In a landmark ruling in 2013, the Supreme Court struck down Section 3 of the Defense of Marriage Act, giving same-sex couple access to the same benefits as traditional married couples. This was a huge ruling that initially came with some confusion as to how federal benefits would ultimately apply to same-sex couples. It wasn’t initially clear if the same federal benefits would apply to those couples who married in a state in which same-sex marriage was legal but resided in a state that did NOT recognize it legally. But as time has gone on, the benefits have been more clearly stated and one of the most important benefits to be decided upon relates to Social Security benefits. Greenback Expat Tax Services takes a closer look at these benefits and how they impact same-sex couples.
Why Are Social Security Benefits Important?
In an article on bankrate.com, the issue of Social Security for same-sex couples was explored in depth.
“Few of (the) benefits are more important than Social Security,” says Crosby Burns, policy analyst of the LGBT Research and Communications Project at the Center for American Progress, an independent, nonpartisan educational institute based in Washington, D.C. “This program forms part of the bedrock of our nation’s safety net,” Burns says. “With full and equal access to this social insurance program, families headed by same-sex couples will finally have access to the economic safeguards they need, intended to keep them out of poverty and afloat during hard times.”
The primary importance of Social Security for same-sex couples involves the financial security it offers later in life.
Benefits of Gaining Social Security Benefits for Same-Sex Couples
The Spousal Benefit
With the spousal benefit, there are definitive advantages when it comes to the retirement of one spouse. At full retirement age, lower-earning spouses are eligible to collect benefits based on their own work history/record or half of their higher-earning spouse’s benefit. This offers the freedom to calculate which way provides a greater amount of monthly income. In addition, the higher-earning spouse has the option to ‘file and suspend’ when they reach full retirement age—allowing their lower-earning spouse to collect benefits even while they continue to work and increase their future retirement credits. This makes a significant difference if one spouse earned significantly less or was a stay-at-home parent.
The Spousal Disability Benefit
Disability strikes many couples at one point during their lifetime, and most often occurs during prime working years. The Social Security benefit provides much needed relief to couples who are in this position. If either spouse becomes disabled, Social Security provides relief to the other spouse. This obviously is most significant if the spouse who is disabled is the higher earning spouse—the non-disabled spouse receives benefits based on the disabled spouse’s record. Even a divorced spouse (same-sex or opposite sex) may be eligible for this benefit. This protection can relieve a significant burden in the face of financial uncertainty.
Death Benefit and the Survivors Benefit
When a spouse passes away, there is a ‘lump-sum’ benefit of $255 paid to the surviving spouse (or even a surviving child). The survivors benefit then kicks in—this allows the surviving spouse the opportunity to receive Social Security benefits based on the earnings of the deceased spouse. This benefit wouldn’t kick in until at least the age of 60, and the couple must be married at least 9 months prior to the death.
This benefit is especially important to couples in which one spouse earns significantly more than the other. If the higher-earning spouse passes away, the surviving spouse can collect benefits based on the higher earnings.
Benefits for Children of Same-Sex Couples
Any unmarried child who is under the age of 18 (up to age 19 if attending elementary or secondary school full-time) can be eligible to receive Social Security benefits if their parent dies. This benefit is not only extended to natural children—adopted children may receive benefits as well. This benefit also applies when someone becomes disabled. Their spouse or children are eligible for benefits on the disabled family member’s record.
There are many advantages to the DOMA ruling for same-sex couples who are married or are seeking to become married. The US now even recognizes same-sex marriages that occur in a foreign country where it is legal. As a result, same-sex married couples now must file married jointly or married separately on their tax returns, which can be a financially advantageous benefit, depending on the individual situations.
If you are unsure about your filing status this year or for prior years, it would be wise to contact a professional who specializes in expat tax services.