By Melissa Myers and Michael J. Tucker, October 2015 Issue.
Melissa Myers: Not only is same-sex marriage legal nationally now, we also have a wave of local couples celebrating their first wedding anniversary this month.
Michael J. Tucker: That’s right! Oct. 17 marks one year of legally recognized same-sex marriages in Arizona!
Myers:What kinds of steps should couples be considering to adjust to their new legally married status, either before or after they get married?
Tucker: Well, by now I am seeing that most couples seem to understand that once they marry, they will almost certainly be filing joint income tax returns with the IRS and the Arizona Department of Revenue going forward.
Myers: Folks who get married can choose to file as married filing separately, but in most cases that is less advantageous in terms of how much income tax liability they will owe.
Tucker: Another latent income tax issue has to do with couples that own houses, land or brokerage accounts as joint tenants with right of survivorship.
Myers:Now that they are married, those couples can transfer those assets to community property with right of survivorship.
Tucker: That shift may save a lot of capital gains taxes if one of the spouses dies and then the surviving spouse sells the asset at a profit.
Myers:Couples can achieve such changes on financial accounts – other than IRAs or retirement plan accounts – by instructing the asset custodian to change the title to community property with right of survivorship.
Tucker: And married folks can change their house titles by having a deed drawn up to transfer each such house title from joint tenancy with right of survivorship to community property with right of survivorship.
Myers:Shouldn‘t these changes happen sort of automatically?
Tucker: Once married, couples need to take affirmative steps to make sure their property is titled in a way that reflects their wishes.
Myers:Same-sex married couples may take a while to understand community property. It’s a whole new concept in many of our circles!
Tucker: You’re right. And, community property law is something that isn’t very well understood by opposite-sex married couples either.
Myers:In Arizona, community property basically means that all assets acquired and income earned during the marriage are jointly owned by the married couple.
Tucker: Including their paychecks.
Myers:Exactly. The exceptions are gifts and inheritances, as well as whatever each of them acquired or earned before they were married to each other.
Tucker: From time to time, we’ve discussed couples being proactive about making an agreement that accepts the marital rights and responsibilities that serve them and rejects the ones that don’t.
Myers:You are referring to prenuptial agreements and postnuptial agreements.
Tucker: Yes, and should couples consider entering into an agreement like that, each spouse would need their own lawyer in order for the agreement to be legally binding. But that reality has an adversarial feeling to it that a lot of couples aren’t comfortable with.
Myers:Plus, it’s expensive.
Tucker: Well, I never promised you a rose garden.
Myers:The point is that getting married will change some of the legal relationships between the couple as well as between the couples and their assets and their debts.
Tucker: It’s wise for couples to take a look at their legal and financial situation and how marriage changes it.
Myers:Each couple’s situation is different.
Tucker: A newly married couple might want to make some changes to how they hold their property in order to reflect their current reality.
Myers:Some of those changes, such as deeds or postnuptial agreements, are typically made with the assistance of lawyers or financial advisers.
Tucker: Couples can effectively make some of these changes to their accounts themselves, without the intervention of their advisers.
Myers: Awareness and follow-through are key.