Many Same-Sex Couples Still Need to Update Plans Post-DOMA

As we have mentioned many times before, in June of 2013, the Supreme Court’s decision regarding the Defense of Marriage Act (“DOMA”) allowed same sex married couples to receive the same federal benefits as their heterosexual counterparts. This landmark decision will have a significant impact on estate planning for same sex couples who possess significant assets. Luckily, these impacts are extremely positive and will finally provide for the equal treatment that same sex couples deserve. The Supreme Court’s decision in DOMA will have a variety of impacts, including greatly lowering the taxation rate for asset transfers between same sex spouses.

Even though the ruling came down months ago, many New York couples have yet to ensure their estate planning reflects the changes in the law. As a result, it it worth re-visiting the basics and remind same-sex couples to take time to update previous work.

Section 3 of DOMA originally held that a “spouse” was defined as “a person of the opposite sex, who is a husband or wife”, and defined the term “marriage” as a “legal union between one man and one woman”.

In the case United States of America v. Windsor, the issue revolved around whether the same-sex spouse of a deceased woman was entitled to take a marital tax deduction previously only allotted to heterosexual couples. This federal marital deduction allows spouses to transfer assets amongst one another without being required to pay federal estate and gift taxes that usually accompany such asset transfers. When the Supreme Court overturned section 3 of DOMA, they made it so same-sex couples were allowed to take the marital deduction just like heterosexual couples.

DOMA’S Effects on Same Sex Estate Planning
The Windsor case concerned Edith Windsor whose same sex partner of 44 years died in 2009. The couple, who were domiciled in New York, had gotten married in Canada, before New York passed the gay marriage law. At issue in the Windsor case was the large tax that the defendant was expected to pay for the inheritance left to her by her late partner. Because of the definitions of marriage and spouse contained within DOMA, the defendant was unable to benefit from the marital deduction tax break, because she and her partner were not considered married under DOMA, and thus not married under federal law. As a result, Windsor was expected to pay federal taxes in the amount of $363,053, a fee that would not be imposed on a heterosexual couple.

The Supreme Court in its scathing 4-5 decision found that such an unfair result was essentially unconstitutional, and struck down DOMA’s section 3 definition of marriage. By doing so over a thousand federal laws, regulations and exemptions now apply to same sex married couples, as they already did for heterosexual couples. The impacts of this decision are significant and finally allow for same-sex marriages to be equally recognized as heterosexual marriages under federal law. More specifically the Windsor will allow same-sex couples to receive significant tax benefits in estate planning that heterosexual couples have been receiving for years.

Same sex couples are finally being allotted the equal rights that they deserve. The decision in DOMA will have positive effects on same-sex estate planning, because it allows transfers amongst spouses to receive the marital deduction previously reserved only for heterosexual couples. The attorney’s here at Ettinger Law Firm are standing by, ready to deliver legal advice and assistance for those same sex couples that require estate planning services in light of this recent federal decision.

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