Thanks to the U.S. Supreme Court decision last June that struck down key provisions of the Defense of Marriage Act (DOMA), there have been some significant changes to the rules governing tax-deferred retirement accounts.
The IRS announced last year that it would recognize same-sex marriages for federal tax purposes. So the rules that used to apply just for opposite-sex married couples now apply for ALL legally married couples, regardless of sexual orientation.
When it comes to tax-deferred retirement accounts like IRAs, this means that same-sex married couples have the same spousal IRA benefits as other married couples, including the right for a working spouse to fund an IRA on behalf of a nonworking spouse and for a surviving spouse to inherit a deceased spouse’s IRA and roll it into their own IRA, deferring withdrawals until age 70 ½.
The same goes for 401(k)s – a surviving spouse in a same-sex marriage can roll over an inherited IRA into their own instead of dealing with it as an inherited IRA, and are also entitled to full spousal 401(k) benefits.
In case of a divorce, same-sex married couples are also treated as other married couples when it comes to the division of retirement benefits, including being able to use a QDRO (qualified domestic relations order) to more equitably divvy up the assets.
Based in Irvine, the Flanigan Law Group is a California estate planning, administration and litigation legal services law firm. For more information on tax planning, contact the Flanigan Law Group at 949-450-0041.