What states recognize same-sex marriage?

On June 24, 2011, New York became the sixth and most populous state legalizing same-sex marriage, joining Connecticut, Iowa, Massachusetts, New Hampshire, and Vermont, as well as the District of Columbia. Other states offer a civil union or domestic partnership, or have a patchwork of case-law or other statutory laws granting some but not all benefits to same-sex couples. While civil unions and domestic partnerships offer some benefits in that particular state, that status does not rise to the level of “marriage”. It is also important to note the distinction between “performing” and “recognizing” same-sex marriage. Under the Defense of Marriage Act (“DOMA”), some states are refusing to recognize same-sex marriages performed in the seven jurisdictions noted. In other states, there is no legislative guidance and whether such marriages are “recognized” is addressed on a case-by-case basis in the various contexts it arises, such as custody disputes, divorce proceedings, and the probate and administration of estates and estate litigation.

My partner just passed away, and I'm concerned about our joint assets and about the assets he left to me in their will. What should I do?

It’s hard during such a trying and difficult time to think about having to fight to maintain the very things a heterosexual widow or widower is automatically entitled to. Your first step should be to seek out counsel that is experienced in handling trusts and estates issues for same-sex and non-spousal couples. The right attorney will be your trusted ally and advisor to help you navigate the legal waters and support you.

My partner died without a will and his blood relatives are contesting my right to inherit from his estate. What should I do?

Unfortunately, when you die without a will, the State writes one for you. This is called intestacy. The intestate scheme in New York provides for a “spouse” to inherit from a deceased spouse in intestacy; however, a domestic partneris not included in the definition of a “spouse” under the intestate statute. Even before the Marriage Equality Act, there is some favorable case law in the State of New York. In Estate of Ranfle, Surrogate Judge Glenn took a very progressive view and held that a same-sex partner was entitled to receive notice of his partner-decedent’s estate proceeding, effectively holding that he was a distribute under New York law, which is not specifically incorporated into the statute. However, there were no guarantees that this would be the result, and contrary case law from another New York State Surrogate Court held differently. Now, as a result of the Marriage Equality Act, same-sex spouses are deemed “spouses” under the intestate statute and all other areas of New York law where marital status is a factor. The most important thing to do is to consult with an estate planning attorney to determine your rights for your particular situation, and whether the facts and circumstances of your situation warrant pursuing an action to enforce your rights in the estate.

Everyone should note that much of the difficulty could have been prevented if the decedent had validly execute a will. With limited exceptions, every individual may distribute his or her assets in a will to whomever they choose. You can leave your assets to individuals — even same-sex partners or spouses — to close or distant family members, or to none of your family members. When you fail to implement an estate plan, you leave yourself and your loved ones completely unprotected, especially in this area where the law is so unsettled.

My partner and I were legally married in New York on July 30, 2011. Does the Federal Government recognize our same-sex marriage?

No. While the individual state may recognize your Civil Union, Domestic Partnership or Marriage, and grant you rights accordingly, the Federal Government will not, and thus you are excluded from the Federal support and protections accorded heterosexual married couples. Thus, even if New York recognizes your New York (or Connecticut, New Hampshire, or Iowan) marriage, the federal government does not. Most significantly, you will not be able to avail yourself of the estate tax benefits that are afforded to heterosexual married couples, and the Federal government will effectively treat you as if you are unmarried, regardless of the various factors of your situation.

If I want transfer assets to my partner, will I be taxed in excess of what a heterosexual married couple would be?

The federal government treats heterosexual married couples as a single economic unit. Heterosexual married couples enjoy an “unlimited marital deduction” during life and at death. That means that heterosexual spouses can make unlimited transfers to each other without incurring gift tax, and may leave an unlimited amount to their partner at death, even if that amount exceeds the federal estate tax exemption at the time of death. Same-sex marriages do not enjoy this benefit. If you transfer more than $13,000 to your partner (for 2010; the amount changes every year), with limited exceptions to pay for medical or education costs, you will  have to file a gift tax return and pay a gift tax. You may elect to use your lifetime gift exemption of $1 million which is afforded to every individual, regardless of marital status, however, that exemption can be used up very quickly over time. 

What are some of the issues that same-sex couples must consider when it comes to life insurance?

Same-sex couples have additional concerns to consider when evaluating life insurance policies: income replacement, tax liabilities, and above all, the titling of policies, which can result in tax liabilities for the inheritor. However, all unmarried individuals must be careful when purchasing life insurance to ensure that it meets their needs. Most people do not realize that while life insurance is a non-probate asset and therefore does not pass through your estate, it is taxable. With the federal estate tax exemption returning to $1 million at a 55% tax rate in 2011, many people do not realize that the majority of the life insurance benefit to their beneficiary will be eroded by the estate tax liability that accompanies it. There are methods to assist with the estate tax impact on life insurance, such as Irrevocable Life Insurance Trusts (ILIT), that you should discuss with your estate attorney to consider whether it is right for your situation.

What is Joint Tenants with Rights of Survivorship (JTWROS) and how can it help us in our joint ownership?

JWTROS is a specific type of joint ownership that ensures the surviving partner will be named sole owner of remaining funds upon the death of the first partner.  Due to several complex taxation rules, it’s important that joint owners using the JWTROS designation keep detailed records.  Otherwise, the IRS may attempt to tax jointly held property in both the estate of the deceased spouse and at the death of the surviving spouse.

What are some other alternative strategies for joint ownership?

Some of the other strategies available to same-sex couples include a Revocable Living trust, Durable Power of Attorney, or a Transfer-on-Death. Please contact us at info@besunderlaw.com for further information.

If my partner passes away, do I automatically receive a tax-free rollover of his IRA account into my own?

No. Again, while a surviving spouse in a heterosexual married couple is entitled to take an IRA into a spousal IRA rollover, a beneficiary in a non-spousal couple has limited recourse. The Pension Protection Act of 2006 has somewhat remedied this situation, although it is only optional for an employer to grant this benefit to same-sex couples. However, it requires a complex transfer structure that must be carefully planned. Any mistake made could result in an irreversible taxation of the assets. Keep in mind that for heterosexual or same-sex married couples, all distributions remain income taxable regardless of status. Please consult an estate planning attorney on this and other issues.