ESTATE PLANNING FOR LGBT COUPLES: POSSIBLE CHANGES ON THE HORIZON

Approximately forty years into their relationship, Edith Windsor and Thera Clara Spyer were married in Canada. Two years into their marriage, Thera passed away. After Thera’s death, Edith paid estate tax of approximately $363,000 to the federal government. The reason that tax was paid is that federal law, in the form of the Defense of Marriage Act (“DOMA”), does not recognize Edith and Thera’s marriage for federal estate tax purposes.

Edith was greatly upset at having to pay the estate tax, finding it an “incredible indignation.” She stated “just the numbers were so cruel.” Her anger turned into action and she sued the federal government for a refund. The trial court held in her favor and then the Second Circuit Court of Appeals also found in her favor, holding the DOMA violates the constitution’s equal protection clause.

She was held to have standing to sue, because New York, although not permitting same-sex marriage until 2011, nonetheless would have recognized Edith and Thera’s Canadian marriage. Thus, Windsor was a surviving spouse who had standing to sue.

James Essex, representing the ACLU, called the ruling “a watershed moment in the legal movement for lesbian and gay rights.” Edith says she wants the decision to be “part of the beginning of the end” so that married LGBT couples will be treated the same as heterosexual couples in the government’s eyes. She wants the entire issue of a person’s sexual orientation to become a non-issue when it comes to marriage in America.

On December 7, 2012, the U.S. Supreme Court decided that it will hear both United States v. Windsor and a case concerning the constitutionality of Proposition 8 in California. The Proposition 8 case, Hollingsworth v. Perry, arises from the Ninth Circuit Court of Appeals. In its ruling, the Ninth Circuit held that the state proposition defining a marriage as exclusively between a man and a woman “serves no purpose, and has no effect, other than to lessen the status and human dignity of gays and lesbians in California and officially reclassify their relationship and families as inferior to those of opposite-sex couples.”

While we wait for the court to rule on the constitutionality of DOMA and California’s Proposition 8, LGBT couples remain “legal strangers” for many purposes under federal law. In addition, the law in each state differs, so rights that may be afforded in Massachusetts or Iowa may not be upheld in Arizona or Oklahoma. For this reason, it is more important than ever that LGBT partners consult with an experienced estate planning attorney and have a comprehensive estate plan prepared.

A comprehensive estate plan would likely include a revocable trust for each partner to designate the other partner as beneficiary of assets, avoid probate, and potentially achieve some tax savings. It would also include a Pour-Over Will for each partner as a back-up to the trust and to designate guardians for any minor children. For incapacity planning, the estate plan should also include powers of attorney for property for each partner and an advance health care directive or medical power of attorney for each partner. Finally, in order to assure the partners will have access to each other’s medical records if needed, each partner should sign a HIPAA authorization form for the other. HIPAA stands for the Health Insurance Portability and Accountability Act, and while it was designed to protect the confidentiality of health information from prying eyes, it has often hindered the ability of (particularly non-traditional) loved ones in accessing much needed medical information.

The State Elections of Maine, Maryland, Minnesota, and Washington

In the meantime, more and more states have made same-sex marriage legal or have authorized domestic partnerships or civil unions with analogous rights. During the November 2012 election, the voters in Maine passed same-sex marriage (starting December 7, 2012) by a margin of 53% to 47%. The Maryland electorate sustained its legislature’s previous enactment of same-sex marriage by a vote of 52% to 48% (effective January 1, 2013). Minnesota voters, by 52% to 47%, refused to amend their state constitution to ban same-sex marriage. However, a state statute still prohibits it. Washington’s electorate, by a vote of 52% to 48% affirmed their legislature’s decision to allow same-sex marriage effective December 6, 2012.

While additional states may be recognizing same-sex marriage, unless DOMA is held unconstitutional or repealed, those marriages will not be recognized by federal law.

Our law firm focuses on estate planning and administration, including estate planning for LGBT couples. We also offer trust administration and probate services. As a member of the American Academy of Estate Planning Attorneys, our firm is kept up to date with information regarding tax developments as well as cutting edge planning strategies for persons of all wealth levels and sexual orientations. We would be happy to assist you with your estate planning needs.  Just call our office at 650-422-3313 to schedule an appointment.

Prepared by The American Academy of Estate Planning Attorneys