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Same-sex marriage case boils down to estate planning

When the U.S. Supreme Court recently heard arguments in two cases involving same-sex marriage, many people in Florida and throughout the country wondered what this might mean for marriage as an institution. But when one looks at the details, at least one of the two cases is not so much about marriage as it is about estate planning.

The second of the two cases heard by the Supreme Court was a challenge to the federal Defense of Marriage Act brought by a woman whose female partner of 44 years died in 2009. DOMA prohibits federal benefits from going to people in same-sex marriages, even in states that have legalized same-sex marriage. One of those benefits is a kind of immunity from federal estate tax.

Spouses can transfer an unlimited amount of money to each other, either as lifetime gifts or through a will, without incurring federal taxes. But under federal law, there is a limit on how much an individual can transfer to non-spouse beneficiaries before being subject to taxes. In 2009, that limit was $3.5 million, while today, it is $5.25 million.

The woman who challenged DOMA had to pay more than $363,000 in federal estate taxes on the inheritance she received from her partner. She argued that because DOMA would not recognize her as married under federal law, it unconstitutionally denied her equal protection of the laws. Lower courts agreed with her.

The constitutional questions in this case are complicated and technical, and the Supreme Court may ultimately issue a narrow ruling that does not greatly change the picture of same-sex marriage nationwide. However, legal analysts say the ruling could have big effects on estate planning for same-sex couples.

If the Supreme Court upholds the lower courts' ruling, it could mean that same-sex married couples could transfer unlimited funds to each other in their estate planning, just as heterosexual married couples can. It would also mean that survivors in these couples could receive Social Security benefits and enjoy about other federal benefits common among heterosexual married couples.

Source: Forbes, "High Court Ruling On Same-Sex Marriage Could Alter Estate Planning For Gay Couples," Deborah L. Jacobs, March 27, 2013

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