This is why I hate people who hate gay people...
And this is what I face, by trying to be a good partner (since I can't be a good spouse):
Are We Being Gouged by Being Gay?
Tuesday November 15, 2005
Federal and state tax laws routinely gouge gay couples in a variety of ways, via inequities in the estate tax, income tax, inheritance tax or gift tax. And when it comes to other important financial issues, like housing, or bequeathing estates, or nursing home care, gay couples must use contract law as the flimsy, threadbare cover to protect their relationships. A rundown of how gay couples get hurt:
Houses. A gay partner whose spouse dies often sees their home going to a family member, as they have no rights to the house. But titling the house as "joint tenants with rights of survivorship" could guarantee a smooth transition to the surviving partner. Doing so can create tax problems. The IRS will count 100% of the value of the house in the taxable estate of the deceased, unless the surviving partner can prove their contribution, says Jennifer Hatch, managing partner of Christopher Street Financial, a New York firm specializing in financial advice for gay couples.
Employee benefits. Gay couples have to pay income taxes on the value of the employer benefits they get from their partner, such as health care coverage, something straight couples never have to pay. And gay couples' compensation packages, when the value of fringe benefits is added in, are usually less than the compensation of a married person doing the same job.
Tax planning. When it comes to gay couples, the gift tax is the gift that keeps on giving--to the government. Say you and your partner live together, and to do things right, you add her to the deed to your house. Did you know that you must then report the value of half of the house on your taxes? Uncle Sam says you made a gift under the law. Ditto for adding your partner to your bank or brokerage accounts. The IRS says those transactions are gifts that must be reported if they amount to more than $11,000 in a year. A married couple is seen as a single economic unit, so they can transfer anything between them, while same-sex couples are seen as business partners, so all transactions are deemed taxable business deals, says Hatch.
Estate Taxes. The "unlimited marital deduction" lets one spouse pass on as much money as he or she wants to the other, free of estate tax. But because Uncle Sam doesn't recognize gay marriage, gay couples can't use this deduction, so they get hit with a big tax bill. And gay couples have to pay extra to take out life-insurance policies on each other in order to fix the problem.
Life insurance. Gay couples may have to fight to establish their right to buy life insurance on each other, if the insurance company challenges the partner's insurable interest. Gay couples need this life insurance to reduce the estate tax hit, because if their estates are large enough, they are taxed twice--upon each partner’s death, Hatch says.
Inheritance Taxes. Some states, including New Jersey and Connecticut, have an inheritance tax for certain “types” of beneficiaries. While straight spouses are exempt, an “unrelated” partner could pay more than 15% of everything inherited.
Social Security. Gay people cannot claim Social Security benefits through their partner's employment, according to tax law, whereas even divorced straight people will receive higher payments based on their spouses’ contribution to the system, says Hatch.
Retirement Accounts. Gay people cannot roll over their partner's retirement account into their own, but must start taking taxable distributions soon after their partner’s death. However, a surviving straight spouse can let the investments compound until mandatory withdrawals at age 70.
Death. Yes gay people still get hurt even when leaving for the great beyond. When their partners die, gay couples must prove their ownership of every item in the house or face a tax bill or even total loss of the items to their partner's next of kin. When a partner dies, gay people often receive no death benefit or continuation of the decedent's pension, though many cities and states including New York City and New York State as well as some corporations allow pension continuation for a partner, Hatch says.