The U.S. Supreme Court recently heard cases regarding same-sex marriages and the Federal Defense of Marriage Act (DOMA), which made marriage other than between a man and a women void for Federal purposes. In a 5-4 decision in the 2013 Supreme Court case, Windsor v. United States, the Court determined that DOMA violates the basic due process and fundamental equal protection clause requirements of the U.S. Constitution. The Court stated that DOMA imposed unequal effects upon same-sex spouses in states that allow such marriages and determined that the principal purpose of DOMA was to impose inequality in violation of the Fifth Amendment of the U.S. Constitution.
Since the Court determined that DOMA is unconstitutional it is thus void ab initio – or “from the beginning”. This provides an important opportunity for same-sex spouses who previously filed separate Federal income tax returns instead of joint tax returns. This opportunity may not be indefinite, but many same-sex spouses living in states that recognize same-sex marriages may benefit from filing amended joint income tax returns.
However, in the U.S. Supreme Court case, Hollingworth, et al. v. Perry et al (Docket No. 12-144, June 26, 2013) (which addressed the constitutionality of California’s Proposition 8) the Court clearly established same-sex marriage as a state right to be determined by each state. Although it is clear that the Federal government may not restrict the rights of same-sex spouses as determined by their state, for those states that have their own stand-alone DOMA-type statutes, same-sex spouses appear not to have the right to file joint Federal income tax returns or the estate tax benefits of surviving “spouses”.
For estate planning purposes, same-sex spouses domiciled in jurisdictions that allow such marriages (such as Massachusetts, Connecticut and New York), now have all the rights of opposite-sex spouses, such as being able to defer estate taxes upon the first spouse’s death by electing a “marital deduction”. This election defers the estate tax on assets claimed for the deduction until the second spouse dies. Therefore, estate planning for same-sex spouses has just become more flexible and all prior plans should be reviewed to maximize tax savings. Unfortunately, this right is still dictated by the state of one’s domicile.