The outcome of ongoing Supreme Court hearings could have significant impact on the estate planning needs of gay couples in New Jersey and across the nation. At the center of the issues before the court are concerns that gay couples who are legally married do not have the same financial benefits afforded to heterosexual couples, putting them at a distinct disadvantage. One aspect of the issue involves the ability to transfer money to one’s spouse after death without having to pay an estate tax. Currently, these concerns leave same-sex couples in need of careful estate planning in order to accomplish their intended goals when one partner survives the other.
The issue is created by the federal Defense of Marriage Act (DOMA). A section within that Act defines marriage as a ‘legal union between one man and one woman.’ The Act prohibits the granting of federal benefits to same-sex spouses. This provision applies even to couples who are legally married in states that allow gay marriage.
As a result, when a gay spouse dies, the spouse left behind cannot avoid federal taxes on an inheritance that exceeds the tax-free ceiling. Strikingly, the inheritance tax issue is but one of nearly 1,000 federal benefits not afforded to same-sex spouses. These include an inability to collect a deceased spouse’s Social Security benefits.
The outcome of the current hearings could result in the Court striking down DOMA. This would bring federal benefits to all married couples, regardless of the gender of the spouses. The estate planning process would become far easier for such couples. However, if DOMA is left standing, same-sex couples in New Jersey and elsewhere will continue to have far more complicated estate planning needs than heterosexual spouses.
Source: Forbes, “High Court Ruling On Same-Sex Marriage Could Alter Estate Planning For Gay Couples,” Deborah L. Jacobs, March 27, 2013