The Defense of Marriage Act (DOMA) states that a marriage is something that can only exist between a man and a woman. Because of this, same-sex couples who have been married in states or countries where these marriages are legal have not been afforded certain privileges that are available to heterosexual married couples.
One of these is the unlimited marital estate tax deduction. There is a $5.25 million estate tax exclusion, and the maximum rate of the tax is 40%. This means that assets that you pass along to others that exceed $5.25 million are potentially taxable.
This exclusion applies to transfers to people other than your spouse. You can give your spouse any amount of money without utilizing any of your available exclusion because of the unlimited marital deduction.
Because of the DOMA definition of marriage the unlimited deduction has not been extended to same-sex couples that have been married in jurisdictions where these marriages are recognized.
The constitutionality of the Act was questioned by New Yorker Edith Windsor. She was presented with an estate tax bill in 2009 after her spouse Thea Spyer passed away and left her a significant inheritance.
A decision has been handed down, and the Defense of Marriage Act has been deemed unconstitutional by a slim 5-4 voting margin.
If you are involved in a same-sex relationship this decision may affect your estate plan. Contact our firm to schedule a free consultation if you have any questions about what this landmark DOMA decision means to you and your family.
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.