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U.S Supreme Court Hears NY Estate Tax Case for Gay Couples — Decision in June

Last week is already being referred to as one of the most important in the history of the equality movement for gay and lesbian couples. That is because, as all news outlets reported on significantly, the U.S. Supreme Court heard two cases related to marriage rights for same sex couples. We have discussed these cases frequently over the last few months, one of them deals with the federal law known as the “Defense of Marriage Act” (DOMA) and the other involves a state referendum in California known as Proposition 8.

For New York estate planning purposes, the DOMA case has very obvious ramifications. The very plaintiff in the case is a New York resident (Edith Windsor) who is suing in her capacity as executor of her later partner’s estate (Thea Spyer). Windsor and Spyer were married in Canada and that relationship was legally recognized in New York. However, because of DOMA, the federal government did not recognize the marriage. The divergent recognition of the couple’s relationship was not merely a symbolic difference, it had very real legal impacts. Specifically, Ms. Windsor was forced to pay over $360,000 in estate taxes to the federal government that she otherwise would not have paid if her relationship to Spyer was recognized. It is a pretty cut-and-dry demonstration of how same sex couples are impacted because of a lack of federal recognition of their marriage.

Obviously, the Supreme Court’s ultimate determination of the constitutionality of the challenged portion of DOMA will affect the planning of same sex couples.

What will they decide?

Some “court watchers” have made a career out of making predictions about how the U.S. Supreme Court will rule on any given matter based on the questions that the judges pose to attorneys during the hearing. However, it is critical to concede that those questions are hard to judge, and any predictions be taken with a grain of salt.

However, that being the case, there was a clear consensus among pundits about what the hearings suggest about how each Justice is leaning. All told, the justices spent a considerable time discussing the issue of “standing.” This refers to whether the group defending the law was the proper party to defend it.. In the DOMA case this is a group of House Republicans referred to a BLAG. Usually these laws are defended by the U.S. Justice Department, but the Attorney General and the President have stated that they believe DOMA is unconstitutional and have refused to defend it. If the Court decides that BLAG does not have standing then essentially they will not reach a judgement about the law itself, and a lower court ruling will stand–the lower court ruling found DOMA to be unconstitutional.

If they determine that BLAG does have standing, then they will actually weigh in on whether DOMA comports with constitutional Equal Protection requirements. Most observers are skeptical that, if the Court reaches the merits, they will keep DOMA in place. The 4 “liberal” justices as well as moderate Justice Kennedy all seemed very concerned about the equal protection issues of excluding same sex couples for federal purposes during questioning.

Ultimately, we won’t know anything for certain until late June when the Court will likely release its opinion. It is important for all local families who may be impacted by this decision to keep abreast of the ruling and to visit with their estate planning attorney for guidance on how any ruling may affect their own affairs.

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