contribution as a married taxpayer. For example, consider Anne and Susan again. In 2014, if they are unmarried, neither Anne nor Susan can contribute to their Roth IRAs. Anne earns above the maximum of $129,000 for a single taxpayer and Susan has no earned income. If Anne and Susan marry, then their combined income of $150,000 is under the $181,000 limit for married couples, so they are both permitted to make the maximum allowable contributions to their Roth IRAs.

 

In other cases, marriage may suddenly make you ineligible to contribute to a Roth IRA. You may find that both you and your partner, as an unmarried couple, are both near the upper income limit for single taxpayers and are able to contribute to Roth IRAs; however, if you were to marry and combine your salaries, you may find yourselves above the Roth IRA limits. Consider a different situation for Anne and Susan. In this case, Anne and Susan each earn $100,000 in 2014. As an unmarried couple, they are each eligible to contribute fully to a Roth IRA, because they are each below the $114,000 limit. If they marry, their combined income would be $200,000, putting them above the $191,000 phase-out limit and preventing both of them from making any Roth IRA contributions at all.

 

Gay Marriage, James Lange, Retire Secure For Same-Sex CouplesGay Marriage, James Lange, Retire Secure For Same-Sex Couples, Pittsburgh, PAGay Marriage, James Lange, Retire Secure For Same-Sex Couples, Western Pennsylvania

Finally, if your income exceeds the limitations for a Roth IRA, consider contributing to a nondeductible IRA. You can convert the nondeductible IRA to a Roth IRA the minute after you make the nondeductible IRA contribution. That is exactly what I do personally, in addition to my 401(k) contribution. So, in January, 2014 I made my 2013 and 2014 nondeductible IRA contributions for me and my wife Cindy (even though she doesn’t work outside the home). We immediately made Roth IRA conversions of the nondeductible IRAs. So, we put away a quick $26,000 tax-free into Roth IRAs ($6,500 each for 2013 and 2014), not including what I contributed to my 401(k). Please note this conversion of nondeductible IRA to a Roth without incurring taxable income only works if you don’t have any traditional IRAs. In effect, after the monkey business, it is just like making a Roth IRA contribution, but you have to do the monkey business first to get around the limitation.

 

Because retirement plans allow your money to grow tax-deferred or tax-free, and we have already seen the enormous power of retirement plans, you may want to consider the impact that marriage will have on your ability to contribute to an IRA or a Roth IRA.

 
Retire Secure! For Same-Sex Couples – James Lange, (pages 61-65) www.outestateplanning.com/contact-us 412-521-2732
 

Same-Sex Couples Nearing Retirement: Get Married

If you're a same-sex couple in a long term committed relationship and are nearing retirement, get married.

Yalman Onaran of Bloomberg News discussed this issue with James Lange of the Lange Financial Group, LLC and had this to say:

“That's the simple advice that emerges from a new book by James Lange, a certified public accountant and attorney who specializes in retirement and estate planning. Of course love and feelings should dictate your decision first, but if you're looking at the financial side of things, then the balance has shifted in favor of marriage since the Supreme Court decision a year ago abolishing the Defense of Marriage Act, Lange argues.”

The chart below shows why marriage would benefit an aging same-sex couple.  A gay or lesbian couple could have higher Social Security benefits, more room to shelter income in IRAs all while avoiding inheritance taxes. 

Same-Sex, Gay, Lesbian, LGBT Couples Nearing Retirement - Get Married

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In this article Yalman Onaran touches on some of the caveats to same-sex marriage for financial reasons including whether you live in a state that still doesn’t recognize gay marriage as well as how far you and your partner are from retirement.  He shares his own experience with marriage and the financial benefits that resulted from getting married and how the landscape has changed post the repeal of DOMA.

To read the rest of this article in Bloomberg News, please click on the link below.

Click this link to read the article

Source: Yalman Onaran, Bloomberg News

An Update For Our Pennsylvania Readers

PA Same-Sex Marriage, James Lange, Retirement, DOMAOn May 20, 2014, the gay marriage ban in Pennsylvania was overturned by U.S. District Judge John E. Jones III.  In addition, Pennsylvania will now recognize same-sex marriages performed in other states that recognize same-sex marriage.  Governor Tom Corbett has announced that he will not appeal the decision, and for the first time in the state’s history, same-sex couples are now permitted to marry.  This is wonderful news for the residents of our state who have been waiting for a long time to marry their same-sex partners, but it also means that some of the information in this book as it relates to Pennsylvania residents has become outdated (as, frankly, I hoped it would become).  Rather than rewrite the book, I thought it would be simpler to provide Pennsylvania residents with a summary of the areas in which their lives will be affected as a consequence of the Pennsylvania decision.

First, if you’re counting, there are now 32 states that do not recognize same-sex marriage – the original text references 33 states.  Chapter 1 states that there are 17 jurisdictions that allow same-sex couples to legally marry, but, as of May 20, 2014, that number has risen – Pennsylvania became the 18th state (plus the District of Columbia) to do so.

Next, there are several references in the book to the federal criteria of “The State of Celebration vs. the State of Domicile,” as well as recommendations that readers consider marrying in a state that does recognize same-sex marriage.  As of May 20, 2014, same-sex couples who reside in Pennsylvania no longer have to travel out of state to get married – unless, of course, they want to – in order to enjoy the same benefits as straight married couples.  Let’s examine some of those benefits in greater detail.

  • Chapters 1, 4 and 5 discuss some odd Pennsylvania conundrums that, I’m sure, legally married same-sex couples will be very happy to see go by the wayside.  In 2013, legally married (in another state) same-sex couples who lived in Pennsylvania were required to file their Federal tax returns as “Married,” but their State returns as “Single.”  Those taxpayers will finally be able to file both their 2014 Federal and Pennsylvania returns as “Married,” and they also have the option to file amended Federal returns for up to three years prior, if it makes financial sense for them to refile as “Married.” (Marital status does not affect the amount of state tax that Pennsylvania residents pay, so filing amended state returns will not be necessary.)  
  • Chapter 1 recommends that your wills and trusts be prepared based on current laws, but include special provisions in case same-sex marriage becomes legalized in Pennsylvania.  Now that the state recognizes same-sex marriage, such highly customized estate planning documents likely will not be necessary. 
  • The beneficiary of a deceased same-sex partner used to be subject to a 15% Pennsylvania inheritance tax whether they had been unmarried or legally married (in another state), and it was my recommendation that wealthier couples consider either making large financial gifts in order to avoid that tax, or purchase life insurance to pay the tax.  Going forward, those strategies will be irrelevant because those same couples will not pay Pennsylvania inheritance taxes on their spouse’s assets (the same as straight married couples).
  • Finally,  from the human perspective, the surviving spouse of a legally married same-sex couple now has, barring extenuating circumstances, sole authority in all matters pertaining to the disposition of their spouse’s remains in Pennsylvania – prior to this ruling, a same-sex spouse couldn’t even be named on a death certificate.
  • Chapter 2 discusses the benefits of marriage as it relates to IRA’s and retirement plans.  Indeed, the benefits are so significant that from the federal perspective, including both income taxes and estate taxes, I recommend that all committed same-sex couples consider the financial advantages of getting married.  (Please reread that chapter if you are on the fence about it.)  But now, there is no need to travel to another state to marry to receive the same favorable federal tax treatment that the survivor of a straight married couple would receive on their deceased spouse’s IRA or retirement plan.  Now if you marry in Pennsylvania, you will assure your surviving spouse of a much better standard of living in his or her retirement than if you had not married. 
  • Pennsylvania does not currently tax retirement income, so the change in the law will have no effect on your state income taxes.  There will be a significant change with respect to state inheritance taxes, though – an individual who inherited a retirement plan from a legally married same-sex spouse, used to have to pay the state’s highest inheritance tax rate of 15%.  In many cases, this amounted to a significant amount of money. Now, that same individual will pay nothing in state inheritance tax. 
  • Chapters 1 and 3 both show, if you are a Pennsylvania resident, the monthly benefit that you would have been eligible for from Social Security, was “in question.”  This was because, unlike the Internal Revenue Service, the Social Security Administration recognizes same-sex marriages in states that recognize same-sex marriages.  If you are legally married, but do not live in a state that recognizes same-sex marriage, you are not currently eligible for spousal Social Security benefits.  The Social Security Administration recognized the inconsistency in their position and encouraged same-sex couples in all states to apply, but asked you to be patient as they develop and begin to implement new policies on this subject.  Well, legally married same-sex couples who live in Pennsylvania don’t need to wait any longer – they can now receive Social Security benefits based on their own earnings record, or the earnings record of their spouse if it is higher.  Remember, though, that the decision about when and how to apply for Social Security benefits can have a far greater impact on your financial security than what the staff at your local Social Security office might lead you to believe. Decisions about timing Social Security benefits should not be done without first talking to a trusted advisor.
  • In the same context, please have a second look at the graph on page 80, which illustrates what happens if Dr. Dan had used the “Apply and Suspend” technique for his Social Security benefits, and subsequently died.  This graph takes in to consideration a 15% inheritance tax assessed on Dr. Dan’s retirement plan.    Since Pennsylvania now recognizes same-sex marriage, this tax will no longer be assessed at his death, which would make the difference between those two scenarios even more dramatic.

You should also have a look at the graph on Page 131, which illustrates the difference between taking my advice and ignoring it.  The steep decline in assets at Baker Bob’s age 80 was due to the 15% Pennsylvania inheritance tax he owed on Dr. Dan’s estate.  Now that Pennsylvania recognizes same-sex marriage and the inheritance tax no longer applies to the surviving spouse, the argument for marriage will be even stronger.

It has been a long time coming, but I am happy to see that Pennsylvania has finally made this change to their law.  Same-sex Pennsylvania couples who marry will finally be treated fairly, with the same dignity and respect as straight married couples.  Since this represents new territory for you, I encourage you to talk with a trusted advisor about the specifics of your own situation, so that you fully understand how these changes will affect you and your partner or possibly your spouse.