On June 24, 2011, 42 years after the gay rights movement began with the Stonewall Riots in New York City, Governor Andrew M. Cuomo signed the Marriage Equality Act into New York State law. After a long political battle and a narrow 33-to-29 vote by the New York State Senate, New York joined Connecticut, Iowa, Massachusetts, New Hampshire, Vermont and the District of Columbia as the seventh (and most populous) jurisdiction to legalize the marriage of same-sex couples (we'll refer to Connecticut, Iowa, Massachusetts, New Hampshire, New York, Vermont and the District of Columbia as “same-sex marriage states”).1
In same-sex marriage states, same-sex couples can avail themselves of state laws, including gift and estate tax laws, which are typically incorporated into effective and efficient estate planning. However, the Federal Defense of Marriage Act (DOMA) is the proverbial thorn in the side of same-sex couples nationwide. DOMA denies same-sex couples many federal rights and privileges enjoyed by opposite-sex married couples. The differences between state and federal laws, particularly tax laws, create a morass of rules and regulations to be deciphered by attorneys, tax professionals, scholars and academics. Conflicting state and federal marriage laws make estate-planning decisions more complex for many same-sex couples, especially when the goal is to minimize exposure to lifetime and after-death taxes.
Evolution of DOMA
The first state to recognize same-sex marriage was Hawaii with the 1993 landmark decision in Baehr v. Miike.2 In Baehr, the Hawaii Supreme Court concluded that although Hawaii's constitutional right to privacy didn't include a fundamental right to same-sex marriage, marriage is a “basic civil right” under state law and, absent a “compelling reason,” the state's refusal to issue a marriage license to a same-sex couple violated the state's equal rights statute. After years of litigation, legislative commissions and voter-approved constitutional amendments, the Supreme Court's decision in Baehr was reversed and same-sex marriages were banned in Hawaii.3
Baehr prompted a nationwide debate on same-sex marriage. Proponents supported granting marriage rights to same-sex couples, while opponents feared the effect that legalized same-sex marriage in Hawaii might have in other states.4 After all, full faith and credit would be given to a same-sex marriage legally performed in Hawaii and, under then-existing principles, those couples would be entitled to the same protections under federal law as those in an opposite-sex marriage.
In response to this growing debate, both houses of Congress passed DOMA by an overwhelming majority and then-President Clinton signed it into law on Sept. 21, 1996. DOMA includes two key provisions: The first provides the explicit authorization that no state is required to give effect to the laws of any other state that recognizes the “relationship between persons of the same sex” as a marriage.5 Effectively, this provision authorizes each state to disregard the principles of full faith and credit with respect to same-sex marriages that may be legal in other states.
The second provides a federal definition of “marriage” and “spouse.”6 Under this definition, which applies to all federal laws and programs, “marriage” is limited to “only the legal union between a man and a woman as husband and wife,” and the term “spouse” refers only to “a person of the opposite sex who is a husband or a wife.”7 This provision requires valid same-sex marriages to be disregarded, whenever marital status is a determinative factor, for purposes of all federal laws and programs. Under federal law, same-sex couples are, for all intents and purposes, treated as strangers. For example, a surviving spouse in an opposite-sex marriage has an automatic right to the retirement and social security benefits of the deceased spouse, while a surviving spouse of a same-sex couple would not. As of Jan. 23, 2004, there were 1,138 federal statutory provisions in which marital status “is a factor in determining or receiving benefits, rights and privileges.”8
Efforts to overturn DOMA appear to be increasing.9 Early this year, President Obama ordered the Department of Justice (DOJ) not to defend DOMA in court.10 The “Respect for Marriage Act,” which was first introduced in September 2009, was reintroduced on March 16, 2011 and would essentially repeal DOMA and permit the federal government to recognize validly performed same-sex marriages. The bill remains in committee. The DOJ is also supporting litigants who are challenging DOMA based upon the equal protection clause of the U.S. Constitution and the federal government's prior consistent deference to state definitions of marriage.11
Same-Sex Marriage States
In same-sex marriage states, married same-sex couples enjoy the full panoply of protections, safeguards and obligations afforded to married opposite-sex couples when it comes to state taxes, property distribution at death, personal health care benefits and custody and visitation of children. While the result in each same-sex marriage state is the same, some states established these equal rights through court decisions, while others passed affirmative statutes.
On May 17, 2004, Massachusetts legalized same-sex marriage as the result of the Supreme Judicial Court of Massachusetts' ruling in Goodridge v. Department of Health,12 that permitting only heterosexual couples to marry violated the Massachusetts constitution.
For purposes of this article, California isn't a same-sex marriage state. Notably, however, in May 2008, in In re Marriage Cases,13 the California Supreme Court found that limiting marriage to opposite-sex couples violated the state constitutional rights of same-sex couples and couldn't be used to prevent same-sex couples from marrying. Voters overturned this decision via Proposition 8 in the November 2008 election, but it's now undergoing challenge in the federal courts.14 California currently doesn't issue same-sex marriage licenses and doesn't recognize same-sex marriages performed in California, unless the marriage was validly performed during the six months in 2008 when such marriages were legal within the state.15
In October 2008, Connecticut legalized same-sex marriage when its Supreme Court held, in Kerrigan v. Commissioner of Public Health, that the Connecticut Constitution protects the right to same-sex marriage.16 The court reasoned that it was a constitutional infirmity to create a separate class of civil unions excluding same-sex couples from the institution of civil marriage. The Kerrigan decision was codified in Public Act 2009-13, which defines marriage as a legal union of two persons.17 All civil unions (which had been issued in Connecticut since 2005) were automatically converted into marriages on Oct. 1, 2010, unless otherwise ended by divorce, dissolution or annulment.18
Iowa followed suit in 2009, when its Supreme Court, by unanimous decision, held in Varnum v. Brien that “the language limiting civil marriage to a man and a woman must be stricken from the statute, and the remaining statutory language must be interpreted and applied in a manner allowing same-sex couples full access to the institution of civil marriage.”19 New Hampshire, Vermont and the District of Columbia also legalized same-sex marriage, via legislative reform, in 2009.20
Most recently, in June, New York's Marriage Equality Act was signed into law.21 The Marriage Equality Act amended New York's Domestic Relations Law to state that a “marriage that is otherwise valid shall be valid regardless of whether the parties to the marriage are of the same or different sex.” The Act also explicitly provides that “no government treatment or legal status, effect, right, benefit, privilege, protection or responsibility relating to marriage, whether deriving from statute, administrative or court rule, public policy, common law or any other source of law, shall differ based on the parties to the marriage being the same sex or a different sex.” The legislature intended that marriage of same-sex and opposite-sex couples be treated equally in all respects under the law.22
Impact on Estate Planning
The common thread among same-sex marriage states is to provide the full spectrum of legal rights and responsibilities afforded to opposite-sex couples without any restrictions or limitations. For example, spouses in same-sex marriage states have the right to intestate succession from and the right of election against the estate of the deceased spouse. A spouse would also be the first in line to act as executor or personal representative of a deceased spouse's estate if the deceased didn't leave a will. In addition, spouses in same-sex marriage states have hospital visitation rights and the right to make medical decisions for their spouses.23
Yet, same-sex couples and unmarried partners still face many legal uncertainties due to varying degrees of protection afforded them by the federal and state governments. Estate planners for same-sex couples must carefully navigate the constantly changing legal landscape. Comprehensive planning and proactive measures are essential to protect the same-sex couple's finances, inheritance rights, property distribution and economic arrangements after their deaths.
Unified Credit and Marital Deduction
The federal gift and estate tax laws now provide for a $5 million “unified” lifetime exemption from the gift and estate tax. The exemption is “unified” because any exemption the taxpayer doesn't use during his lifetime on gifts may be used for property included in the taxpayer's estate upon his death. Any gifts or transfers of property upon death that exceed this $5 million amount are taxed at a rate of 35 percent. The $5 million exemption and the 35 percent rate are in place until Dec. 31, 2012 and will become a $1 million exemption and a 55 percent maximum rate beginning in 2013 unless Congress acts. For purposes of this article, we've assumed the current 2011 exemption and rate.
There's also an unlimited federal gift and estate tax marital deduction. This unlimited deduction allows spouses to pass property outright, or in a qualifying trust, between them during life or at death free of any federal gift or estate tax and without using any of either spouse's $5 million unified credit.
On a day-to-day basis, the unlimited federal gift tax marital deduction allows spouses to establish joint bank accounts, give gifts to each other and provide financial support to each other without imposition of federal gift tax. These benefits are unavailable to same-sex married couples, requiring the use of an exemption for transfers in excess of the annual exclusion.
The unlimited federal gift tax marital deduction also allows spouses of disparate financial means to “equalize” their assets without the imposition of federal gift tax. Equalization typically involves the transfer by the more moneyed spouse of assets to the less wealthy spouse so that both spouses have sufficient assets to maximize their available tax exemptions. This benefit is also unavailable to same-sex couples, thereby requiring a same-sex spouse to use his exemption for transfers to his spouse.
Another benefit of the unlimited federal gift tax marital deduction is that it enables married couples to take advantage of “gift splitting,” by which a gift made by one spouse to a third party will be treated for federal gift tax purposes as being made one-half by each spouse, if both spouses agree. Gift splitting is beneficial because it allows both spouses to make use of their gift tax exemptions or exclusions even if the gifted property, in fact, belonged to only one spouse. Again, same-sex married couples can't split gifts for federal gift tax purposes, which may result in the use of an exemption or the payment of tax by the spouse who makes the gift.
The unlimited federal estate tax marital deduction allows spouses to provide for one another without the imposition of estate tax and without the use of the unified credit. In addition to outright bequests, transfers to certain types of trusts, most typically a qualified terminable interest property (QTIP) trust, qualify for the federal estate tax marital deduction.24
The lack of the unlimited federal marital deduction for gift and estate tax purposes and the inability to split gifts for federal gift tax purposes results in significant tax costs to a same-sex married couple that aren't imposed on an opposite-sex married couple.
In a typical scenario, an opposite-sex married couple with $10 million in assets would like to maximize the use of both of their $5 million federal gift tax exemptions. If all of the couple's $10 million is in the name of one spouse, efficient and full use of each spouse's federal estate tax exemption may be achieved in two ways: The wealthy spouse could transfer $5 million to the less wealthy spouse by making use of the unlimited marital deduction, and then each spouse could make a gift of $5 million to the intended beneficiaries. Alternatively, the wealthy spouse may make a $10 million gift directly to the intended beneficiaries and then elect on a federal gift tax return to split gifts with his spouse.
On a federal level, an opposite-sex married couple could use both options to effectively make use of both spouses' $5 million lifetime gift tax exemptions without imposing any gift taxes. For a same-sex couple, the first scenario would result in two separate $5 million taxable gifts by the wealthy spouse and a $5 million gift by the less wealthy spouse. Both spouses' gift tax exemptions would be fully used. This transaction wouldn't be tax efficient because it “wastes” the wealthy spouse's gift tax exemption by transferring assets to the less wealthy spouse merely for it to be transferred again to a third party. The second scenario would result in a $10 million taxable gift by the wealthy spouse, fully using her gift tax exemption and no gift by the less wealthy spouse. While this scenario is slightly better for the same-sex couple than the first scenario, it's less tax efficient than the same transaction for the opposite-sex couple because it requires the payment of gift tax by the wealthy spouse. In both scenarios, the wealthy same-sex spouse would owe $1.75 million in federal gift tax that the wealthy opposite-sex spouse would not.
In a typical estate plan for a married couple, assets are divided upon the first spouse's death between a trust that doesn't qualify for the marital deduction (a credit shelter trust) and a disposition, either outright or in a QTIP, that does qualify for the marital deduction (the marital gift). In New York, a credit shelter trust is typically funded with either the amount of the New York estate tax exemption ($1 million), which ensures that there's neither federal nor New York estate tax upon the first spouse's death, or the amount of the federal estate tax exemption ($5 million), which ensures that the federal estate tax exemption is fully used on the first death, even though it would generate New York estate tax. The balance of the decedent's estate constitutes the marital gift. If a New York decedent has $10 million in assets, with $1 million passing to the credit shelter trust and the remaining $9 million passing as the marital gift, an opposite-sex married couple wouldn't pay any New York or federal estate tax upon the death of the first spouse, while a same-sex married couple would owe $1.75 million in federal estate tax. If the amount passing to the credit shelter trust is increased to the $5 million federal estate tax exemption amount, both the same-sex and opposite-sex couples would pay a New York estate tax of $391,600, but the same-sex married couple would pay an additional federal estate tax of $1,612,940.25
Due to the current disparity between state and federal law, when a federal gift or estate tax return is filed for one same-sex spouse, estate planners should consider whether to file a protective claim. For example, if a same-sex spouse makes a gift to his spouse of $1 million, the donor spouse would file a federal gift tax return reporting the gift because it exceeds the annual exclusion amount and doesn't qualify for the federal marital deduction. It may be advisable to include a protective claim on that federal gift tax return. Such a claim would essentially provide the caveat that the donor spouse is reserving his right to a refund or adjustment of taxes paid if DOMA were repealed and the federal marital deduction subsequently became available. As mentioned above, recent challenges to DOMA are on the rise and there's a real possibility that DOMA could be repealed. If that happens, the federal tax rules, including the marital deduction and gift splitting, currently now available only to opposite-sex married couples, would be applicable to same-sex married couples.
Married couples can use disclaimer planning to build flexibility into their estate plan. Disclaimer planning typically provides that, if the surviving spouse disclaims his interest in a portion or all of a bequest, the disclaimed property is held in a trust (typically a credit shelter trust), for the surviving spouse's benefit, that doesn't qualify for the marital deduction. This allows for flexibility to determine the extent to which a credit shelter trust is funded (for example, with the state estate tax exemption amount, the federal estate tax exemption amount or another amount) while still allowing the surviving spouse to benefit from the disclaimed property.
Generally, an individual who disclaims property can't receive any benefit from that property. However, a surviving spouse is the only exception to this rule.26 For the disclaimer to be effective for federal purposes, the disclaimed property must pass either to the decedent's spouse or someone other than the disclaiming party.27 Therefore, while opposite-sex married couples may take advantage of this type of planning without depleting the assets available to the surviving spouse, same-sex couples can't. A surviving same-sex spouse could only make an effective federal disclaimer if the disclaimed property passed to someone other than himself.
Equalization of Assets
Equalization is often recommended when one spouse doesn't have enough property to fully take advantage of his state or federal estate tax exemption. This technique is effective for an opposite-sex married couple, who may transfer property between themselves without adverse gift tax consequences. In addition, opposite-sex couples may take advantage of federal estate tax exemption “portability” for decedents dying in 2011 and 2012. Portability permits the unused federal estate tax exemption of a decedent spouse to be transferred to the surviving spouse on a filed federal estate tax return.28 Effectively, this allows the estate of the surviving spouse to use the remainder of the deceased spouse's federal exemption and his own remaining federal exemption. Opposite-sex spouses may rely on the unlimited marital gift tax exemption and estate tax exemption portability (for 2011 and 2012) to ensure that they take full advantage of their federal estate tax exemptions.
As discussed above, a same-sex married couple making the same transfer would be making a federal taxable gift that would use the donor's remaining gift tax exemption, if any, or would be subject to federal gift tax. In addition, same-sex couples can't take advantage of estate tax exemption portability because it's available only on a federal basis.29 As a result, a same-sex married couple who wants to equalize their assets to fully use their federal estate tax exemptions faces challenges that an opposite-sex married couple would not. Without proper planning, it's possible that one same-sex spouse's federal estate tax exemption may not be fully used.
The current estate and gift tax treatment of same-sex married couples and opposite-sex married couples highlights the federal distinctions, based on DOMA, despite equality under the laws of the same-sex marriage states.
Despite the complex and changing landscape, there are several planning techniques that same-sex married couples in same-sex marriage states may wish to implement. As with any married couple, same-sex couples should consider the benefits of a prenuptial agreement to define rights vis-à-vis each other arising from the marriage. All of the technical requirements imposed by state law on marital agreements, such as representation by counsel and full financial disclosure, would apply equally to all married couples in same-sex marriage states. Through the use of a prenuptial agreement, a same-sex couple may selectively opt in or out of many of the rights and obligations attendant to marriage in accordance with their wishes, just like an opposite-sex couple. However, a same-sex married couple should be aware that any property settlements or payments incident to divorce pursuant to a separation agreement or prenuptial agreement are likely to constitute a gift subject to gift tax because an exclusion available to opposite-sex couples isn't available to same-sex couples.30 Same-sex couples should pay special attention when drafting and negotiating the prenuptial agreement to take into account the potential gift tax liability.
Annual Exclusion Gifts
Same-sex married couples should consider taking advantage of the same basic estate-planning techniques that are available to any other married couple, while remaining mindful of the possible impact of the lack of recognition of their marriage for federal purposes. Same-sex married couples with sufficient assets should consider making regular gifts to third parties equal to the federal annual exclusion amount. Annual exclusion gifts are gifts that can be made to an unlimited number of recipients per year, in an amount that doesn't exceed the annual exclusion amount, currently $13,000, for each recipient. Annual exclusion gifts aren't tied to marital status, so any person, whether married or unmarried, may make annual exclusion gifts to any other person. Through the use of annual exclusion gifts, a donor who has several intended beneficiaries can give away a significant amount of his assets over time. However, as discussed in more detail below, same-sex married couples should be wary of the issues surrounding spousal gift splitting when making annual exclusion gifts.
Same-sex married couples may also take advantage of the federal unlimited gift tax exemption for qualifying medical expenses and tuition payments made directly to a medical service provider or school.31 If a testator has an intended beneficiary, including his same-sex spouse, this could be a way to significantly benefit the intended recipient as well as reduce the testator's assets over time. For same-sex couples, this technique can help greatly in allowing the spouses to pay for medical and educational expenses without any concern about federal gift tax consequences.
Other Planning Techniques
The long-term objectives of a same-sex married couple can be reached via planning vehicles that don't rely on being recognized as “married” under federal law. This can be achieved through the use of regular annual exclusion gifts, as well as the use of more advanced vehicles such as a grantor retained annuity trust (GRAT) or a grantor retained income trust (GRIT), which isn't available to opposite-sex married couples. Another option would be to implement transfers that would otherwise trigger the Chapter 14 valuation rules if the marriage of the parties were recognized under federal law. Some of these techniques include the transfer of interests in closely held corporations or partnerships and the ability to hedge mortality risk.
What happens if DOMA is repealed? Will it be sufficient to simply declare DOMA unconstitutional? Will additional legislation or clarification of the definition of “marriage” under federal law be needed? Will it be as simple as the federal government declaring that federal benefits that rely on a couple's status as “married” or “unmarried” are governed by state law? Will the repeal of DOMA simply mean that the federal government may no longer refuse to recognize a marriage legally performed in a state that chooses to permit and legalize same-sex marriages? Only time will tell.
Unless DOMA is repealed or the legislature takes further action, same-sex couples seeking tax-efficient wealth management will face a myriad of challenges in preparing state and federal estate and gift tax returns. Same-sex couples, including those living in same-sex marriage states, and their estate-planning attorneys should consider the use of prenuptial agreements, consider the differences in the states' tax laws and continue to take advantage of lifetime planning opportunities available only to non-married and unrelated individuals.
— The authors would like to thank Sharon B. Soloff, an attorney in the New York office of Withers Bergman, LLP, who provided valuable feedback and assistance during the preparation of this article.
- In addition, eight other states provide same-sex couples with extensive marriage-like rights. Hawaii approves of civil unions (effective Jan. 1, 2012); Illinois approves of civil unions (effective June 1, 2011); Delaware approves of civil unions (effective Jan. 1, 2012); California recognizes registered domestic partnerships (including community property rights); Nevada recognizes registered domestic partnerships (including community property rights); New Jersey recognizes civil unions; Oregon recognizes domestic partnerships; and Washington recognizes registered domestic partnerships (including community property rights).
- Baehr v. Miike, 74 Haw. 530 (1993).
- Baehr v. Miike, No. 20371 (Hawaii Supreme Court 1999-12-09). In February 2011, Hawaii's legislature passed the civil unions bill which, effective Jan. 1, 2012, will permit all couples, whether same-sex or opposite-sex, to enter into a civil union. See www.msnbc.msn.com/id/41630515/ns/us_news-life/.
- See, e.g., John Cloud, “For Better or Worse, In Hawaii, a Showdown over Marriage Tests the Limits of Gay Activism,” Oct. 26, 1998, www.cnn.com/ALLPOLITICS/time/1998/10/19/hawaii.marriage.html.
- The Defense of Marriage Act (DOMA), 1 U.S.C. Section 7 and 28 U.S.C. Section 1738C (1996), Section 2.
- DOMA Section 3.
- U.S. General Accounting Office, DOMA: Update to Prior Report, Jan. 23, 2004, www.gao.gov/new.items/d04353r.pdf.
- Past attempts to repeal DOMA were unsuccessful. For example, on Sept. 15, 2009, three Democratic members of Congress introduced the Respect for Marriage Act, which would have functioned to repeal DOMA, but the bill failed.
- Press Release, U.S. Department of Justice (DOJ), Statement of the Attorney General on Litigation Involving the Defense of Marriage Act (Feb. 23, 2011).
- For example, in Golinski v. Office of Personnel Management, 764 F. Supp.2d 1178 (N.D. Cal. 2011), the plaintiff was denied spousal health benefits by her employer (the U.S. Ninth Circuit Court of Appeals in San Francisco). In support of the plaintiff's claim that DOMA “unconstitutionally discriminates” against her same-sex spouse, the DOJ asserted that “[t]he federal government has played a significant and regrettable role in the history of discrimination against gay and lesbian individuals” and that DOMA is unconstitutional. This case is pending before the U.S. District Court for the Northern District of California. More recently, in Windsor v. United States, Case No. 1:10-cv-8435 (S.D.N.Y. 2010), Edith Windsor alleges that the federal government's refusal to acknowledge her marriage to Thea Spyer, her partner of 44 years, violates the equal protection principle of the U.S. Constitution. As the surviving spouse and executor of Thea's estate, Edith claims she incurred over $350,000 in federal estate taxes because, pursuant to DOMA, the federal government didn't recognize her valid marriage under Canadian law and, as a result, she wasn't permitted to take advantage of the unlimited federal estate tax marital deduction. The United States maintains that DOMA is entitled to a presumption of constitutionality and its definition of “marriage” doesn't offend the equal protection clause. The DOJ filed papers affirmatively supporting Edith's request that Section 3 of DOMA be struck down as unconstitutional. The matter is pending.
- Goodridge v. Department of Health, 798 N.E. 941 (Mass. 2003).
- In re Marriage Cases, 43 Cal.4th 757 (2008).
- See, e.g., Perry v. Schwartzenegger, 704 F. Supp.2d 921 (N.D.Cal. 2010) (On Aug. 4, 2010, the U.S. District Court for the Northern District of California held that Proposition 8 violated the due process and equal protection clauses of the 14th Amendment of the U.S. Constitution. Judgement of that decision is stayed pending appeal to the Ninth Circuit.) See www.ca9.uscourts.gov/content/view.php?pK_id=00000472.
- Because of the limited period of validity of same-sex marriages performed in California, this article doesn't discuss California as a same-sex marriage state.
- Kerrigan v. Commissioner of Public Health, 957 A.D.2d 407 (Conn. 2008).
- Connecticut Public Act No. 09-13, An Act Implementing the Guarantee of Equal Protection Under the Constitution of the State for Same-Sex Couples (2009).
- “GLAD Guide to Connecticut Civil Unions,” www.glad.org/uploads/docs/publications/ct-civil-union.pdf.
- Varnum v. Brien, 763 N.W.2d 862, 907 (Iowa 2009).
- Vermont's An Act Relating to Civil Marriage states that marriage is “the legally recognized union of two people.” It further states that “[t]erms relating to the marital relationship or familial relationships shall be construed consistently with this section for all purposes throughout the law, whether in the context of statute, administrative or court rule, policy, common law, or any other source of civil law.” The District of Columbia's Religious Freedom and Civil Marriage Equality Amendment Act 2009 defines marriage as “the legally recognized union of two people” and further states that “any person who otherwise meets the eligibility requirements … may marry an other eligible person regardless of gender.” See Religious Freedom and Civil Marriage Equality Amendment Act 2009 (D.C. 2009). New Hampshire's legislation eliminated the exclusion of same-gender couples from marriage, affirming the legislatures' intent to permit two individuals, regardless of their sexual orientation, to marry. See HB 436-FN-Local - Chapter 59-Version adopted by both bodies.
- New York Marriage Equality Act, Legislative Bill Draft in Commission, 12066-04-I. The heavily debated legislation followed a proclamation by New York's Court of Appeals, New York's highest court, which concluded in 2006 that full marriage equality requires the legislature to act. Hernandez v. Robles, 7 N.Y.3d 338 (2006).
- Ibid., Section 2.
- Notwithstanding this automatic right, it would still be advisable from a planning perspective to make sure that a healthcare proxy is duly appointed in a separate legal document.
- A qualified terminable interest property (QTIP) trust ensures that the surviving spouse will receive all of the trust income for his life and that he's the only permissible beneficiary of principal. A QTIP trust also ensures that on the surviving spouse's death, the remaining trust property will be distributed as directed by the first spouse to die.
- The difference between $1,750,000 and $1,612,940 is attributable to the federal deduction for state estate taxes paid.
- 16 U.S.C.A. Section 2518(b)(4).
- The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 created portability. 26 U.S.C.A. Section 2010(c)(4) H.R. 4853, 111th Cong. Sections 302-304 (2010).
- Interestingly, none of the same-sex marriage states discussed herein that impose an estate tax allow for the portability of state estate tax exemptions to a surviving spouse, regardless of whether the marriage is same-sex or opposite-sex. It would seem, however, that were these states to permit state estate tax exemption portability, the benefits would be enjoyed by all married couples, whether same-sex or opposite-sex.
- See 26 U.S.C.A. Section 2516 and Treasury Regulations Section 25.2512-8.
- 26 U.S.C.A. Section 2503(e).
Lauren Rocklin, far left, and Chi-Yu Liang are attorneys in the New York office of Withers Bergman LLP