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IRS issues new guidance for same-sex married couples

New Jersey same-sex couples may be interested in new policies from the Internal Revenue Service that may open up new avenues for smart estate planning. The Treasury Department announced on Aug. 29 that the IRS will now recognize legal same-sex marriages for the purposes of calculating federal taxes. The ruling will mean significant changes to tax planning and asset protection planning for same-sex couples. New guidance on same-sex couples had been expected after a portion of the Defense of Marriage Act was defeated on June 26.

Under the new guidance, legally married same-sex couples will be able to file their 2013 returns as either "married filing jointly" or "married filing separately." A same-sex marriage is considered legal if the couple was legally married in the United States or a foreign country. Civil unions, domestic partnerships and other relationships are not considered legal marriages, however. Couples can also refile tax returns for 2010, 2011 or 2012 if they were married at that time.

Aside from federal income taxes, the new guidance will also significantly change estate planning for same-sex couples. Tools like the estate tax exemption for married couples and gift-splitting can now be used by same-sex married couples. Before the ruling, those tools could only be used by marriages involving a man and a woman. The introduction of the new policy means that accountants, attorneys and other financial professionals will need to reevaluate their approach to financial and estate planning for same-sex couples.

The Treasury Department could issue more rulings, including a new process for employers who want to file refund claims for payroll taxes for same-sex married couples. While the changes to federal tax treatment are welcome, they may also be complicated. An attorney with experience in estate planning and financial planning could help same-sex couples understand the changes and make recommendations on how to take advantage of the new rulings.

Source: Investment News, "Drastic changes to tax and estate planning for same-sex couples", Darla Mercado, August 30, 2013

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