Estate Planning Benefits for Same-Sex Couples

By Kimberly L. Chu

The historic Supreme Court decision, Obergefell v. Hodges, affirming a constitutional right to same-sex marriage in all 50 states, opened estate planning opportunities for couples in the 13 states that had not permitted same-sex marriage.  Same-sex couples in those states (Arkansas, Georgia, Kentucky, Louisiana, Michigan, Mississippi, Missouri, Nebraska, North Dakota, Ohio, South Dakota, Tennessee and Texas) were functioning in a gray area.  For those who were married out-of-state and could obtain federal benefits of marriage, their home state could still deny them the benefits of marriage under state law.  In a nutshell, the new ruling means that same-sex married couples now are entitled to the exact same federal benefits as heterosexual married couples.

Gift Splitting.  As an individual, you can give $14,000 in 2015 tax-free to any individual and defer gift tax up to the federal lifetime exemption ($5.34 million in 2015).  What changed after the recognition of same-sex marriage is, if agreed upon, a couple can combine their individual allowances, gifting up to $28,000 to a nephew, cousin, or even a complete stranger without having to send two separate checks.

Estate Settlement.  Prior to the new ruling, a surviving spouse in a same-sex couple who resided in a state that did not recognize their union could not speak for a deceased spouse whose estate was contested in court without previous specific legal authorization.  Now same-sex spouses are considered automatic heirs when the deceased spouse dies intestate.

Spousal Estate Tax Benefits.  Same-sex couples now have the unlimited marital estate tax deduction that allows them to pass their assets to their spouses with no estate tax.  The Supreme Court in the Windsor decision extended that federal right to same-sex couples.  The Obergefell decision extends that spousal exclusion right at the state level.  Now that same-sex marriages are recognized for federal tax purposes, the unlimited exemption will pass on to the surviving spouse and basically can be used to double the value of an estate that is protected from federal tax (to $10.86 million in 2015).

Surviving Spouses.  Same-sex couples have enjoyed rights of survivorship for benefits such as social security at the federal level since 2013, but this has only been true at the state level for those states that recognized same-sex unions.  Now all same-sex spouses automatically are accorded the same rights at the state level in all states, which means that they can elect survivorship options for state government pensions or similar benefits.

Please contact Aaronson, Dickerson, Cohn and Lanzone for your estate planning needs (650) 593-3117.

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