Same Sex Estate Planning After DOMA

ESTATE PLANNING FOR SAME-SEX COUPLES

The Supreme Court’s decision in Windsor signaled a new era for same-sex marriages legally performed under state law. The central ruling in Windsor held that the Defense of Marriage Act (DOMA) was unconstitutional by depriving same-sex couples of equal protection under the law. Importantly, Windsor did not address whether states are required to recognize same-sex marriages performed in other states. This touches widespread federal benefits and is a significant change for same sex estate planning.

Two Types of States

Following Windsor there are basically two types of states: states that recognize same-sex marriage (ex. California) and states that do not yet recognize same-sex marriage (ex. Arizona).  A recognition state will recognize a same-sex marriage if the marriage was valid where performed. A non-recognition state will not recognize the same marriage, even if it was validly performed. As time continues, further developments will change how state laws interact.

Place of Celebration Versus Place of Residence

While state treatment is largely dependent on the recognition status of the state, for Federal laws and regulations, two different approaches are being used.

For Federal law, agencies must determine how a marriage is to be deemed valid. One approach would look at the “place of residence” while the other focuses on the “place of celebration”. For example, the US Department of Homeland Security clarified that “… the law of the place where the marriage was celebrated determines whether the marriage is legally valid for immigration purposes.”  As a result, same-sex couples will be able to apply for immigration petitions whether or not their state is a recognition state.

Other agencies have used the “place of residence” approach. The Department of Labor, addressing application of the Family Medical Leave Act, defined “spouse” to include same-sex marriages where recognized under state law (HERE).

Same Sex Estate Planning After DOMA

For Estate Planning purposes es, the IRS has adopted a “place of celebration” rule, which allows couples with a marriage performed in a recognition state to be recognized as married for all federal tax purposes. This means that same sex married couples can now benefit from:

1) the unlimited marital deduction, allowing unlimited gifts of assets between spouses during life or at death, tax-free.

2) spousal portability, allowing one spouse to transfer an unused gift tax-exemption to the surviving spouse after death

If your estate planning was pre-DOMA, you should consider having it reviewed to make sure it remains appropriate for your current circumstances.

With more rulings and pronouncement sure to come in the years ahead, further clarity will be developed. At a minimum, same sex couples should consider filing protective claims and amended returns for any income, gift, estate, or other taxes that may have been impacted prior to federal recognition.

Estrada Legal PC

At Kamper Estrada LLP we believe your family is your most important asset. We want to help you create an estate plan that minimizes future headaches and addresses things like your digital assets.