What is the impact of United States v. Windsor on your estate plan?

Wednesday, July 24th, 2013

Last month, the Supreme Court ruled in United States v. Windsor that 1 U.S.C. §7, also known as Section 3 of the Defense of Marriage Act (“DOMA”), is unconstitutional because it violates the due process protections of the Fifth Amendment of the U.S. Constitution, the concept of equal protection as applied to the federal government and principles of Federalism. The text of

Section 3 of DOMA reads:

In determining the meaning of any Act of Congress, or of any ruling, regulation, or interpretation of the various administrative bureaus and agencies of the United States, the word “marriage” means only a legal union between one man and one woman as husband and wife, and the word “spouse” refers only to a person of the opposite sex who is a husband or a wife.

The practical result of United States v. Windsor is that, in states where marriages between same-sex couples are legal, the federal government can no longer deny federal benefits to any married couple. Federal benefits include income tax, gift tax, estate tax, veterans’ benefits, Social Security, Medicare, Medicaid and the Family Medical Leave Act, among others.

For the clients of Frankel Sims Law, we are most concerned with updating you on the status of your tax benefits, since estate and gift taxes are two of our practice areas. Also, our firm practices in three states that have recognized same-sex marriage at the state level, Maryland, D.C. and New York.

  1. Revisit your estate planning documents, especially if your state has a state-level estate tax. There are state and federal estate tax postponement strategies that you and your estate planning attorney can employ to reduce the estate tax burden upon the death of you and your spouse.
  2. Confer with your income tax professional. You can file amended income tax returns for the previous three (3) years if you and your income tax professional determine that you would have owed less money if you were treated as a married couple instead of two single persons.
  3. Alert your employer that they may not have to withhold federal income tax on health care premiums paid out of your paycheck for your spouse. However, regulations have not yet been issued by the IRS to address this, so your employer may wish to wait for further guidance.
  4. If you filed gift tax returns recording gifts to your spouse in the past three years, contact the person who filed those returns for you and request that the returns be amended. Amending the returns to reflect that the gifts were made to a spouse, not an unrelated person, will preserve your lifetime gift and estate tax exemption for use upon your death.
  5. Please be aware that you now can make unlimited gifts between spouses for federal gift tax purposes. This means that if your same-sex spouse is on your employer-sponsored health insurance plan, the premium payments now fall under the unlimited gifts that you can give to your spouse.

Beware: United States v. Windsor did not change Section 2 of DOMA, which reads:

No State, territory, or possession of the United States, or Indian tribe, shall be required to give effect to any public act, record, or judicial proceeding of any other State, territory, possession, or tribe respecting a relationship between persons of the same sex that is treated as a marriage under the laws of such other State, territory, possession, or tribe, or a right or claim arising from such relationship.

The constitutionality of Section 2 may be open to challenge, but it underscores the uncertainty of having a same-sex marriage respected outside of the state that issued the marriage certificate.

Therefore, if a same-sex couple marries in Maryland, New York, or D.C. and then moves to another state that does not recognize same-sex marriage, such as Virginia, Pennsylvania or New Jersey, the new state may not have to recognize the marriage. In fact, it is still not clear whether or not the federal government will recognize as married a couple who married in Maryland but live in Pennsylvania. We encourage our same-sex married clients to consider the impact of a move to a state that does not recognize same-sex marriages.

If you have questions about how Windsor may affect your estate planning, please contact Frankel Sims Law.


More information for federal workers can be found here:

http://www.chcoc.gov/transmittals/TransmittalDetails.aspx?TransmittalID=5700

The National Center for Lesbian Rights has also produced fact sheets about how Windsor affects various government programs:

http://www.nclrights.org/site/PageServer?pagename=DOMA_FAQ_2013

By Laura Lynn Thomas and David R. Forrer