|Defense of Marriage Act and Planning for Same-Sex Spouses|
Estate planning can be a challenge for same-sex spouses. Even if a couple of the same sex has a marriage that is valid under the laws of their state, the marriage is not recognized for any federal tax purposes due to the operation of the Defense of Marriage Act (DOMA), enacted by Congress in 1996. DOMA prohibits the use of the marital deduction for property passing by gift or bequest to a same-sex spouse, with the result that if an individual’s estate is in excess of the exclusion amount, estate tax will be payable on that excess even if the entire estate is given to a same-sex spouse (while no such tax would be due for an estate given to a spouse of the opposite sex).
Last November, the executor of the estate of a New York woman who passed away in 2009 leaving her entire estate to her same-sex spouse filed a constitutional challenge to DOMA and requested a refund of the estate taxes paid. On February 23, 2011, the U.S. Department of Justice issued a statement that it would no longer defend the constitutionality of the portion of DOMA at issue in this case (and one other, similar case), as it does not believe that it is, in fact, constitutional.
Many have asked what this means for tax planning purposes. Since DOMA has not been overturned, it remains law. No decisions have been issued in these cases to date and it is possible that members of Congress may intervene to defend DOMA in the pending litigation. However, some same-sex spouses with marriages recognized as valid in their state are revising their estate planning documents to provide for different plans depending on whether the marital deduction is available at the time of the death of the first spouse, in order to ensure that they will have the benefit of the marital deduction for federal estate tax purposes should DOMA ultimately be overturned on constitutional grounds.
The opinions expressed do not constitute investment advice and specialist advice should be sought about your specific circumstances.
Published on our website on Apr.21, 2011