05 Jun Defense of Marriage Act

The Defense of Marriage Act, also known as “DOMA,” was struck down last year by the Supreme Court and declared that same sex couples who are legally married deserve equal rights to the benefits under federal law that go to all other married couples.

How Does DOMA’s Invalidation Affect Estate Taxes?

Under Federal law, spouses enjoy an unlimited marital deduction. This means that when a person dies, his or her spouse will not incur any estate tax liability with respect to assets left by their deceased spouse. The “marital deduction” allows married couples to postpone any taxes due until the second spouse dies. Ultimately, a married couple is taxed once, at the second spouse’s death.

By invalidating DOMA, same sex couples are now able to enjoy the unlimited marital deduction as would a heterosexual couple.

How does DOMA’s Invalidation Affect Gift Taxes?

Generally, spouses can make gifts and transfer property to one another without incurring gift taxes. Now that DOMA has been invalidated, the gift tax “marital exemption” should apply to married same-sex couples as well.

We cannot stress the importance of having a comprehensive estate plan in place for same sex couples, especially in light of the fact that the gay rights movement still has a long way to go.

Most importantly, every same sex couple should have the following documents in place, especially if they are planning to travel to states that do not recognize same sex marriage:

  • Powers of Attorney for Finance
  • Power of Attorney for Healthcare
  • Authorization for Use and Disclosure of Protected Health Information

These core documents can alleviate some of the complications that may arise if there was a need to make medical or financial decisions.