How marriage act ruling may impact your estate
Special to the Bonanza
In 2007 Edith Windsor married Thea Spyer in Canada. Both Edith and Thea were women.
Thea died a resident of New York. Edith filed the Federal Estate Tax Return claiming the exemption from Federal Estate taxes as a surviving spouse. She was denied by the IRS. Edith appealed.
President Obama’s administration refused to defend the “Defense of Marriage Act.” A group from the House of Representatives retained counsel and provided a defense.
Edith won in Federal Court. The House group appealed to the Supreme Court.
The Supreme Court decision was recently released: Edith won and the Defense of Marriage Act is dead.
Nine states recognize same-sex marriages: California, Connecticut, Iowa, Maine, Massachusetts, Minnesota, New Hampshire, New York and Vermont.
Four states and the District of Columbia recognize same-sex marriages, domestic partnerships, and civil unions: Delaware, Maryland, Rhode Island and Washington.
Five states recognize civil unions or domestic partnerships, but not same-sex marriage: Colorado, Hawaii, Illinois, New Jersey, Oregon and Wisconsin.
The rest of the states, including Nevada, do not recognize any of these things.
While the Windsor case applies to same-sex marriages, it is unclear how much it will apply to civil unions and domestic partnerships.
Here are some estate planning issues to consider in light of these changes:
1. Between same-sex spouses there are no Federal Estate Taxes of gifts at death from one to the other. Also, gifts to third parties which are held in trust with income to the survivor until the second death will have deferred estate taxes.
2. The surviving same-sex spouse will be able to use any unused portion of the deceased spouse’s estate tax exemption.
3. A same-sex spouse may double annual gifting free of estate taxes by using the spouse’s gift-tax exemption.
4. Same-sex surviving spouses will be able to roll over retirement accounts into their own, rather than having to take distributions within five years.
5. Same-sex spouses may no longer file Federal Tax returns as single taxpayers, but must file as married filing jointly or separately.
6. The Windsor case may be retroactive to September 21, 1996, the effective date of the Defense of Marriage Act. This could mean a lot of tax refunds. They may be limited by the three-year statute of limitations. The Department of Treasury may determine the extent of retroactivity.
7. It is unclear whether the state of residence or the state where the wedding ceremony takes place is important.
8. Green cards are now being issued to same-sex foreign spouses of citizens even in states that do not recognize same-sex marriage.
9. Retirement plans governed by ERISA must allow the same benefits to same-sex spouses, including civil unions.
10. In one Ohio case a court determined that death certificates must include the surviving spouse designation for same-sex couples.
It is important to understand that this was a Federal case and state laws have not all been changed as a result of the Supreme Court decision.
For example, the laws governing what happens when people die without wills, divorce law and homestead law are all state laws which have mostly not changed as a result of this decision.
Frank Spees is an Incline Village estate planning attorney who is licensed to practice before all the courts of California, Nevada, Hawaii and Florida. For more information about this article, email him at email@example.com or call Spees & Spees at 775 832-7006.
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Kelley R. Carroll, a certified specialist, handles estate planning and will contests in our office with the help of our firm’s litigation department. I do not handle any, be forewarned.