Tag Archive for 'marriage'

Same Sex Marriage, The Estate Tax & The [Possible] Death of DOMA

“There is nothing more powerful than an idea whose time has come.” – Victor Hugo

I posted last week about Hawaii having approved civil unions for same sex and couples (and for the rest of us breeders too).  Then the Obama administration one-upped that news by deciding to stop defending DOMA in the federal courts which lead directly to a number of posts and articles out there on the blog-o-nets about how a possible repeal of DOMA may have estate tax implications for same-sex couples.  It gets a little technical but my man Joel Shoenmeyer does a great job of getting us started in his post, DOMA, Same-Sex Marriage, and the Estate Tax.  Joel writes:

Federal estate tax law allows for a “marital deduction” for gifts made to a spouse at death, but the deduction is “equal to the value of any interest in property which passes or has passed from the decedent to his surviving spouse.” And, because of DOMA, same-sex married couples were not deemed to have a surviving spouse. This created a larger burden on same-sex married couples with estates subject to tax.

Some commentators have called this additional burden a “Gay Tax.”  FamilyFairness.org writes here:

The Williams Institute of UCLA School of Law has released a study [pdf] that shows that same-sex couples are assessed an average of $3.3 million more in taxes upon the death of their partner than a similarly situated opposite-sex couple. Because estate taxes are set federally, the Defense of Marriage Act prohibits even married same-sex couples from taking advantage of the marital deduction.

The Edith Windsor case, detailed here (and in this NYT article),  illustrates the point:

On November 9, 2010, Ms. Windsor, who shared her life with her late spouse, Thea Spyer, filed a lawsuit against the federal government for refusing to recognize their marriage. In the lawsuit, Ms. Windsor alleged that DOMA violated the equal protection clause of the U.S. Constitution because it recognized marriages of heterosexual couples, but not those of same-sex couples, despite the fact that New York State treats all marriages the same. Edie and Thea were married in Canada in 2007, and were considered married by their home state of New York.
When Thea died in 2009, Edie was the sole beneficiary of Thea’s estate. Because they were married, Thea’s estate normally would have passed to her spouse Edie without any tax. But because the federal government refuses to recognize otherwise valid marriages of same-sex couples due to DOMA, Thea’s estate had to pay more than $350,000 in federal estate tax. Earlier in 2010, Edie requested a full refund from the government. The IRS rejected that claim, citing DOMA.
These cases are going to come like a flood into the courts.  This NYT article describes how,  back in July of 2008, Judge Joseph L. Tauro of United States District Court in Boston sided with the Plaintiffs and ruled that DOMA “compels Massachusetts to discriminate against its own citizens in order to receive federal money for certain programs.” The other case [pdf], brought by Gay and Lesbian Advocates and Defenders, focused more narrowly on equal protection as applied to a handful of federal benefits. In that case, Judge Tauro again sided with Plaintiffs in ruling that DOMA violated the equal protection clause of the Constitution by denying benefits to one class of married couples — gay men and lesbians — but not others.
DOMA feels like its on its way out folks.  1996 was a long time ago and, though opinions on gay marriage have changed dramatically since then, the real force of change here looks to be the writing of unfair checks to Uncle Sam.  The insecurity over the future of the federal estate tax and a potentially lower exemption can only mean that we will see more of these cases.  And thus, another test of Mr. Hugo’s maxim may not be too far away…

Hawaii Approves Civil Unions

Add Hawaii to the list of states that now allow Civil Unions for all of its citizens:

On Wednesday, Hawaii state legislators approved civil unions for gay and lesbian couples, and Governor Neil Abercrombie vowed to sign it into law. It was approved with an 18-5 vote. The bill allows all couples to enter into a civil union — a legal status with all the rights, benefits, protections, and responsibilities as traditional marriage. A similar bill was passed last year, but then vetoed by then-Governor Linda Lingle.
“I have always believed that civil unions respect our diversity, protect people’s privacy, and reinforce our core values of equality and aloha,” Abercrombie said in a statement. “For me this bill represents equal rights for all the people of Hawaii.”

Gay marriage, by legislature, in Vermont

Someone asked me the other day:  Michael, why are so many of your blog posts about gay marriage?”  “Well”, I replied, “Because tyranny, like hell, is not easily conquered.”

I know, I’m pretty awesome right?!  Well, in truth, I am only that which Thomas Paine made me.

Seriously though, the issue is a huge one for us estate planners.  What we are forced to do now for non-traditional families is burdensome, expensive and oftentimes not guaranteed to work.  Granting a marriage right with gender-neutral language would make our jobs much easier…  Which Vermont did today:

From The Volokh Conspiracy:

Nine years after it became the first state to approve civil unions, Vermont becomes the first state to enact gay marriage legislatively. With just one vote to spare, the Vermont state legislature has overridden the governor’s veto of a gay marriage bill. The state house voted 100-49 and the state senate voted 23-5.

Sec. 3. 15 V.S.A. § 8 is amended to read:

§ 8. MARRIAGE DEFINITION

Marriage is the legally recognized union of one man and one woman two people. Gender-specific terms relating to the marital relationship or familial relationships, including without limitation “spouse,” “family,” “marriage,” “immediate family,” “dependent,” “next of kin,” “bride,” “groom,” “husband,” “wife,” “widow,” and “widower,” shall be construed to be gender-neutral for all purposes throughout the law, whether in the context of statute, administrative or court rule, policy, common law, or any other source of civil law.

This is making the rounds out there in the blogo-netcom…  I’m sure I’m not the first.

Same-Sex Spouse To Inherit Deceased Partner’s Estate

Saw this yesterday and its making its predictable rounds (here and here and here) today.  The actual decision was hard to find so I offer it to you here (PDF).  I enjoy these decisions; the ones whose menial size belies the hefty weight of their potential impact.  It seems a simple matter too: The Court was asked to determine the identity of decedent’s distributees entitled to receive notice of the probate of decedent’s will.

     The decedent married his same-sex partner, J. Craig Leiby, in Montreal, Province of Quebec, Canada on June 7, 2008.  He died on November 1, 2008 survived by Mr. Leiby and by three siblings.  The decedent had no children.  His parents predeceased him, as did another sibling, who also left no children.

     Marriages valid where solemnized have long been recognized in New York; exceptions exist only for marriages affirmatively prohibited by New York law, or proscribed by “natural law” [citation omitted] [footnote omitted].  As decedent’s marriage was valid under the law of Canada, where performed, and falls into neither exception to the general rule, the marriage is entitled to recognition in New York [citation omitted].

Accordingly, Mr. Leiby is decedent’s surviving spouse and sole distributee.  [Notice] in this probate proceeding need not issue under SCPA 1403(1)(a) or any other provision of law to any other person as distributee.

The ruling is boring insofar as it appears to merely affect notice, but its more interesting as a determination of standing…  If the Judge’s ruling holds, then family members of gay or lesbian decedents who were married and left a surviving spouse would have no standing in probate, since they would be neither heirs nor legatees of the gay or lesbian decedent.  Lacking standing they would not be able to challenge decedent’s will.

“The Disadvantages of Not Being Married”

The title is taken from an article I’m reading today by Robert B Larson and Stephen J. Larson, PhD, CFP, in the Journal of Financial Service Professionals. I may be doing a presentation on some of these topics at a conference on estate planning for “non-traditional” families and thought a summary of the article was relevant here.

  1. Family Medical Leave: The Family Medical Leave Act of 1993 allows employees to receive up to 12 weeks/year of unpaid medical leave for specific reasons. These reasons include the birth of a child (both mother an father are entitled to family leave), placement of a foster child (again both mom and dad are similarly entitled), caring for a sick spouse, child or family of the employee.
  2. Health Care Decision Making: If one’s partner becomes disabled, state law will determine who has the right to make decisions for him/her (absent an appropriately drafted durable power of attorney). State laws typically follow the order of intestate succession – the spouse has the first right, followed by any children, parents, siblings, etc.
  3. Loss of Consortium and Wrongful Death: Loss of Consortium is a civil claim where one can sue an alleged wrongdoer for causing them the loss of companionship, comfort, protection and sexual relations. Though this is a state-by-state issue, many states do not allow loss of consortium claims between partners unless they were married at the time of the loss.Wrongful death is also a civil claim where one spouse sues over the loss of the other and can thereby obtain an economic relief to cover the economic support lost when the other spouse died.
  4. Crime Victim Recovery: Similar to the above except this is a criminal remedy awarded to the surviving spouse.
  5. Martial Privilege: There are two parts to the privilege. The first prevents a husband or wife from being compelled to testify against the other spouse. Should a spouse choose to testify then he or she is not permitted to disclose confidential marital communications – this is the second part of the privilege. This is anything said between spouses that was intended to be confidential (and where no third party was present).
  6. Problems with Insurance (including COBRA and Workers’ Compensation and Employer Health Care Benefits): Spouses and children are often automatically covered under an employee’s homeowner’s policy. The same is true for group health care coverage.
  7. Federal Income Taxes: Unmarried persons can obviously not file joint returns.
  8. Residential Real Property Capital Gains: Married persons who file jointly can exclude up to $500,000 of gain when they sell their home but those who file individually can only exclude $250,000. The current capital gains rate on real estate held for more than one year is 15%
  9. Social Security: The spouse of an employee who has been paying into the system is entitled to receive benefits when the working spouse becomes disabled, retires or dies.
  10. Retirement Plan Survivorship Benefits: Sometimes the benefits of certain plans are only available to spouses – you’ll have to read your plan to find out.
  11. Intestacy Laws: Non-married persons cannot inherit under the laws of intestacy in any state. A robust estate plan is required to pass property.
  12. Estate Taxes and The Marital Deduction: Spouses enjoy an unlimited deduction on property gifted between them both during their joint lives and after the death of one of them.
  13. Gift Taxes and The Marital Deduction: Kind of the same as above. Non-married individuals can also not enjoy the benefits of gift-splitting to reduce the sizes of their estate to further avoid the federal estate tax.

There are 1,138 recognized legal rights and privileges associated with marriage. These are just some of the ones that I deal with everyday when planning for families both “non-traditional” and otherwise.

California Supreme Court Strikes Down State Same Sex Marriage Ban

This is everywhere already but its also relevant here…

[T]o the extent the current California statutory provisions limit marriage to opposite-sex couples, these statutes are unconstitutional.

The issue as framed by the court (which is interesting in and of itself) was:

Accordingly, the legal issue we must resolve is not whether it would be constitutionally permissible under the California Constitution for the state to limit marriage only to opposite-sex couples while denying same-sex couples any opportunity to enter into an official relationship with all or virtually all of the same substantive attributes, but rather whether our state Constitution prohibits the state from establishing a statutory scheme in which both opposite-sex and same-sex couples are granted the right to enter into an
officially recognized family relationship that affords all of the significant legal rights and obligations traditionally associated under state law with the institution of marriage, but under which the union of an opposite-sex couple is officially designated a “marriage” whereas the union of a same-sex couple is officially designated a “domestic partnership.” The question we must address is whether, under these circumstances, the failure to designate the official relationship of same-sex couples as marriage violates the California Constitution.

The court further wrote, as if to preempt those who would complain about judicial activism:

It also is important to understand at the outset that our task in this proceeding is not to decide whether we believe, as a matter of policy, that the officially recognized relationship of a same-sex couple should be designated a marriage rather than a domestic partnership (or some other term), but instead only to determine whether the difference in the official names of the relationships violates the California Constitution. We are aware, of course, that very strongly held differences of opinion exist on the matter of policy, with those persons who support the inclusion of same-sex unions within the definition of marriage maintaining that it is unfair to same-sex couples and potentially detrimental to the fiscal interests of the state and its economic institutions to reserve the designation of marriage solely for opposite-sex couples, and others asserting that it is vitally important to preserve the long-standing and traditional definition of marriage as a union between a man and a woman, even as the state extends comparable rights and responsibilities to committed same-sex couples. Whatever our views as individuals with regard to this question as a matter of policy, we recognize as judges and as a court our responsibility to limit our consideration of the question to a determination of the constitutional validity of the current legislative provisions.

The case is available for download (PDF) here.

More thoughts after I read the whole opinion.

Various State’s Marriage Amendments’ Have Unintended Consequences

Amending one’s constitution can be a dangerous exercise usually made even more so by the unfortunate fact that most legislatures can’t write good. (thems jokes people)

A while ago both Michigan and Ohio proposed amendments to each state’s constitutions via referendum. Both proposed amendments passed. Ohio’s passed by a wide margin. Basically, both amendments narrowly define a marriage as only between one man and one woman. This would have been simple enough but both state’s amendments went even further by preventing the state from acknowledging or conferring any rights or benefits upon any relationship that is similar to or seeks to approximate the designs and qualities of a marriage… And this is where the wheels came right off.

Ohio’s amendment says:

“Only a union between one man and one woman may be a marriage valid in or recognized by this state and its political subdivisions. This state and its political subdivisions shall not create or recognize a legal status for relationships of unmarried individuals that intends to approximate the design, qualities, significance or effect of marriage.”

Ohio’s amendment faced an interesting interpretive challenge when many (and I mean many) individuals who had been arrested for domestic violence for beating their non-married cohabitating partner, challenged their arrests/convictions based on the theory that, by convicting them the state would be implicitly acknowledging a relationship that approximated marriage. It was only after some seriously specious reasoning on the part of an Ohio appeals court that these various abusers were held accountable.

On May 7, 2008, The Volokh Conspiracy posted this story about a related problem in Michigan:

By state constitutional amenment in 2004, Michigan voters barred the state from recognizing same-sex marriages. But the awkwardly worded amendment went further: “To secure and preserve the benefits of marriage for our society and for future generations of children, the union of one man and one woman in marriage shall be the only agreement recognized as a marriage or similar union for any purpose.”

The “similar union” language, along with the “for any purpose” language, was enough for the majority to conclude that it prohibited same-sex domestic partners benefits provided by some 20 state universities and municipal entities in the state. From the dissent: “It is an odd notion to find that a union that shares only one of the hundreds of benefits that a marriage provides is a union similar to marriage.”

The full text of the Michigan Supreme Court’s ruling is available here.

Ohio’s Marriage amendment is again placed squarely in another controversy involving adoption rights:

This story does a fair job of explaining the details behind a case being handled by my very good friend LeeAnn Massucci:

The Tenth Ohio District Court of Appeals was asked on March 27 to overturn a Franklin County ruling that the amendment has no effect on custody agreements.

Almost immediately after the amendment passed in 2004, Denise Marie Fairchild asked the Franklin County Common Pleas Court to invalidate a nearly four-year-old parenting agreement with her former partner, Therese Marie Fairchild, now Therese Marie Leach.

Denise is the biological mother of a son, now 12, born of artificial insemination from an anonymous donor. The couple lived together for four years before he was born in 1996. Their relationship ended in 2001, six months after the custody agreement was entered.

[…]

The court pointed out that the amendment can’t apply because the case is about the child.

“Denise equates the granting of custody to a non-parent as somehow promoting a same-sex marriage. The relationship between the child and the custodian is not the same as the relationship between two adults.”

The child’s best interest is a long-standing principle guiding all Ohio family law.

The trial court also held that “granting of custody does not ‘approximate the design, qualities, significance or effect of marriage.’ ”

Denise appealed this decision, and the case was heard March 27 by a three-judge panel: Charles R. Petree, Susan Brown, and Peggy Bryant. Danny Bank and Lorie McGaughan of Capital University law school were appointed by the court to represent the child.

I’ll be keeping an eye on this one.