Life After DOMA :: We’re Not in Kansas Any More
It seems like such a short time ago I mused that perhaps in my lifetime we would see DOMA overturned, and such a short time before that such musings seemed unimaginable! As we celebrate the Supreme Court’s recent rulings, we should be grateful for a legal system that enforces justice for a minority. What a wonderful country we live in!
While recent rulings will lead to monumental changes, some of those changes will require time for implementation. This is more than just a huge social shift. Not all of the changes will be good financially. Keep in mind that from a legal perspective, these rulings will mean different things to each of you. Some of you will undoubtedly decide to marry. All of you, I hope, will give the many issues significant thought before you radically modify your relationship.
THE DOMA RULING
At the risk of oversimplifying, the decision does not guarantee a right to marry. In short, it simply provides that if you are married under state law, your marriage will be recognized for Federal purposes. At stake are well over 1,000 federal statutes that apply to married individuals, including tax rules, Social Security, federal pensions, immigration and bankruptcy.
It is important to note that these changes may apply only if you are married. While some states recognize registered domestic partnerships (RDPs) and civil unions as the equivalent of marriage, federal statutes likely will not apply unless you are married.
There is a great deal of confusion regarding couples who married in a state or country that recognizes same-sex marriages, but now live in a state that does not. The state in which you live can apply its own rules for local purposes, but the Federal government has not decided in all cases, which rules will apply. For example: Social Security law determines benefits based on whether you are married in the state in which you live. So, if you married in California and now live in a state that does not recognize your relationship, you might not be seen as spouses when applying for Social Security benefits. On the other hand, the Office of Personnel Management, which handles benefits for Federal employees, the IRS, and The Department of Homeland Security, which handles immigration, have all announced they will determine such things based on whether your marriage was legal where it was performed, regardless of where you reside now.
THE PROPOSITION 8 RULING
The Supreme Court simply left the lower Court’s decision intact, ruling that the proponents of Prop 8 lacked the ability to defend the proposition before the Court. Because the lower Court had ruled that Prop. 8 was unconstitutional, this meant that marriages could begin again. Proponents of Prop. 8 appealed the decision to the California Supreme Court, asking that the Federal District Court’s ruling only relate to the jurisdictions where the ruling applied; Alameda County and Los Angeles County. The Court rejected the appeal and marriages are continuing statewide.
Following are some brief highlights of things to consider as you plan your future after these decisions:
WILLS, TRUSTS AND INHERITANCE
Inheritance and the workings of your will and/or trust are governed by state and local law, not Federal law. So the bare mechanics of how you expressed your wishes may not need dramatic revisions, just some fine-tuning. If you marry, you may not need to amend just to indicate a change in your marital status, but if other changes are in order or if you want to strengthen the statement of your relationship in the event of a move to a non-marriage state, it may be a good time to change the language.
If you are married or plan to marry, you might also want to discuss adding marital trust provisions to your documents. Federal estate taxes allow an unlimited marital deduction for property transfers to a qualified spouse. While estate taxes typically only apply to large estates, planning for the marital deduction can provide great flexibility and was never before available to same-sex married couples.
Discuss with your attorney possible provisions to your trust that allow the place it will be administered after your death or disability to be changed to a state that recognizes your marriage. You might also consider adding provisions that your marital status should be determined by the location in which you married, not where you currently reside. It is unknown at present how useful such steps might be in the event you end up in a state that does not recognize your marriage, but such steps might be helpful.
If your marriage was performed in any state or country recognizing same-sex marriage, you will be required to file as married on your 2013 Federal income tax return. The IRS will not treat Registered Domestic Partners (RDP) or those in a Civil Union the same way because they are the equivalent of marriage under state law but not marriage.
While the IRS is mandating that same-sex married couples file as married for 2013, they consider it optional whether you amend your returns for prior years. An article on cnn.com recently suggested that sizeable refunds might be in order for same-sex married couples filing jointly. The article was based on some flawed assumptions, at least for taxpayers in California. Many couples in fact may owe more money filing as married. This occurs because most same-sex married couples in California were already splitting income between returns and thus driving themselves into lower brackets and because married couples are often subjected to a well-known "marriage tax penalty."