Many people don’t know that the current Supreme Court case against the Defense of Marriage Act (DOMA) is in essence an estate tax case. Edie Windsor, 83, brought suit against the federal government after the IRS cited DOMA when it denied her refund for $363,300 in federal estate taxes she had paid following the death of her partner, Thea Spyer.
Windsor and Spyer had been together for more than 40 years. They married in Canada in 2007, and Spyer died in 2009. Under the Internal Revenue Code any property passing to a spouse upon death is exempt from federal and state estate tax. The IRS advised Windsor, a former IBM executive, that under Section 3 of DOMA, no federal agency is permitted to recognize same sex marriage, even if the marriage is legal or recognized under state law. As a result, she was forced to pay $336,300 in estate tax. Windsor then requested a refund from the IRS, which was denied. She then brought an action seeking to invalidate Section 3 of DOMA, as Windsor would have been eligible for an estate tax marital deduction had Spyer been a man, arguing that DOMA's Section 3 violates her equal protection rights under the Fifth Amendment.
The resolution of the Supreme Court case may solve the issue of whether same sex marriages are legal from a state or federal perspective, but it has the potential to create a host of additional problems for unmarried domestic partners, regardless of their gender.
In states where same sex marriage is legal, insurance companies are starting to treat unmarried couples as they did in the past, pushing back on providing health insurance for domestic partners. If same sex marriages are recognized on the federal level, this may become a larger problem.
Now that same-sex couples are able to marry in some states, insurance companies are showing signs that they will move backwards to restrict coverage only to couples who are either married or in a civil union. We are also concerned that it is possible that other areas where the rights of a spouse had been extended to unmarried couples may also be pulled back.
This makes it more important than ever before unmarried couples, regardless of their gender or sexual orientation, protect each other’s legal rights.
Here’s a list of documents that unmarried couples in New York State should have in place:
• Medical Health Proxy
• Durable Power of Attorney for Financial Matters
• Hospital Visitation Authorization
• Parenting Agreements
• Domestic Partnership Agreements
• Will and Testament and Revocable Trust
• Living Will
This case also highlights the importance of tax planning and the use of appropriate trusts for unmarried and same sex couples. A Revocable Trust is often the preferred foundation for an estate plan for non-traditional couples. A Will is a public document, and as such, relatives are required to be notified and see a copy of the Will during the probate process. If there are parents, siblings or other family members who disapprove of the relationship, relying on a Will leaves the couple open to family disputes and presents the possibility of contesting the will, etc. The use of a Revocable Trust gives the couple far more control and privacy.