DOMA: Social Security Spousal Benefits

Posted on
Categories: Media Commentary

As promised, we’re taking a look at the impact DOMA will have on insurance planning, specifically concerning social security spousal benefits, for same-sex couples.

 

Will states start recognizing out-of-state same-sex marriages or even allow them to happen?

Pennsylvania and Virginia could possibly follow Maryland and Delaware’s footsteps, which legalized same-sex marriages in January and July, respectively.

A federal lawsuit was filed in Pennsylvania by the America Civil Liberties Union on behalf of 21 plaintiffs who either wish to get married or want their out-of-state same-sex marriage recognized. Importantly, Attorney General Kathleen Kane publicly announced that she would not defend the state against the lawsuit claiming that she found Pennsylvania’s ban “wholly unconstitutional.” The state will have Gov. Tom Corbett’s general counsel defend the state’s anti-gay-marriage law.

In Virginia, the ACLU says a lawsuit is currently in the works that would challenge the constitutionality of Virginia’s ban on same-sex and recognizing out-of-state same-sex marriages.

 

What changes will happen in the 13 states and Washington DC where same-sex marriage is legal?

We already discussed that same-sex couples can now transfer property from one partner to another without worrying about a federal gift tax.

Same-sex couples in marriage equality states are now eligible for Social Security’s spousal benefits. They can now apply for

  • Spousal retirement: if your spouse or ex-spouse is receiving or eligible for retirement or disability benefits and if you are at least 62 years of age, you may be able to receive money
  • Disability: if you cannot work because of a medical condition that is expected to last at least one year or result in death, certain family members can receive money
  • Survivor benefits: if you die, members of your family could be eligible for benefits based on your earnings

The claims processing instructions will allow for payment of claims when the claimant “was married in a state that permits same-sex marriage” and “is domiciled at the time for application, or while the claim is pending a final determination.”

How Striking Down DOMA Affects Unlimited Marital Deduction

Posted on
Categories: Media Commentary

On June 26 2013, the United States Supreme Court ruled Section 3 of the Defense of Marriage Act (DOMA) as unconstitutional. In a 5-4 decision, the judges said, “DOMA is unconstitutional as a deprivation of the equal liberty of persons that is protected by the Fifth Amendment.”

Striking down DOMA means that same-sex married couples can now access over 1,000 benefits that have been traditionally only available to heterosexual married couples.

 

How was DOMA brought into the Supreme Court?

It’s important to note that DOMA ended up before the US Supreme Court in the first place because it was basically a lawsuit about federal estate tax liabilities.

DOMA plaintiff Edith Windsor was forced to pay $363,053 in estate taxes when her wife died—something that would not have happened if her spouse was male. After paying the taxes, Windsor filed a lawsuit against the IRS, claiming that DOMA prevented her from being a spouse under federal tax law, resulting in a $363,053 tax liability that traditional married partners would not have been subjected to.

The U.S. District court for the Southern District of New York ruled that $363,053 worth of damages be paid to Windsor. Then the Second circuit Court of Appeals ruled in favor of Windsor. After that, the Supreme Court considered the case.

 

How will this affect Unlimited Marital Deduction?

The Unlimited Marital Deduction allows an individual to transfer an unrestricted amount of assets to his or her spouse at any time, including at the death of the transferor, free from tax. This is one benefit that DOMA restricted from spouses of the same sex.

By striking down DOMA, the unlimited marital deduction benefit, along with hundreds of other benefits, is eligible for same-sex married couples. This also meant that Windsor won her case and was awarded $363,053 plus interest.

However, there may still be some confusion about tax treatment for legally-married, same-sex couples that live in states where same-sex marriage is recognized[1] or not. Where a couple resides (State of Residence) versus where a couple was married (State of Celebration) will have an impact with respect to some federal benefits for the 29 states that have currently have bans on same-sex marriages, unions, or don’t recognize them at all.

Next month, we will explore how DOMA will impact insurance planning for same-sex couples.

 

 

 

1There are currently 11 states that recognize same-sex marriages: California, Connecticut, Delaware, Iowa, Maine, Maryland, Massachusetts, New Hampshire, New York, Vermont, Washington, and the District of Columbia. By August 1, Minnesota and Rhode Island will also recognize same-sex marriages. There are also 4 states that recognize same-sex civil unions: Hawaii, Illinois, New Jersey, and Colorado.