Missouri recognizes same-sex marriage exclusively for tax purposes

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Missouri recognizes same-sex marriage exclusively for tax purposes

Show-Me State sidesteps administrative confusion, but not financial planning pitfalls

By Darla Mercado

Nov 20, 2013 @ 12:14 pm (Updated 1:52 pm) EST

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Missouri will be recognizing same-sex marriages for the purpose of income tax filing. But don't celebrate just yet: financial planning pitfalls still abound.

Gov. Jeremiah W. Nixon issued executive order 13-14 on Nov. 14th, stating that the Show-Me State's tax code is coupled to the federal tax code, so same-sex couples who are married in a state that legally authorizes them must file a combined state income tax return.

What's notable about the development is that going back to 2004, the state has a constitutional amendment that excludes same-sex couples from marriage.

“This is the first state I've seen that's doing the opposite of other states [with respect to recognizing gay marriages for state income tax purposes],” said George Karibjanian, senior counsel in the personal planning department for Proskauer Rose LLP. “Most have issued proclamations that say you have to file as non-married individuals.”

Currently, 16 jurisdictions recognize same-sex marriage: California, Connecticut, Delaware, Hawaii, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, New Jersey, New York, Rhode Island, Vermont, Washington State and Washington, D.C.

Illinois Gov. Pat Quinn is expected to sign same-sex marriage into law this afternoon.

As far as Missouri's reasoning for the decision, the impression among tax experts seemed to be that recognizing same-sex marriages for income tax purposes is a way to avoid an administrative mess.

“For states that have their own filing status tied to the federal status [as is the case with Missouri], it would begin to create a logistical nightmare” if they did not recognize same-sex marriages for income tax purposes, said John McGowan, senior vice president, national practice leader for the LGBT and non-traditional family practice at Northern Trust Corp.

If Missouri chose not to recognize same-sex marriages for income tax purposes, then state legislators would have to prepare some kind of additional guidance that indicates as much – and they would have to do so sometime between now and the end of the year when people begin filing their taxes, McGowan said.

Instead, the governor opted to allow the state to continue tying its filing status to what's in the federal code.

“What Nixon did was follow the law as it is stated now so they don't have to change their tax code to make that delineation,” said Mr. McGowan. “It would've been an extra burden.”

Same-sex married couples living in Missouri should bear in mind, however, that while they can file as being married for state income taxes, they still aren't granted the same protections that they would otherwise receive in states that recognize their marriages.

Indeed, Mr. Nixon's press secretary Scott Holste confirmed that the order does not apply in any other context, including retirement benefits for state employees who are in same-sex marriages.

A good deal of planning is in order for LGBT married couples who live in the Show-Me State. For instance, they need to consider their estate planning documents, specifically their powers of attorney, and their wills and their trusts.

“Even if the marriage happened outside of Missouri, if a same-sex spouse dies without a will, the surviving spouse will get nothing because they are legal strangers in Missouri,” said Mr. McGowan.

Similarly, for powers of attorney for health and property, documentation needs to be in place in order to give same-sex spouses in Missouri the appropriate rights to make health care and financial decisions on the behalf of an incapacitated spouse.

“An opposite-sex spouse would have those powers naturally,” Mr. McGowan added. “My warning to our clients in Missouri is not to presume that you get the same benefits that come with marriage. This is strictly for state income taxes.”

Darla Mercado

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Darla Mercado covers life insurance, annuities and retirement products for InvestmentNews, and she's looking for advisers' informed opinions, plus chatter on products and other industry developments.

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