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By Richard B. Schneider, Estate Planning Attorney
Members of the LGBT community, as well as those who support them, have been fighting for equality in a number of areas of the law for decades. One area in particular which has both personal and legal implications for same-sex couples is the right to legally marry.
Two cases recently decided by the Supreme Court of the United States, or SCOTUS, will likely go down in the history books as paving the way for legalizing same-sex marriage across the United States. Although neither case went so far as to accomplish that goal yet, the rulings handed down in both have powerful implications for same-sex couples in the area of estate planning for now.
Same-Sex Marriage in the United States Prior to Windsor and Hollingsworth
Marriage laws in the United States are determined by the individual states. Until several decades ago, the concept of same-sex marriage was not something that was even considered by any of the states. During the 1980s and 1990s, however, several countries legalized same-sex marriage. A few states in the United States also began to visit the issue. The U.S. federal government chimed in on the issue by passing the Defense of Marriage Act, or DOMA, in 1996. DOMA accomplished two important things.
First, it gave states the right to refuse to recognize a same-sex marriage that was legally entered into in another state. Second, it defined marriage for federal benefits as “between one man and one woman.”
Estate taxes were just the tip of the iceberg in the long list of areas where same-sex couples suffered as a result of DOMA’s definition of marriage. With the SCOTUS decisions, however, same-sex couples can now enjoy those federal benefits just as their heterosexual counterparts do.
DOMA was a significant blow for the same-sex marriage movement because it effectively cut off over 1,000 federal benefits for legally married same-sex couples. Despite DOMA, states continued to introduce, and pass, legislation legalizing same-sex marriage or other similar unions. As of 2013, 13 states
and the District of Columbia allow same-sex marriage with an additional four states allowing a civil union or domestic partnership for same-sex couples. Such was the legal landscape in the United States when U.S. v. Windsor and Hollingsworth v. Perry came before SCOTUS.
What Were the Legal Issues in Windsor and Hollingsworth?
Interestingly, Windsor was based on an estate planning issue. Edith Windsor’s spouse and partner of 44 years, Thea Spyer, died in 2009 leaving her a fairly large estate. The two were legally married in 2007 in Canada—a marriage that was recognized by the State of New York where they lived at the time of Spyer’s death.
Windsor attempted to claim the unlimited marital deduction to avoid paying gift and estate taxes on the inheritance; however, because of the definition of marriage in DOMA, the I.R.S. refused to recognize the marriage and levied a $363,053 tax on the gift. Windsor challenged the I.R.S. ruling on the grounds that the DOMA definition of marriage violates the U.S. Constitution. Both lower courts that heard the case sided with Windsor. The case was appealed all the way to SCOTUS.
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Hollingsworth was based on legislation proposed by the State of California that would amend the state constitution to include a DOMA definition of marriage, thereby preventing same-sex marriage in the state. Known as Proposition 8, the proposed amendment was challenged by proponents of same-sex marriage on the basis that it violates the U.S. Constitution. As was the case in Windsor, the lower courts agreed with the challengers and the case landed in front of SCOTUS for a decision. As a side note, it is important to understand that as part of the U.S. judicial system, states have a significant amount of sovereignty, meaning they can make many of their own laws; however, no law may violate the U.S. Constitution.
What Did Windsor and Hollingsworth Change?
In the Windsor case, SCOTUS affirmed the lower court decision, meaning they agreed that the definition of marriage found in DOMA violates the principal of equal protection found in the U.S. Constitution. Therefore, the definition of marriage found in DOMA can no longer be used to determine eligibility for federal benefits of any kind.
If a member of the LGBT community fails to properly plan, the result can be devastating to his or her partner and family. Having no estate plan, or relying upon a Will, Joint Tenancy, or Tenancy in Common as an estate plan, is tantamount to giving up control of one’s estate and management of one’s well-being in times of incapacity.
In the Hollingsworth case it was not actually the State of California that appealed the lower court ruling but proponents of Proposition 8 instead. Because SCOTUS decided that standing
was lacking, the case reverts back to the last court’s decisi on. In this case, that means that Proposition 8 is dead because the Ninth Circuit Court of Appeals ruled that way.
What Did SCOTUS Not Address in Windsor and Hollingsworth?
Though these rulings are certainly historical, it is crucial to understand the breadth of the decisions. Put another way, it is important to know what SCOTUS did not decide in Windsor and Hollingsworth as well as what they did decide.
With the death of DOMA, estate plans should be reviewed and revised accordingly.
In Windsor, SCOTUS did not legalize same-sex marriage across the United States. Instead, the Court left it to the individual states to decide whether they will permit same-sex marriage. In addition, SCOTUS did not address the provision in DOMA that allows a state to refuse to recognize an out of state marriage. Therefore, states are still able to decide if they will, or will not, honor same-sex marriages entered into in another state.
In Hollingsworth, SCOTUS did not consider the actual facts of the case, meaning that the Court did not answer the question of whether Proposition 8 violates the U.S. Constitution or not. Though the Ninth Circuit answered that question in the affirmative, that decision does not hold the same weight as a SCOTUS ruling.
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How Do the Decisions in Windsor and Hollingsworth Change Estate Planning for Same-Sex Couples?
Many legal analysts believe that the decisions in Windsor and Hollingsworth will eventually lead to the legalization of samesex marriage throughout the United States eventually; however, that may be years down the road. In the meantime, there are some important points to take away from these decisions, particularly in the area of estate planning for same-sex couples. 1. Same-sex marriage remains legal in 13 states plus the District of Columbia. 2. A state may still refuse to recognize your same-sex marriage from another state 3. The DOMA definition of marriage is no longer valid. 4. Federal benefits may no longer be denied to same-sex couples who are legally married in a state that allows same-sex marriages.
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Experts estimate that over 1,100 federal benefits were denied to same-sex couples as a result of the DOMA definition of marriage. Many of those benefits have a direct relation to estate planning. Some of the more important benefits that
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About the Author should now be incorporated into the estate plan of legally married same-sex couples include: 1. Unlimited marital deduction 2. Portability 3. Social Security and Veteran’s benefits 4. Qualified retirement account beneficiary designation 5. Roll-over rights for IRAs and qualified retirement accounts 6. Next-of-kin designation for emergencies 7. Rights to medical and school records for minor children as well as custody and visitation rights
Law Offices of Richard B. Schneider, LLC – Estate Planning & Asset Protection Attorneys Portland OR
Before devoting his professional efforts exclusively to estate planning, Mr. Schneider spent over fifteen years working on Wall Street for major law firms and investment banks. After graduating from law school, he practiced general civil law in New York City for five years, specializing in business transactions, financings and corporate matters. He also represented major investment banking firms in mortgage trading and real estate-related matters. Among his clients were international shipping companies, commercial and investment banks and institutional lenders, including General Electric Capital Corporation, Salomon Brothers and Merrill Lynch.
2455 NW Marshall St, Suite 11 Portland, OR 97210 Phone: (503) 241-1215
Because of the sheer number of benefits that may now be available, and the fact that each estate plan is as unique as the individual who creates the plan, be sure to consult with your estate planning attorney to determine what changes need to be made to your estate plan post Windsor and Hollingsworth.
SCOTUS Blog, Federalism and the authority of the states to define marriage National Law Review, Same-Sex Marriage and the Effect of Windsor and Hollingsworth Cases on Estate Planning in Michigan Forbes, How The Supreme Court Decision Will Change Estate Planning For SameSex Spouses PBS News Hour, 15 Federal Benefits Same-Sex Couples Can Now Look Forward To
Fax: (503) 241-1216 www.rbsllc.com
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