By Tracy Fischer
The new Supreme Court ruling striking down the Defense of Marriage Act, which defines marriage as a union between only a man and a woman, has surprising ramifications not only for marriage but also for divorce. Until now, in Massachusetts a same-sex marriage that led to a divorce had several complicating factors.
Often same-sex couples choose mediation as a way to end their marriage in an amicable and cost effective manner, just as opposite-sex couples have for many years. While many of the same issues arise in a same-sex divorce, the opportunities to divide property and deal with tax issues are very different. Here are just a few examples.
Currently, in a same-sex divorce, a pension that one spouse may have earned during the marriage could not be divided through a Qualified Domestic Relations Order. This Order divides pensions and retirement accounts at the time of divorce without any tax payments or penalties and insures that the non-owning spouse, or alternate payee, would have their rightful share of the pension at the time of retirement. Divorcing same-sex couples were forced to use other assets to effectuate an equitable division of the marital assets, many times in ways that were not in either parties’ financial interest.
Another area that disadvantaged same-sex divorce was in the area of alimony. In an opposite-sex divorce, the party paying alimony is able to deduct this payment from their gross income for Federal Tax purposes and the lower earning spouse would claim that same amount as income at a lower tax bracket. Often this would result in a lower payment of tax for the couple as a unit. This was not available to same-sex divorcing couples but will now be allowed. Tax planning can be investigated in same-sex divorce to allow for the same tax savings as opposite-sex divorce.
The Federal health insurance benefit, COBRA, continuation health insurance will automatically continue to cover a divorced spouse if the employed ex-spouse loses their employment. This coverage was not applicable to same-sex divorced spouse and now will be.
Spousal social security benefits are available for couples married 10 years. A divorced spouse has the option to have their social security income calculated based on their own employment record or 50% of their spouses record and choose whichever is greater. This major benefit has not been applicable in same-sex marriages or divorce and will now become an option that may bring greater financial security to an ex-spouse.
The ramifications of how these new Federal changes will specifically be handled will take time, but clearly are major improvements in fairness for same-sex couples who divorce.