In this video blog, Associate Director of Education, Steve Hartnett, discusses same-sex marriage update and planning opportunities. This blog gives a brief update of the status of same-sex marriage as it expands to more states. It also examines two planning opportunities which still exist for same-sex couples, which would disappear if the Defense of Marriage Act (DOMA) is held to be unconstitutional by the Supreme Court. A decision in Windsor, which examined that issue, is expected in June.
Yesterday, the Supreme Court heard oral argument in Hollingsworth v. Perry, the case concerning the validity of California’s Proposition 8.
A link to the audio and transcript of the oral argument is here.
The California Supreme Court had held marriage was a fundamental right for all couples in California, without regard to gender. Thus, same-sex marriage ensued in May 2008. In November of the same year, Proposition 8, which defined marriage as only between a man and a woman, effectively overturned the California Supreme Court’s decision.
Today, the Court hears oral argument in U.S. v.Windsor, the case concerning the validity of the Defense of Marriage Act (“DOMA”). DOMA provides that only a marriage between a man and a woman will be recognized by the federal government, among other provisions which are not directly at issue. In Windsor, a decedent woman had been married to another woman. Their marriage was not recognized for purposes of the federal estate tax marital deduction, resulting in a greater tax burden for the estate.
These cases have far-reaching implications for your same-sex client couples (current and future) and for the estate planning which you might do for them on a go-forward basis. Nine states and the District of Columbia currently allow same-sex marriage. In addition, some states recognize same-sex marriages validly created elsewhere. In whatever state you are located, these cases could have great impact on LGBT planning in your state.
If your state allows or recognizes same-sex marriage, Windsor could result in federal recognition of those marriages. Federal recognition would mean that planning for same-sex couples might be much the same as planning for traditional married couples. This would impact not only estate planning, but also elder law planning, and financial planning. Federal recognition would mean that both spouses’ assets would be considered for Medicaid purposes. It would also mean eligibility for Social Security Survivor benefits and a broad range of other federal benefits including the ability to file a joint tax return.
If your state does not allow or recognize same-sex marriage, Hollingsworth v. Perry could hold that there is a constitutional right for same-sex couples to marry in all states.
These changes could mean significant changes in planning for LGBT couples. You will want to be prepared.
Stephen C. Hartnett, J.D., LL.M. Associate Director of Education
American Academy of Estate Planning Attorneys, Inc. 9444 Balboa Avenue, Suite 300
San Diego, California 92123
Phone: (858) 453-2128 www.aaepa.com
The U.S. Supreme Court has scheduled the dates for oral arguments in two landmark cases concerning same-sex marriage. As I discussed in my December 26th blog, these cases might have lasting impact on estate planning for same-sex couples.
The constitutionality of California’s Proposition 8 will be examined in Hollingsworth v. Perry. The Court will hear oral argument in the case on March 26th.
The constitutionality of the Defense of Marriage Act (“DOMA”) will be examined by the Court in U.S. v. Windsor. Windsor involves a fact pattern which would be familiar to estate planners because it involves the availability of the estate tax marital deduction. The couple in Windsor had been married under the laws of Canada and lived in New York. At the time of the death, New York law recognized same-sex marriages performed in other jurisdictions. The decedent had left the assets to her surviving spouse in a manner that would have qualified for the marital deduction. Therefore, but for DOMA, the estate would have been entitled to a marital deduction. However, the marital deduction was denied in that case. The Court has scheduled oral argument in the case for March 27th. (I was recently quoted in Estate Tax and Same-Sex Marriage, BNA Daily Tax Reports January 4, 2013, p. J-1, concerning the implications of Windsor.)
Today, estate planning for same-sex married partners is much the same as for unmarried partners, with a twist and a few extra layers. Depending on the holding in these cases, the planning might change considerably, both from a tax and a non-tax perspective.
Broadly, there are three possible avenues the Court could take in deciding these cases
The Court could hold that California’s Proposition 8 and DOMA are both unconstitutional because of a fundamental right to marry whom you choose. If the Court is going to go this route, one might wonder why it is taking both these cases, when Windsor alone would have been sufficient to do so.
The Court could hold that California’s Proposition 8 is unconstitutional because it removed a right which the California Supreme Court had granted and that DOMA is unconstitutional because the federal government cannot discriminate among married couples. However, the Court could determine that other states need not allow same-sex marriages nor respect those performed elsewhere.
The Court could uphold both Proposition 8 and DOMA.
Of course, the Court could surprise everyone with something completely different, too! We will have to wait and see. The Court is expected to hand down its opinions in these cases this summer.
Stephen C. Hartnett, J.D., LL.M.
Associate Director of Education
American Academy of Estate Planning Attorneys, Inc. 9444 Balboa Avenue, Suite 300
San Diego, California 92123
Phone: (858) 453-2128 www.aaepa.com
Up until now, planning for same-sex couples has been a minefield of different state and federal laws. A couple could be married under state law yet be considered legal strangers for federal purposes because of the Defense of Marriage Act. Not only does DOMA mean that a marriage in New York or Iowa need not be respected in Oklahoma or Utah, it also prohibits the federal government from extending the various benefits of marriage to same-sex married couples. These benefits include the right to file a joint tax return, the ability to give money to each other without payment of a gift tax, and social security survivor benefits, among others.
The United States Supreme Court has decided to hear two cases. Windsor examines the constitutionality of DOMA in an estate tax setting. Another case examines California’s Proposition 8, which narrowly removed the right of same-sex couples to marry in that state.
Depending on the outcome of these cases, planning for same-sex couples may become much less complicated. It is possible that there will be uniformity of marriage laws concerning same-sex couples across all states and between the state and federal governments.
But, the outcome is not certain. If DOMA is held to be unconstitutional, then same-sex spouses could equalize their estates like many opposite sex spouses do. If DOMA is upheld, same-sex couples still have the waning days of 2012 to make transfers to their partners and take advantage of the temporary $5.12 million applicable exclusion.
I will keep you updated on these cases in 2013. Decisions are expected in these cases sometime next summer.
Stephen C. Hartnett, J.D., LL.M.
Associate Director of Education
American Academy of Estate Planning Attorneys, Inc. 9444 Balboa Avenue, Suite 300
San Diego, California 92123
Phone: (858) 453-2128 www.aaepa.com
In what many consider to be a decision that is long overdue, a federal judge has ruled that the Defense of Marriage Act’s (DOMA) denying equal benefits to same-sex couples violates the equal protection clause of the Fifth Amendment. This recent ruling was handed down as a summary judgment to plaintiff Edith Windsor.
Windsor sued the government for not recognizing her 2007 marriage, in Canada, to her partner of 44 years, Thea Spyer. As a result of that denial, and the resulting unavailability of a marital deduction, Windsor paid out $363,000 in federal estate taxes on the death of her spouse.
In Windsor v. United States, the court ordered the government to repay the widow the money it had taken from her in federal estate taxes, thus setting a precedent for other jurisdictions with similar cases.
This is more than a legal victory in recognizing the rights of others. It is more than the fact that this is the fourth judge to rule against the Defense of Marriage Act. If the decision stands, it means that State marriages would receive federal recognition, and that married same-sex clients could file joint income tax returns, get marital deductions for gifts and estate taxes, etc.
Same-sex clients often want to use married joint trusts. Currently, this is not advisable because of the lack of federal recognition of the relationship. In the eyes of the federal authorities, including the IRS, the couple is two single individuals who are unrelated to each other. The Second Circuit has yet to rule on this case. Then, presumably, the case will be appealed to the Supreme Court. If the Supreme Court grants cert. and reaches the same conclusion as the District Court, only then should same-sex clients use joint trusts.
Stephen C. Hartnett, J.D., LL.M.
Associate Director of Education
American Academy of Estate Planning Attorneys, Inc. 9444 Balboa Avenue, Suite 300
San Diego, California 92123
Phone: (858) 453-2128 www.aaepa.com
