By Deborah L. Jacobs | Forbes
The U.S. Supreme Court heard oral argument today in a case that could radically change estate planning for affluent same-sex married couples.
Federal tax law allows heterosexual spouses to transfer as much as they want to each other, either during life or at death, without having to pay any estate or gift tax, provided that the recipient spouse is a U.S. citizen.
Same-sex couples can’t use this unlimited marital deduction, as it’s called, because of the federal Defense of Marriage Act or DOMA. Section 3 of that law defines marriage as a “legal union between one man and one woman,” and spouse as “a person of the opposite sex who is a husband or a wife.” DOMA prohibits all types of federal benefits to spouses of same-sex marriages, even in states that have recognized gay marriage.
As a result, same-sex married couples have been forced to pay federal estate tax on their inheritance if it exceeded the tax-free amount. (For a rundown of other practical issues, see my FORBES magazine article, “Same-Sex Couples Face A Raft Of Planning Issues.”) Federal law currently allows each individual to transfer as much as $5.25 million (through lifetime gifts or at death) to nonspousal beneficiaries untaxed, but the tax-free amount is has gone up dramatically in recent years. In 2001 it was only $675,000!
If you’d like to discuss estate planning/asset protection, contact Laura Bianchi, Director RLG’s Estate Planning/Asset Protection Department., lbianchi@roselawgroup.com
