Estate Planning For Same-Sex Couples after DOMA

The Supreme Court’s recent decision in United States v. Windsor, 570 U.S. ____ (2013) (Docket No. 12-307) has far reaching impacts on estate planning for same-sex couples in the United States.   As a result, now more than ever, there is a need for careful estate planning for same-sex married couples.

In United States v. Windsor, the Supreme Court struck down portions of the Defense of Marriage Act (“DOMA”) that prohibited the federal government from recognizing same-sex marriages legalized by the States.  Specifically, the decision struck down the definition of “marriage” and “spouse” as being between a man and a woman.  This definition had the effect of denying federal benefits to same-sex married couples in over 1,000 federal laws, rules and regulations.

The ripple effects of the Court’s ruling spread across all aspects of the federal government.  The federal government’s Human Resource Agency now extends federal benefits to legally married same-sex spouses of federal employees and children of legally married same-sex couples including health care benefits, life insurance, dental insurance, long-term care insurance, and retirement benefits.

Following the decision, the Internal Revenue Service issued a ruling (Revenue Ruling 2013-17) announcing that the terms “spouse” and “husband and wife” now include same-sex married couples.  Same-sex married couples can jointly file their federal tax returns, they can inherit federal pensions and can be buried together in veterans’ cemeteries.  A surviving same-sex spouse is now guaranteed Social Security benefits on the first to die.

Importantly, the Supreme Court’s decision allows same sex married couples to benefit from the unlimited marital deduction potentially saving hundreds of thousands (and possibly millions) of dollars in estate taxes.  Same-sex spouses can also make unlimited gifts to each other for estate tax planning purposes without any gift or estate tax consequences.

Finally, same-sex married couples can now avail themselves of basic estate planning tools until now only available to opposite-sex couples including credit shelter trust planning, marital deduction planning, portability of a spouse’s Individual Exemption, and ability to pass death benefits for life insurance to spouses tax free.

Thus, the historic decision of United States v. Windsor brings a host of new possibilities and estate/gift tax savings to same-sex married couples until now off limits to them and it behooves such couples to determine whether they can benefit from these historic changes when it comes to their own estate planning.