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DOMA is Unconstitutional – What Now?

Posted on 10 July 2013 by admin

DOMA IS UNCONSTITUTIONAL – WHAT NOW?      

TAX & ESTATE PLANNING OPPORTUNITIES FOR SAME-SEX MARRIED COUPLES AFTER THE SUPREME COURT HAS CLEARED THE WAY

On June 26, 2013, the Supreme Court ruled on United States v. Windsor, declaring that part of the Defense of Marriage Act (“DoMA”) is unconstitutional.  This landmark decision will dramatically affect tax and estate planning for same-sex married couples going forward and may provide taxpayers with additional opportunities to claim refunds for prior years.

Same-sex couples married in any of the thirteen states and District of Columbia where it is legal will enjoy the benefits granted to other married couples such as health care, retirement savings, Social Security and transfers of property. 

Same-sex married couples will now be able to make decisions regarding filing a joint tax return that were previously denied them.  However, if a couple has two highly compensated spouses, the joint return may result in a higher total tax liability known as the “marriage penalty”, which applies to all married couples.

In addition, same-sex married couples will now be able to make deductible gifts from one spouse to another for gift tax purposes, and gifts from one spouse to a third party will be deemed to be from both spouses equally thus doubling the annual exclusion.  Transfers of property from one spouse to another or to a former spouse, if the transfer is incident to a divorce, are now permitted without any recognition of gain or loss. These provisions permit same-sex married couples to transfer substantial sums to one another without tax liability in circumstances which single taxpayers or domestic partners would not enjoy.

For more information on the ruling, see the Domestic Partners Network website.

On the same day, the Court also dismissed the appeal on California’s Proposition 8 (Hollingsworth v. Perry), thus relinquishing any opinion on the merits of that case.  The US Court of Appeals for the 9th Circuit has since lifted its hold on the case, in effect permitting same-sex marriage again in California.  While that’s good news for California couples, it does not answer the underlying issue: is marriage a fundamental right of all?  There are still 37 states that currently prohibit same-sex marriage.  This fact will continue to complicate planning for same-sex couples. 

Contact your Janover advisor to discuss your personal situation. To request additional information please click here.

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