During an end-of-March post, we brought to the attention of our readers the very real possibility that changes could be made to estate taxes barring the decision of the Supreme Court of two very important cases. The most import of those was that of United States v. Windsor. As many of our readers may remember, this court case asked whether the federal government had the right to define marriage and whether it could prohibit same-sex couples from receiving federal benefits.
Now, in what Time Magazine is hailing as “one of the fastest civil rights shifts in the nation’s history,” the Supreme Court has not only provided same-sex couples with more civil rights than were previously allowed, but may very well have changed tax and estate laws as we know them.
As many people here in Texas know, the court struck down the Clinton-era Defense of Marriage Act, which defined marriage (for the federal government) as a heterosexual union. Once DOMA was effectively abolished, the court then ruled in favor of Windsor, which ultimately changed estate planning for same-sex couples in regards to estate taxes. Even though our state does not recognize gay marriages, the federal government must now recognize the legitimacy of a homosexual marriage in the other states that do.
Aside from the lasting changes this will have on tax law, the impact this will have on estate planning will be far-reaching. It’s important to point out that while our state does not recognize gay marriage, federal estate taxes will still apply to same-sex couples provided their marriage occurred in a state that does recognize their union as being legal. What this means is that same-sex couples married in another state that have moved to Texas may file for the same “death tax” break that is awarded to heterosexual couples across the nation.
But while this will have an effect on federal tax laws, this may not an effect on other estate planning laws that are state specific. It’s because of this that same-sex couples are urged to speak with a qualified attorney to discuss how their assets will be affected down the road.
Source: Forbes, “Tax Implications Of The Supreme Court’s DOMA Decision: Same-Sex Couples To Be Subject To Marriage Penalty,” Tony Nitti, June 26, 2013