Post Windsor Estate Planning: Are You Ready for the End of DOMA?

September 1, 2013Articles

As most of you know, several weeks ago, the Supreme Court struck down the Defense of Marriage Act (DOMA) in the case of U.S. v. Windsor. On the surface, the Windsor decision is important because of its direct application to something we see regularly – a same sex couple interested in an estate plan that includes minimizing exposure to estate taxes. At its most superficial level, the Supreme Court in Windsor said that the unlimited marital deduction is now available to same sex couples that live and marry in states that permit same sex marriages.

Beyond that though, consider all of the other aspects of our work that depend upon marital status:

  • Filing status on income tax returns
  • Entitlement to be named as the beneficiary on a 401(k) plan,
  • What portion of jointly held property is included in an estate

And these examples are just the tip of the iceberg.

The Windsor ruling makes it incumbent on planners to keep track of the states that permit same sex marriages and those that are considering it. Windsor also adds a new dimension to traditional domicile planning. The choice of where same sex couples reside could have massive economic implications for the couple. A significant unanswered question is whether the law of the state of the celebration or the state of residence applies to a same sex couple seeking the marital deduction.

For sure, the Windsor case also has implications well beyond the federal tax law. Check out this list of the reach of this decision in areas that planners delve into with our clients every day. Just a cursory consideration of the reach of the decision for planners is stunning – taxes, planning for children with special needs, Medicaid planning and entitlement to the community spouse resource allowance, entitlement to veterans benefits, asset protection and bankruptcy. Think of the economic impact this offers to our same sex clients. Are you ready to plan post-Windsor?