We have always been very friendly to the LGBT community, and estate planning has traditionally been an absolute must for committed life partners. This is because of the fact that same-sex marriages were not possible. As a result, certain automatic protections that are afforded to people that are legally married did not exist.
For example, the intestate succession rules of the state of Ohio determine how assets will be distributed when someone passes away without any estate planning documents. If you are married and you pass away before you create an estate plan, your spouse would inherit your intestate property.
On the other hand, the parents of anyone that is not legally married with no children would inherit the property that is subject to the intestate succession laws. If there are no living parents, siblings would be the sole inheritors.
This is one of the reasons why estate planning was so essential for same-sex couples that could not get legally married. In addition to the asset transfers, the plan would include incapacity planning components that put medical decision-making in the hands of the partner rather than the next-of-kin.
The Landmark United States vs. Windsor Case
Over time, a number of states started to recognize same-sex marriages, but the federal government did not and could not do so. It was bound by a provision in the Defense of Marriage Act (DOMA) which defined marriage as a union that could only exist between a man and a woman.
The states could act independently because DOMA did not prevent individual states from the recognition of marriages that were entered into by members of the LGBT community. The first state to do so was Massachusetts, and this took place back in 2003, and other states followed.
In states that allowed marriages that were not between a man and a woman, all of the legally married people in the states enjoyed the same protections. As a result, matters like the ones we looked at it in the opening regarding the state specific advantages of marriage in this context would no longer be a source of concern.
However, the lack of federal recognition did still have an impact on high net worth individuals that are exposed to the federal estate tax. The reason why the tax is only a factor for wealthy people is because there is a relatively high credit or exclusion that stands at $11.4 million in 2019.
Only the portion of an estate that exceeds this amount would be subject to the federal death tax. This tax would be applied on transfers to anyone other than a surviving spouse. There is a marital deduction that allows for unlimited tax-free transfers between spouses, as long as the people are American citizens.
Two women named Edith Windsor and Thea Spyer were legally married in Canada in 2007. The state of New York recognized the validity of the marriage in 2008. Spyer died in 2009, and she left her entire estate to Windsor, which was considerable.
It exceeded the amount of the federal exclusion at that time, and the Internal Revenue Service ultimately presented her with an estate tax bill of over $360,000. Windsor initiated a legal action, contending that the Defense of Marriage Act was unconstitutional.
The case made its way to the Supreme Court, and a final decision was rendered by the justices in 2013. By a thin 5-4 majority, they struck down the legality of the Defense of Marriage Act. Same-sex marriages have been federally recognized since then.
Estate Planning for Married Couples
Even though all married people are treated equally, this does not mean that estate planning is not important for them. There are many different estate planning strategies that can be implemented, and the right course of action will depend upon the circumstances.
Regardless of your sexual orientation, same-sex or otherwise, you and your spouse should definitely put a well-constructed estate plan in place with the benefit of the appropriate legal counsel.
Schedule a Consultation!
We would be more than glad to discuss your estate planning goals with you in person. You can give us a call at 513-721-1513 to set up an appointment, and you can use our contact form if you would prefer to send us a message.