BLACK LIVES MATTER

Pasternak & Fidis Reporter

September 11, 2015

Estate Planning in Light of Marriage Equality

The recent Supreme Court decision in Obergefell v. Hodges makes marriage equality the rule in all U.S. jurisdictions. Couples whose marriages will now be recognized in all states should give some thought to these estate planning issues implicated by the ruling:

  • Joint filing is available for income tax returns—not only federal returns, but also state returns. Consider filing amended returns for open years to seek a refund.
  • Transfers between spouses can qualify for the marital deduction (i.e., no estate or gift tax, at either federal or state level) and are exempt from state inheritance tax.
  • A surviving spouse has an elective share right under the laws of nearly all states, to take a share of the deceased spouse’s estate (regardless of what the deceased spouse’s will says) and a right to inherit in the event that the deceased spouse dies intestate (i.e., without a will). This share is typically in the 1/3 to 50% range.
  • Spouses living in (or who formerly lived in) community property jurisdictions may have community property rights, affecting not only their ownership interests in property but also the tax basis analysis for capital gains purposes after a spouse dies.
  • Social Security and survivor benefits and health insurance benefits may be available through a spouse’s employment.
  • Spouses have priority rights to serve in decisionmaking roles with respect to a spouse’s health care and disposition of bodily remains, as well as a priority right to be appointed as guardian of an incapacitated spouse, and to be appointed as personal representative of an intestate spouse’s estate.

It is a good idea to revisit estate planning documents and any premarital/postnuptial/domestic partnership agreements, paying particular attention to (i) the definition of “spouse” in those documents, (ii) whether the tax planning provisions take advantage of the state estate tax marital deduction and exemptions, and (iii) fiduciary appointments (including appointment of an agent under a health care directive and designee for disposition of bodily remains).

Finally, keep in mind that some jurisdictions still have common law marriage. All states must recognize same-sex marriages validly entered into in other states, and “validly entered into” can include via common law marriage in a state that permits it.