Update July 2015: The Supreme Court ruling on June 26, 2015, declared that states cannot ban same-sex marriage, which further opened the door to married same-sex partners to be eligible to receive equal benefits available to heterosexual spouses.
Spousal benefits have been equal for all serving military members since 2013. However, VA benefits for those in same-sex marriages were limited for veterans residing in certain states because the law only recognized marriage in the state where the veteran resides. VA benefits were not available to same-sex spouses who resided in states that did not recognize same-sex marriage, even if they had a valid marriage certificate.
Again, this was not a malicious act by the VA. This was due to the language of the law, US Code Title 38, Section 103 C, which specifically recognized marriage in the state where the veteran resides. The recent Supreme Court ruling now requires all states to recognize same-sex marriages, permitting the VA to extend these benefits to all veterans, regardless of the state of residence. See below for an update on how this will roll out.
Overview of Benefits for Same-Sex Couples
When the Supreme Court declared section 3 of the Defense of Marriage Act unconstitutional on June 26, 2013, it opened the doors for federal recognition of same-sex marriages. And this federal recognition meant that same-sex spouses of federal employees would be eligible to receive the same benefits as spouses of heterosexual employees. This, of course, also included military members.
The Department of Defense extended benefits to same-sex spouses of uniformed service members and DoD civilian employees after the Supreme Court ruling provided the servicemember was able to provide a valid marriage certificate (a recognized civil union is not sufficient for benefits; there must be a marriage certificate).
While the military was quick to extend benefits to legally married servicemembers and their same-sex spouses, The Department of Veterans Affairs could only legally extend the benefits if the veteran had a legally recognized marriage certificate and resided in a state that recognized same-sex marriages (due to the wording in the US Code).
Military Benefits Available to Same-Sex Spouses
The repealing of the DOMA laws permitted all military members with same-sex spouses to receive the same benefits as servicemembers with heterosexual spouses – provided they have a valid marriage certificate. These benefits include a dependent ID card, TRICARE access, Basic Allowance for Housing at the Dependent Rate, Family Separation Allowance during TDYs and deployments, and other benefits.
These benefits were made retroactive to the Supreme Court’s decision on June 26, 2013, or the date of marriage if the marriage was held after the date of the Supreme Court decision.
Non-Chargeable Leave for Same-Sex Marriage if Residing in a State Where Same-Sex Marriages Are Not Legal. The DoD also granted servicemembers non-chargeable leave if they wanted to marry a same-sex partner, but resided in a state where this was not permitted by law. Here is a quote from the DoD statement:
We recognize that same-sex military couples who are not stationed in a jurisdiction that permits same-sex marriage would have to travel to another jurisdiction to marry. That is why the department will implement policies to allow military personnel in such a relationship non-chargeable leave for the purpose of travelling (sic) to a jurisdiction where such a marriage may occur. This will provide accelerated access to the full range of benefits offered to married military couples throughout the department, and help level the playing field between opposite-sex and same-sex couples seeking to be married. (Source)
Further guidance requires servicemembers to reside at least 100 miles or further from a state where same-sex marriage is legal. Contact your base personnel section for further guidance.
VA Benefits for Veterans & Same-Sex Spouses
Equal benefits are now available for veterans who are in a same-sex marriage, provided they have a legal marriage certificate. Previously, the law required the veterans and spouse to have a legal marriage certificate and reside in a state that recognizes same-sex marriages. This was overturned in the June 26, 2015, Supreme Court decision requiring all states to recognize same-sex marriages.
Benefits: Same-sex married couples now have equal rights with veterans, and are eligible to share veterans pensions, survivor benefits, VA home loans, medical coverage, burial benefits, transfers of GI Bill benefits, and same-sex spouses will count as dependents for service-connected disability compensation. Learn how to add a dependent to your VA compensation claim.
Note: The VA is in the process of drafting guidance to provide benefits to veterans and their same-sex spouses who reside in states that did not previously recognize same-sex marriages. in the meantime, they have stopped processing certain claims for affected veterans to avoid making errors based on previous policy. If you have specific questions regarding your claim, you should contact the VA or a benefits counselor at a Veterans Service Organization for further assistance.
The Financial Impact of the Supreme Court DOMA Rulings
While this will have far-reaching social and political implications, it will also have a major financial impact on many people. Let’s take a look at how same-sex couples will be impacted (financially) by this change.
Benefits Are Now Wide Open for Married Same-Sex Couples
The Defense of Marriage Act basically ruled that the federal government wouldn’t recognize marriage between same-sex couples, even if they were legally married in a state that allowed same-sex couples to marry. This meant that same-sex couples weren’t able to file joint income tax returns, share in federal benefits, receive survivor benefits from the government, share in social security benefits, and more. In short, they were treated by the federal government and many states as unmarried couples. This treatment makes financial planning more difficult, especially when it comes to taxes, estate planning, retirement, joint property ownership, and other legal situations.
According to CNN Money, Repealing the Defense of Marriage Act opens the door to over 1,000 spousal benefits that were previously off-limits to same-sex couples (source).
Many couples file their taxes jointly. By doing so, they simplify their tax returns, and can often save money in the process. A good example of when it is helpful is when one spouse is making more money than the other. Combining incomes for the tax return may lower the taxable income rate for the higher earner. However, it doesn’t always work that way. If both couples are making too much money, they may find that they pay more in taxes. The best way to see if you may be affected is to look at the marginal income tax rates. As you can see from the chart below, couples who are “Married, Filing Jointly” don’t always come out ahead.
Correcting previous tax returns. Some married couples are filing protective refund claims with the IRS for tax returns and estate taxes paid, going back to 2009. You should consult with a tax professional if this may apply to you.
Many large companies already allow same-sex couples to be included on health insurance benefits if they meet certain criteria (not all companies offer this, however, so be sure to check with your employer regarding health insurance benefits). In most cases, health insurance benefits aren’t taxed for the individual and his/her family. However, under DOMA, a same-sex partner who received health insurance benefits was required to pay income taxes on the value of the benefits received. This will change under the new laws. There may also be some complications under the Affordable Care Act, as the law will soon require people to have health insurance, or pay penalties if they don’t carry it.
Estate Taxes and Gift Taxes
Estate planning can be complicated, especially for wealthy individuals. Further complicating estate planning are the limitations on how many assets people can transfer to others, and when. The gift tax, for example, limits how much people can transfer tax-free in any given year to $14,000, and $5.25 million over a lifetime. The catch is that same-sex couples couldn’t easily transfer large amounts of wealth between each other without incurring gift taxes. Additionally, estate taxes took a large bite from estates after one person passed away and left their estate to their partner or spouse. Repealing DOMA removes the gift tax exclusion between married couples and makes it easier to transfer assets within the estate. Again, this can be a very complicated topic and one where it is always good to seek professional advice.
What Isn’t Covered
These changes only apply to how the federal government recognizes same-sex marriage to couples who were married in a state that legally recognizes same-sex marriages (currently only 12 states, plus the District of Columbia). These changes don’t affect federal recognition for same-sex couples who are in a civil union or domestic partnership (currently recognized by 7 states), or same-sex couples who reside in a state that doesn’t recognize any same-sex unions. In other words, this only applies to marriage, and the federal government is leaving it up to individual states to determine if they will recognize same-sex marriage or not.
Keep in mind these changes listed above are only federal benefits. You will need to check with your individual state to determine if there are any state benefits available to you.
This is obviously a game-changer for many couples. Right now, it’s too early to say how broadly these changes will be interpreted, and how the federal government will treat issues that occurred while DOMA was still in effect. I expect there will be many couples who will try to refile their taxes, or even sue the federal government for previous rulings, especially where there are large amounts of money at stake. (The estate tax is a good example of this). If this affects you, then I recommend watching the news over the coming weeks and months to see how this plays out, and whether you can refile your previous tax returns or make any other corrections. It may also be a good idea to consult with a tax professional or other financial professional to see how this might affect your financial situation.