1099-INT spells trouble for gay couples

For unmarried partners, it's a paperwork headache

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While the gay and lesbian community waits for the U.S. Supreme Court to decide on the fate of same-sex marriage, lesbian and gay couples ignore the Internal Revenue Service's 1099-INT at their own risk.

The 1099-INT is a slip of paper from the bank that arrives in time for Tax Day that shows how much interest has been paid to the account holder. That same information has been reported to the IRS.

For unmarried people who share an account, the information can be a paperwork headache -- or even grow to the level of legal disaster. To properly handle it, the first account holder should issue a separate 1099-INT to the second and then file a Form 1096 with the IRS to alert the government that the interest was split between two parties.

It's one of those paperwork things nobody does, but that puts lesbian and gay couples at legal risk, said Anthony C. Infanti, a professor at the University of Pittsburgh School of Law.

Today during Pittsburgh Pride events, there will be lesbian, gay, bisexual and transgender Pittsburghers, along with their families and friends publicly and proudly marching through Downtown. Every other day of the year, lesbian and gay couples privately walk through a complex array of financial issues that traditionally married couples may not face.

Financial planning for same-sex couples includes a whole raft of complicated issues such as planning for long-term care and estate planning in a state that regards the partners in the relationship basically as legal strangers.

The 1099-INT is just one of those complications.

"People aren't often audited," Mr. Infanti said. "People weren't arrested for sodomy often either. It's just there and it's hanging over people's heads like Damocles' sword."

There are plenty of other issues. Pennsylvania is one of the U.S. states that maintains a legal ban on same-sex marriage so if a lesbian or gay couple is married in another state but returns to Pennsylvania, they are each legally single.

A case currently before the U.S. Supreme Court concerns taxes assessed on an estate left by Thea Spyer, a New Yorker who left her assets to Edith Windsor, the woman with whom she had shared her life for 44 years and whom she had married in Canada. The IRS, following the 1993 Defense of Marriage Act signed into law by President Bill Clinton, refused to recognize the relationship when it taxed Ms. Windsor on the estate.

A decision on the constitutionality of the Defense of Marriage Act is expected by the end of the month along with a decision about a proposition in California that threw out same-sex marriage after it had been legal in the state.

Kathleen D. Schneider, a Regent Square attorney, said codifying a same-sex relationship should begin with the consideration of death -- a will, specifically. Otherwise, she said, members of a same-sex couple in Pennsylvania are considered legal strangers, the way roommates would be seen.

With that will, Ms. Schneider said, same-sex couples might want to consider creating trusts to make sure, for instance, that family money stays in a family or with their biological children. They may also want the estate, upon the death of the surviving partner, to be split between the families.

There is also the possibility, she said, that if a house is in one of their names, the other could be forced out by the legal relatives of the deceased partner without legal protection.

For same-sex couples, there is also the reality that if one dies, the other is not entitled to Social Security survivor benefits or, in most cases, survivor benefits from pensions.

Another consideration is where to live.

Dave Huting, who works with lesbian and gay couples in PNC Financial's Wealth Management offices, said if a same-sex couple lives in New Jersey -- a state that has domestic partnerships for gay couples -- and one of them is offered a job in Pennsylvania, that sends up warning flags. The cost associated with not being recognized as a couple might outweigh the benefits of the new job.

While the legalities of creating savings may be different, Lisa Snyder, a Los Angeles-based wealth management consultant for UBS Financial Services, which has offices in Shadyside, said opposite-sex couples and same-sex couples all have the same goals.

"We want to be financially secure. We want to take care of the people we love and the causes we love, and we want to make sure when we're gone that our money goes where we want it to go," she said.

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Ann Belser: abelser@post-gazette.com or 412-263-1699.


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