You’d think that, after DOMA, gay divorce is the same as straight divorce. But, as is the case with so many items in LGBT finance, it’s never quite that simple.
For some gay couples, divorce is no different than it is for straight couples; however, for those who are married but–here’s the crux–live in a state that does not recognize gay marriage, the process is a mucky one.
Scenario 1: Why you should get married even if you want a divorce
Let’s say you live in Massachusetts, one of the 14 states that recognize gay marriage. You and your partner are not married, but you do share assets. And it’s come time for you two to part.
It may behoove you to get married and then divorce. It’s an absurd arrangement, but it can save you from gift and estate taxes. If you each own a home and some stocks together, for instance, divvying them up could be treated as a taxable sale.
For example, if Mark transfers $200,000 in assets to Steve, then a substantial amount of that sum is subject to taxes. With a $14,000 exclusion, a whole $186,000 would be taxed, and Mark would have to pay $50,320. That’s one pricey divorce.
Scenario 2: Divorce is an impossibility for some
Although the federal government recognized gay marriage on June 26, its unfortunate other half was not given the same attention. Couples who married in one state and then settled down in another are in a bind. They do have all the federal benefits that come with marriage: a shared tax bill, spousal Medicare benefits – the list goes on. But if their state bans gay divorce, then a couple can be stuck in this arrangement, even after the relationship sours.
As we iterated above, it’s common that you must live in a state for a lengthy period of time before you can file for divorce, from six months to a year. Washington, D.C. has one of the more flexible policies. If you married in D.C., you can file for divorce there, even if neither you nor your spouse lives there now.
Mike Anderson is an analyst for NerdWallet, a financial-literacy company dedicated to helping consumers make better decisions with their wallet.