What Windsor Means for Estate Planning

This morning (26 June 2013) the U.S. Supreme Court decided Windsor v. United States, 1 of 2 pending gay marriage cases, involving whether the (federal) Defense of Marriage Act was constitutional. (They also decided the other case, Perry v. Hollingsworth, kicking the case back to the California court on procedural grounds, which isn’t relevant to our discussion.) Based on a combination of federalism and equal protection grounds, Justice Kennedy wrote the 5-4 decision for the bitterly divided Court. Many will spill much ink analyzing the legal reasoning, politics, and historic importance of Windsor and Perry. But putting aside politics, what does Windsor mean for estate planning?

  • Windsor’s holding (a federal blessing of state-authorized same sex marriages) means that Edith Windsor and other gay men or lesbian women who live in states that permit same sex marriage will be able to claim at least some federal benefits that married couples are entitled to receive. For Windsor, a New York resident, she gets an IRS refund of the roughly $363,000 she paid in estate taxes upon her wife’s (Spyer’s) death. Windsor sued the IRS as Executor of Spyer’s Estate for the refund.
  • Windsor explicitly says it doesn’t authorize same sex marriage across the nation. Under Windsor, for the U.S. government to recognize a valid same sex marriage, the local state has to recognize it. How the President and Congress will react (via executive orders and/or Congressional acts) remains to be seen.
  • Windsor’s logic appears to allow a duly married same sex couple (again, under state law) to use martial deductions and other estate planning and IRS tax tools, just as a duly married heterosexual couple would.
  • Under Windsor, attorneys or advisors counseling same sex couples on their estate planning or financial needs would be well advised to counsel them to (1) move to a state that allows same sex marriage and (2) get married.

What do you think Windsor means for estate planning? (again, no politics please)

While the Court’s opinion doesn’t expressly address the tax and estate planning implications of its holdings, these 4 issues are crucial for estate planning professionals and their clients to know about. If my law firm, Johnson Law KC LLC, can serve you or your family’s estate planning or other legal needs, please call (913-707-9220) or email (steve@johnsonlawkc.com) for a convenient, free consultation.

(c) 2013, Stephen M. Johnson, Esq.

 

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