The U.S. Supreme Court’s recent decision, United States v. Windsor, opens up important tax planning opportunities for same-sex couples who marry in states that recognize same-sex marriage. In Windsor, the Court held that Section 3 of the 1996 Defense of Marriage Act (DOMA) was unconstitutional because DOMA is subject to “intermediate scrutiny” under the Equal Protection Clause of the Fifth Amendment to the United States Constitution. The ruling held that DOMA does not withstand the test and that, as a result, must afford same-sex married couples Federal benefits that are available to opposite-sex couples.
In the estate planning and tax arena, such benefits include, but are not limited to:
- Claiming the marital deduction for gift and estate tax purposes;
- Naming the spouse as the beneficiary under a qualified retirement account, thereby potentially extending the ultimate payout of the account;
- Electing portability of the deceased spouse’s unused applicable exclusion amount;
- Simplifying the basis and contribution rules with respect to jointly-owned property;
- Electing gift-splitting for inter-vivos gifts;
- Eliminating adverse tax consequences for the transfer of property pursuant to a marriage settlement agreement; and
- Granting certain Social Security, Medicare and Medicaid benefits.
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