Life After DOMA for Estate Planning

There are numerous tax and other important consequences of the Supreme Court’s decision to overturn the Defense of Marriage Act (DOMA). Also, estate planning for same-sex married couples will be easier and less cumbersome than ever before. Some of the effects of the recent decision are discussed below.

“Married” Filing Status for Federal Income Taxes
Same-sex married couples will now file their annual federal income taxes as married, either jointly or separately. Tax preparation should be less expensive and simpler than under DOMA. Married same-sex couples will no longer have to decide which spouse takes which deduction or who claims which dependent child.

Gift Taxes
Generally, spouses are able to make unlimited gifts to each other without incurring gift taxes because of a “marital exemption.” Life post-DOMA means that same-sex married couples will also enjoy the marital exemption and all transfers between spouses will be exempt from gift taxes. Under DOMA any gifts made to a same-sex spouse in excess of the annual exclusion amount necessitated filing a gift tax return and potential gift taxes.

Estate Taxes
The IRS allows a marital deduction for money transferred to a surviving spouse upon death. This means that the estate will not incur any estate tax liability (and no estate taxes will be due) until the death of the surviving spouse. DOMA did not allow the marital deduction and thus same-sex married couples with large estates were forced to pay estate taxes on the death of the first spouse. Also, portability will be available for surviving spouses allowing them to make use of any unused estate tax exemption of a deceased spouse.

Estate Planning

Joint trusts will finally be advisable for same-sex married couples. This may reduce the overall cost of estate planning and may make estate planning simpler.

Life after DOMA will be very different for same-sex married persons. For these couples, it will be important to consider income tax filings, estate planning, beneficiary designations and other testamentary documents in order to incorporate all the new planning and tax saving techniques available.

State Bar of California
Contact Information