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Same-sex divorce includes financial benefits of other divorce

When the Supreme Court struck down sections of the federal Defense of Marriage Act last June, the ability of states to outlaw same-sex marriages was not altered. Although some positive changes have taken place, same-sex couples considering marriage or divorce continue to face many stumbling blocks relating to their financial and legal situations because of conflicting state laws. However, contrary to the past when the interests of the parties in a same-sex divorce were not protected as in heterosexual divorces, the changes made in June last year have leveled the playing field in California and other states where same-sex marriages are recognized.

Prenuptial agreements and postnuptial agreements can now be signed by same-sex couples in those states, and complete or partial transfers of an IRA are now allowed between divorcing partners. Before the changes, same-sex partners who split up were not entitled to qualified domestic relation orders. This means that the Individual Retirement Account of one spouse can now be transferred to the other spouse without incurring taxes on the transfer. The same applies for property transfers.

Retirement plans from the workplace, such as 401Ks and other retirement assets, can now be seen as marital property and may be divided in the event of divorce. Furthermore, alimony paid by a spouse is now deductible from federal income tax returns. These changes provide significant financial advantages.

Couples in California may want to keep in mind that only in states where a same-sex marriage and same-sex divorce are recognized will these changes be effective. There is still a large gray area when a couple’s status is to be determined. It is not always clear whether a couple’s state of residence or the state where they were married determines their status. Same-sex couples considering divorce may benefit from tapping into the many sources of advice and guidance that are available.

Source: Fox Business, "A financial benefit of same-sex marriage? Divorce.", Tobie Stanger, June 5, 2014

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