We always emphasize the importance of estate planning for all responsible adults. This being stated, before a landmark Supreme Court ruling was handed down in 2013, it was absolutely essential for committed LGBT couples.
Prior to that time, same-sex marriages were recognized in some states, including New York. However, they were not recognized on the federal level because of a provision that was contained within the Defense of Marriage Act (DOMA). It defined marriage as a union that can only exist between a man or woman.
Because of this, certain rights that are afforded to married people were not extended to LGBT couples. A woman named Edith Windsor challenged the status quo, and she is largely responsible for the total legalization of same-sex marriages that we have now in the United States.
Federal Estate Tax Marital Deduction
The case began when Windsor, who was a New Yorker, married her longtime partner Thea Spyer in Toronto in 2007. New York state recognized the union the following year, and in 2009, Spyer passed away. She left a sizable inheritance to her surviving spouse.
There is a federal estate tax that carries a 40 percent maximum rate, but it is only applicable on estates that exceed the amount of the exclusion. It is in the millions, so most people are not exposed to the tax. However, Spyer was in possession of a considerable amount of wealth, and she left all of it to Edith Windsor.
A married person can use the federal estate tax marital deduction to leave any amount of money to their spouse free of taxation. This is the one type of transfer that is exempt from the tax. Windsor felt as though she should be able to use this deduction to avoid taxation.
The IRS did not agree, and she was ultimately forced to pay more than $360,000. She did what she had to do, but she did not think it was fair, and she did not take it lying down. Windsor filed a lawsuit challenging the constitutionality of the Defense of Marriage Act.
It ultimately reached the docket of the United States Supreme Court. In 2018, the Justices ruled that DOMA was in fact unconstitutional. This opened the door to absolute legalization of same-sex marriages in all 50 states.
Estate Planning Is Still Required
Even though you and your spouse have certain inherent rights, estate planning is important for all married people. You should make informed decisions with regard to the asset transfer vehicle or vehicles that you use, and your estate plan should include an incapacity component.
Plus, your life situation is invariably going to evolve over the years. You can have additions and subtractions to your family, and your financial profile can change considerably. Estate planning should be looked upon as an ongoing process, because periodic adjustments will invariably become necessary.
Download Our Estate Planning Worksheet
Since you are on this website, you must be interested in learning more about estate planning. There are many different free resources here, and you are welcome to access any of them at any time.
One tool that we highly recommend is our carefully prepared estate planning worksheet. If you go through it and absorb the underlying information, you will walk away with a far better understanding of the process. To get your copy, visit our worksheet page and follow the simple instructions.
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We have a Covid-19 update page that you can check out to see what we are doing to respond, and we can be reached by phone at 802-879-7133 in Vermont and there is a contact form on this website that you can use to send us a message.