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Same-Sex Couples Should Review Estate Plan

Same-sex couples should review their estate plans in light of the Supreme Courts decision striking down part of the federal Defense of Marriage Act.

The Supreme Court said that the federal law, which refused to recognize same-sex marriages with regard to federal taxes and benefits, was unconstitutional.

The law had made estate planning especially difficult for same-sex couples, because they couldn’t take advantage of techniques that were available to other married couples. For instance, under federal law, married couples can make unlimited gifts to each other, and can leave an unlimited amount of property to each other in a will, without incurring gift or estate tax. But the law said this wasn’t true for same-sex couples.

The Supreme Court ruling affects more than a thousand federal laws and regulations, ranging from Social Security to veterans’ benefits to income taxes to immigration.

While the ruling affects tax and estate planning for almost every same-sex couple, exactly how it will apply is complicated. One reason is that same-sex marriage is allowed in only about a quarter of the states, and only a small number of other states legally recognize out-of-state same-sex weddings. So the exact impact of the decision will likely depend on the state in which a couple has, or plans to establish, their legal residence.

Nevertheless, the potential impact is very significant. For instance, in the case before the Supreme Court, a widow in New York (which allows same-sex marriage) will be entitled to a refund of more than $360,000 in estate taxes she had paid as a result of the Defense of Marriage Act.

Another question is what happens if a same-sex spouse passed away before the Supreme Court announced its decision. It seems likely – although it’s not entirely clear – that the spouses’ estate tax return could be amended, potentially resulting in a significant tax refund.

In addition to reviewing their estate planning, same-sex couples should also review their federal income tax returns, since they may be able to amend them and claim a refund.

This is quite complicated in Florida, which is a state that does not recognize same sex marriages in spite of the recent Supreme Court ruling. Consult your attorney.

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