How Does DOMA Ruling Affect Your Estate and Tax Planning?


The Supreme Court’s decision in Windsor v. U.S. has effectively struck down Section 3 of the Defense of Marriage Act, also known as DOMA, retroactively. Here are some tax advantages now available to married same-sex couples:

  • Filing a joint federal income tax return. This can produce a lower combined tax than filing as single persons
  • Re-filing tax returns as “married, filing jointly” for certain recent tax years. This right is lost with the passage of time
  • Qualifying for tax-free employer health coverage for the same-sex spouse
  • “Stretching out” distributions from a qualified retirement plan or IRA under more favorable rules
  • Ability to engage in estate planning that was previously unavailable

Married same-sex couples should consult with knowledgeable, estate planning attorneys to form or amend their plans. You may take advantage of favorable estate and gift tax planning opportunities, including:

  • Using the marital deduction for lifetime, gift tax-free transfers to the other spouse
  • “Splitting gifts” when one spouse wants to make gifts in excess of the annual exclusion
  • Planning for an unlimited marital deduction – and thus avoiding federal estate tax – for all amounts transferred to the surviving spouse from the first spouse to die
  • Electing to transfer the deceased spouse’s unused exclusion amount to the surviving spouse when time and circumstances permit 

According to current IRS rules, whether a couple is married is determined by state law where they currently reside. A same-sex married couple now living in a state which does not recognize same-sex marriage may not be considered married for federal tax purposes. The IRS will issue guidance on this subject. 

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Bernstein Shur | Attorney Advertising

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