DOMA’s Impact on Estate Planning
for LGBTQ Couples

 Written by the American Academy of Estate Planning Attorneys
Compliments of Morris Hall

 

June 26, 2013 was a landmark day for LGBTQ couples across the United States. With two much-anticipated rulings, U.S. v Windsor and Hollingsworth v. Perry, the U.S. Supreme Court made federal benefits available to spouses in same-sex marriages and cleared the way for same-sex marriage in California.

DOMA

In U.S. v. Windsor, the Supreme Court struck down a section of the Defense of Marriage Act (DOMA), a federal law defining marriage as only between a man and a woman. That section of the law denied federal recognition to same-sex couples validly married under state law.

Currently, thirteen states and the District of Columbia allow and recognize marriage between same-sex spouses. New Mexico law is silent on the matter, while the remaining 36 states prohibit same-sex marriage.

The purpose of the Court’s ruling is to ensure that all married couples within a state are treated equally under federal law. Going forward, if a same-sex couple is married and resides in a state that recognizes their marriage, they will be entitled to all the federal benefits granted to other married couples in their state. If a same-sex couple resides in a state that does not recognize same-sex marriage, they will be treated like all the other unmarried couples in their state for purposes of federal benefits.

Unresolved Questions

Because each state has the power to decide whether it will allow or recognize same-sex marriage within its own borders, Windsor leaves us with plenty of unresolved questions. For instance, what happens with regard to social security, federal income taxes, estate taxes, Medicare, and other federal benefits if a same-sex couple is validly married in Vermont but later moves to Georgia, where their marriage is not recognized? In this situation, with regard to most benefits, the federal government may not recognize the marriage once the couple relocates to Georgia. The federal government is still finalizing rules in this area, agency by agency.

Estate Planning Impact

Where does the DOMA decision leave the LGBTQ community when it comes to estate planning? Estate planning remains just as important as it has always been. Seventy percent of Americans live in the 36 states that prohibit same-sex marriage within their borders and refuse to recognize same-sex marriages performed in other states. Therefore, it is still essential that LGBTQ couples have a comprehensive estate plan in place.

For LGBTQ couples living in states that do not recognize their marriage (even if they are married elsewhere), this includes:

  • Trust(s):  Separate revocable trusts are appropriate. A revocable trust serves as the cornerstone of your estate plan, allowing you to control who receives your assets after your death and when and how your assets are distributed. A trust can also provide asset protection for your beneficiaries, and it can be structured to reduce estate taxes.
  • Durable Powers of Attorney for Property: A durable power of attorney for property allows you to appoint an agent (someone you trust, such as your spouse, partner, or a friend or relative) to manage your finances in the event you become incapacitated.
  • Health Care Power of Attorney: A health care power of attorney lets you appoint an agent to make health care decisions on your behalf if you are seriously ill and unable to communicate your wishes to your doctor.

For those married LGBTQ couples living in a state that recognizes their marriage, in addition to the powers of attorney mentioned above, either a joint revocable trust or separate trusts may be appropriate. For example, if the couple expects to ever relocate to a state that does not recognize their marriage, separate trusts may be advisable.

The rules that govern LGBTQ estate planning are subject to sudden and sweeping shifts. When seeking planning advice, make sure you talk to an estate planning attorney who has knowledge and experience specific to the LGBTQ community. He or she can keep you up-to-date on legal developments and new planning strategies and can give you expert guidance as you plan for your family’s future.

For more information or to schedule your free consultation, contact our office today at 888.222.1328.