The Fall of “DOMA”—New Planning Opportunities For Same Sex Couples

By: Rudman Winchell Attorney Tracy Roberts

 On June 26, 2013, the Supreme Court of the United States issued the groundbreaking opinion regarding same-sex marriage in U.S. v. Windsor. Windsor was an estate tax case at its core involving a significant tax benefit married couples call the marital deduction. Prior to the decision in Windsor, same sex couples could not take advantage of the marital deduction because of Section 3 the federal Defense of Marriage Act (“DOMA”), which defined marriage as a legal union between one man and one woman. In Windsor, The Supreme Court overturned Section 3 of DOMA and ruled that the federal government could not deny tax and other benefits to legally married same sex couples. (To read the decision and see how the court was split in its decision.

This case puts same sex couples in Maine, and other states that have legalized same sex marriage, on par with married heterosexual couples. New planning opportunities include:

•Unlimited Marital Deduction – same sex couples may now leave each other an unlimited amount in estate assets without incurring estate and gift taxes.

•Portability – Same sex spouses may now use any unused portion of the spouse’s lifetime exemption to gift and estate taxes that he or she leaves behind upon death.

•Gift Splitting – Same sex spouses may now take advantage of gift splitting. Gift splitting allows a couple to increase their total gift tax exemption amount by combining individual allowances. In 2013, the gift tax exemption is set at $14,000 per individual gift annually. Thus, a couple can donate a total of $28,000 before being taxed on the contribution.

• Social Security and Veterans Benefits – Same sex spouses are now entitled to Social Security benefits and veteran’s benefits.

• Retirement Benefits – Same-sex spouses should also qualify for Spousal Rollovers of IRA, 401(k), and other retirement accounts after one spouse passes away. This benefit could result in significant income tax deferral and tax-deferred growth of assets in those accounts.

Questions remain as to how these rights and privileges will apply to same sex couples who move to states that currently do not recognize same sex marriage. For further discussion regarding questions remaining after the Windsor case see an article by Deborah Fords in Forbes magazine:

While questions still need to be answered, the fact remains that same sex couples in Maine have an opportunity to take advantage of new planning opportunities. We would welcome the opportunity to review or craft an individualized estate plan for you.