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The DOMA Ruling on Same Sex Spouses in New York


What DOMA ruling means for a gay couple's finances and how it affects the way estate planning is handled.

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What DOMA Ruling Means for Gay Couple’s
  Finances and How It Affects the Way
      Estate Planning Is Handled

                         SAUL KOBRICK
The DOMA Ruling on Same Sex Spouses in New York   1
                              Justice Kennedy.

                              "Congress has enacted discrete statutes to regulate
                              the meaning of marriage in order to further federal
                              policy, but DOMA with a directive applicable to 1,000
                              federal statutes and the whole realm of federal
                              regulations has a far greater reach.”

                              And with that, same sex marriages were given the
         green light.

         Many of the details in the Supreme Court’s ruling are applicable across the
         board, regardless of the sex of the two people. In some ways, estate
         planning attorneys may see this as business as usual, but for others, there
         are dynamics that will play a role in marriage in New York.

         The ruling has changed the way estate planning is handled for affluent
         couples – same sex or otherwise. In one specific area, there exists a crucial
         tax break that will affect married couples. The marital deduction allows
         spouses to move as many assets as they wish to each other with no federal
         estate taxes or gift taxes. Until DOMA, the verbiage in the law defined
         marriage as a “legal union between one man and woman. A spouse was
         defined as a person of the opposite sex who is either a husband or wife.
         That meant same sex couples were paying inheritance taxes above the tax
         free limits. Those two phrases were also at the heart of the suit that
         changed everything.

         In United States v. Windsor, Edith Windsor sought a refund for the
         more than $360,000 in estate taxes following the death of her partner,
         Thea Spyer. Windsor and Spyer were married in Canada in 2007. Spire
         died in 2009 and left her entire estate to Miss Windsor. Section three of
         DOMA barred Windsor as the executor from claiming the estate tax
         exemption for surviving spouses. $363,000 was paid in estate tax and the

The DOMA Ruling on Same Sex Spouses in New York              2
         IRS denied Windsor's request for a refund. Windsor believed those two
         provisions in the definitions of marriage and spouse violated the Equal
         Protection Clause of the Constitution. Windsor brought a refund suit,
         contending that DOMA violated the equal protection clause of the Fifth
         Amendment. Simply put, the clause abbreviated reads, "No person shall be
         deprived of life, liberty or property without the due process of law.” DOMA
         though contained two provisions, one that was directly addressed in
         Windsor and one that was not addressed. Both the New York District Court
         and the Court of Appeals for the Second Circuit agreed with her
         assertations and ordered the tax refund be made.

         That, in essence, changed everything, as mentioned in Justice Kennedy’s
                                                     remarks. There are many federal
                                                     benefits for estate planning,
                                                     including the marital deduction.
                                                     Surviving spouses of same sex
                                                     marriages can now take
                                                     advantage of any unused estate
                                                     taxes. Currently, that exclusion is
                                                     $5.25 million. Also, any gift above
                                                     the annual exclusion will affect
                                                     the lifetime gift exclusion. If that
         limit is surpassed, surviving spouses will then be gift taxed up to 40%.

         The IRS does have regulatory power on some of these issues and it could
         be that before long, executive orders may be given also. That said, it
         remains open and will likely have to be hashed out by the court at a later

         In terms of estate planning, the estate executor will be required to transfer
         the unused benefits to named survivors. From that point forward, those
         assets can be used in the same traditional ways that married heterosexual
         couples are accustomed to.

The DOMA Ruling on Same Sex Spouses in New York                 3
         There’s also another mandatory caveat: an estate tax return must be filed
         right after the death of the first spouse. Keep in mind – this is a
         requirement even if there exists no outstanding taxes due. The window in
         terms of a timeframe is nine months; however, one extension can be made
         for no more than six months after the nine months have lapsed. This is
         absolutely crucial in that if a surviving spouse drops the ball, he or she
         loses portability rights.

         In terms of Medicaid, elder lawyers are busy working out the logistics and
         the impacts for Medicaid planning and even nursing home planning. In
         traditional marriages, the spouse is required to cover nursing home care as
         the community spouse. But what happens in same sex marriages where
         there’s already one spouse in a nursing home? Remember, DOMA had
         pretty much tied the hands of those in nursing homes in terms of the legal
         considerations. There are tons of “what ifs” that will have to be worked out
         – both on the federal and state levels.

         There are states that have already made a move and say same sex
         marriages aren’t possible and won’t be honored. That opens up a host of
         federal tax quagmires. Again, those too will have to be worked out in the
         coming months. Ultimately, though, the ruling has absolutely cleared the
         way for possibilities many same sex couples wondered if they’d ever see.

  Estate Planning for the GLBT Community
                      Will you be shut out when your partner really needs you? Without proper planning, you
                      may be.

                      If a member of the GLBT community fails to properly plan, the result can be devastating to
                      his or her partner and family. Having no estate plan, or relying upon a Will, Joint Tenancy, or
                      Tenancy in Common as an estate plan, is tantamount to giving up control of one's estate
                      and management of one's well-being in times of incapacity.

                      This need for an estate plan is critical in case of an accident or illness that renders the
                      partner incapable of making decisions or managing his or her affairs. Without a proper
                      estate plan, the other partner could be legally precluded from having any role in the
                      decision-making of his or her partner's care, managing his or her affairs, or even having
                      access to the incapacitated partner.

                      Read more…
The DOMA Ruling on Same Sex Spouses in New York                                         4
         A few other issues that have already been raised include whether an
         executor can sign for a deceased spouse if their marriage is now
         recognized. And what about gift splitting? Will one-time recognized
         marriages now require to go through the process of “recognition” again?
         Immigration considerations? Are they now citizens because they were
         married before or do they become citizens if and when they remarry again
         to one another?

         Perhaps the best advice for same sex married couples in New York is to
         contact an estate planning attorney who can ensure all of these delicate
         intricacies are handled both legally and completely. The possibility of
         missing something, especially since there’s such a wide learning curve, is
         certainly a realistic concern. And this is just the tip of the iceberg. Legal
         help with your financial planning can go a long way towards peace of mind.

         This is just the beginning of a very high mountain that will be climbed by
         same sex partners and their attorneys too as they set out to ensure legal
         compliance in every aspect of their lives. It’s been a long battle for so
         many, and for those same people, it’s not over yet. No doubt, the word
         “trailblazer” comes to mind and it all began with Justice Kennedy’s now oft-
         quoted statement.

The DOMA Ruling on Same Sex Spouses in New York              5
         About the Author
                                      Saul Kobrick
                                      Estate Planning Attorney

                                    Saul Kobrick is an attorney licensed to
                                    practice law in the State of New York and the
                                    owner and founder of The Law Offices of Saul
                                    Kobrick, P.C. Mr. Kobrick is licensed to
                                    practice law in all courts of New York State,
                                    as well as in the Federal District Courts for
                                    the Southern and Eastern Districts of New
                                    York. He is a member of the New York State,
         Nassau, and Westchester County Bar Associations as well as a member of
         the American Academy Estate Planning Attorneys. Mr. Kobrick is also a
         member of the National Academy of Elder Law Attorneys.

         Prior to founding his Garden City Law Firm in 1992, Mr. Kobrick has for
         many years, practiced law both as a Sole Practitioner, and in partnership in
         New York City. His work has always included business law, wills, trusts and
         estate planning. A Suffolk County Branch of the firm was added in January
         of 1998, and a Westchester County Branch of the firm was added in August
         of 1999 providing quality Estate Planning and Elder Law services to
         residents of Nassau, Westchester and Suffolk Counties.

                          The Law Offices of Saul Kobrick, P.C.

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           Phone: 800-295-1917       Fax: (516) 248-7606      Phone: (914) 701-0777
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The DOMA Ruling on Same Sex Spouses in New York             6

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