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DOMA and Estate Tax Planning

 Posted on June 27, 2013 in Estate Planning

On Wednesday June 26th, the United States Supreme Court ruled five to four that the Defense of Marriage Act is unconstitutional.  The definition of marriage will now change to reflect the diversity of human life.  There will also be far reaching affects concerning married couples when they plan their estates.

The first change concerns the tax break afforded to married couples which was the issue in the United States v. Windsor case.  This is defined as the marital deduction which lets spouses that are US citizens transfer assets to each other without paying gift taxes or other federal taxes.  But that was not the case for same sex couples because they could not be married under federal law.  That is because under section three of DOMA, marriage is defined as the "legal union between one man and one woman" while a spouse is defined as a "person of the opposite sex who is a husband or a wife".

In 2009, Edith Windsor lost her spouse of 44 years Thea Spyer.  The couple was married in Canada but it was not recognized by the United States.  When Windsor's inheritance was above the gifting limit of $3.5 million at the 45 percent tax rate, the inheritance was taxed over $350,000.

In New York, Windsor filed a lawsuit seeking a refund of that taxation.  She believed that DOMA's definition of "marriage" and "spouse" violated the Constitution.  Specifically, the Equal Protection clause or 14th amendment provides that "no state shall…deny any person within its jurisdiction the equal protection of the laws".  This opinion was held by lower courts, appeals court and now the Supreme Court of the United States.

Now the marital deduction is available for same-sex couples along with other estate planning benefits.  This includes portability of unused tax exclusions, gift-splitting, and  rollover rights.  If you want more information about these tax planning tools or how to plan your estate, contact an experienced estate planning attorney in Wheaton today.

image courtesy of  Stuart Miles /

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