Signed into law in 1996, the Defense of Marriage Act, known as DOMA, defined “marriage” for purposes of federal law as a union between one man and one woman as husband and wife, and “spouse” as a person of the opposite sex. Under DOMA lawfully married same sex couples must be treated for federal purposes as if they are not married. The United States Supreme Court’s recent decisions in Windsor v. United States and Hollingsworth, et al v. Perry et al have swept away DOMA and reaffirmed states’ rights to determine the treatment of same sex couples under state law. In the Windsor case the Court found that DOMA’s federal definition of marriage was an unconstitutional deprivation of basic due process and equal protection.
The Court’s ruling in Windsor eliminates the distinction under federal law between same sex and heterosexual married couples. The same federal benefits are now available to both. These include:
- filing joint federal income tax returns
- ability to give an unlimited amount to one’s spouse without paying federal gift or estate tax
- ability to name one’s spouse as beneficiary under a qualified retirement benefit plan and elect a spousal “roll over” on the death of the plan participant
- electing portability of a deceased spouse’s unused federal estate tax exemption
- simplification of basis and contribution rules with respect to jointly owned property
- lifetime gift splitting
- ability to transfer property incident to a divorce without federal gift tax
- deductibility of alimony
- spousal social security benefits
- spousal veteran’s benefits
- the maximum ability to shelter gain on the sale of a primary residence
- “innocent spouse” protections
- immigration status rights
The above list is not exhaustive.
While the Windsor decision changes treatment of same sex couples for federal law purposes, the decision in Perry has left to the individual states the treatment of same sex couples as to state law. The state law rights of a surviving spouse remain state specific and are far from uniform. State law controls homestead protections, elective share rights, spousal retirement benefits, spousal state governmental benefits. Trust administration will be complicated by the fact that the governing law of a trust may govern which state law applies to the rights of trust beneficiaries.
In the wake of these decisions, what, in the short term, should same sex couples, and their planners and fiduciaries, be doing?
For federal purposes, all same sex married couples should review their estate plans and consider filing amended income, gift, and estate tax returns.
For state law purposes, all same sex married couples should consider the rights of a surviving spouse in the state of their domicile and how it affects their existing planning, and, if necessary, update their estate planning accordingly.
All trustees of trusts benefiting individuals who could be affected by the Court’s rulings will need to consider the patchwork of various state laws, as they govern the administration, legal interpretation, and property of the trust, and affect each trust beneficiary.
If you have any questions regarding these new changes, or if you would like a Pierce Atwood attorney to review your estate plan to make sure you are positioned to take advantage of the new DOMA changes, please contact a member of our Trusts & Estates Practice Group.