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A recent case caught my eye. First, the facts had an interesting twist. But, second, divorce is sometimes considered by couples who wish to protect assets from Medicaid or for other financial reasons.
In Burnett v. Burnett, the court looked at a divorce case. But, this was no ordinary divorce case. The traditional couple was married in 1984. However, in 2003, the party to the marriage who was born a man underwent gender reassignment surgery and became “Bobbie.” At that time, Devon, who was born and continued to be a woman, was not competent. Devon’s children, as her conservators, sued for divorce.
There were two primary issues in the case. First, since Michigan does not recognize same-sex marriage, did the gender reassignment surgery act as an automatic divorce? Devon’s conservator/children argued that the reassignment surgery acted as an automatic divorce. The court found that it did not. The parties were not the same gender when they were married back in 1984. The fact that one party underwent gender reassignment surgery did not invalidate the marriage.
Next, the court addressed whether a conservator can bring a divorce action for the conservatee, or, if divorce is a personal action and only exercisable by the individual himself or herself. The court found that a conservator may bring any action on behalf of the conservatee, including a divorce action.
Thus, in Burnett v. Burnett, Devon’s children/conservators were able to bring a divorce action on Devon’s behalf.
While few of your clients will have these circumstances arise, it is interesting to note that divorce is still a possibility, even after the incapacity of a client. Divorce is a drastic step that Medicaid rules now make less attractive. Medicaid now allows a substantial Community Spousal Resource Allowance that keeps the “well” spouse from being completely impoverished. But, if the circumstances require a divorce, it may be possible to achieve, even if one of the parties no longer has capacity.
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
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
Same-sex marriage recently became legal in the state of New York. New York now joins Massachusetts, Connecticut, Iowa, Vermont, New Hampshire, and the District of Columbia as the U.S. jurisdictions which currently allow same-sex marriage. (California allowed same-sex marriage for a few months before the passage of Proposition 8, which ended it. California only recognizes those same-sex marriages performed in the state in that narrow window. Maryland recognizes same-sex marriages which were valid where formed.) The addition of New York doubles the population in the United States living in locales which recognize same-sex marriage.
What does this mean for estate planning for same-sex couples in New York? Does this mean that the estate plan for a married same-sex couple would be identical to that of a similarly situated traditional married couple? Unfortunately, until the federal government repeals the Defense of Marriage Act (“DOMA”) and all states recognize same-sex marriage, it does not.
As we know, state law impacts on many parts of estate planning, including intestate succession. However, if a client moves from one jurisdiction, like New York, to another jurisdiction, like Florida, their same-sex marriage would not be recognized in the new state. Thus, a “plan” by relying upon intestate succession would be in jeopardy if the spouses move. Thus, it is imperative that same-sex couples confirm their dispositive desires, even if it is the same as the default provisions under state law. So, while a traditional married couple might choose to rely on intestate succession, it would be unwise for a same-sex married couple to do so.
Further, federal law does not recognize same-sex marriages, even those validly performed under the laws where the couple lives. As a result, if one same-sex spouse gives his or her spouse money, it will not qualify for the federal marital deduction, in life or at death. For these and other reasons, it is best to continue to plan for same-sex couples with two separate trusts rather than a joint trust.
New York and other states have moved closer to allowing same-sex couples all the rights, privileges, and responsibilities available to traditional married couples. While this may be welcome news to same-sex couples in those states, it may make the estate planner’s job more difficult, keeping track of, and planning for, the disparate treatment of the couple under state and federal law.
Stephen C. Hartnett, J.D., LL.M
Associate Director of Education
American Academy of Estate Planning Attorneys, Inc.
6050 Santo Rd Ste 240
San Diego, CA 92124
858-453-2128
www.aaepa.com
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