Upcoming ruling will impact estate plans for same-sex couples

A ruling from the United States Supreme Court that is anticipated this month will have a major impact on estate planning and tax planning for same-sex couples. The case involves a woman who was legally married to her spouse in the state where they lived when her spouse passed away, leaving behind a substantial estate. For opposite-sex couples, marriage means that a surviving spouse can inherit without tax liability. In this case, the woman paid a substantial estate tax because of a federal law that does not provide that tax benefit to legally married same-sex couples.

The woman challenged the Defense of Marriage Act, saying that the federal government deprived her of her property without due process of the law. If she is successful and the court rules in her favor, same-sex couples who are legally married in one of the 12 states that permits it will have access to tax benefits, which will likely have a big impact on their estate plans.

As the ruling approaches many couples are hoping that a favorable ruling will help untangle some of the mass of legal documents and property arrangements that they have needed to share property and other assets.

As it stands, even legally married couples must execute air tight wills and trust documents to insure that their spouse inherits instead of children, siblings, or other family members. Since the tax liability still exists, it is often advisable to take advantage of gift tax exemptions and structure the estate in a way that maximizes those opportunities. All of this can be done with the help of an experienced estate planning attorney.

Source:Wall Street Journal, “Advisers Bolster Same-Sex Estate, Tax Planning,” Arden Dale, May 30, 2013.