The momentous 5-4 decision of the United States Supreme Court on June 26, 2013 in United States v. Windsor, striking down as unconstitutional a portion of the 1996 Defense of Marriage Act (DOMA) gives immediate rights to some same-sex couples but raises immediate responsibilities for employers even as many unanswered questions are sorted out.

Edith Windsor and Thea Spyer, a same-sex couple living in New York, were lawfully married in Canada in 2007. Two years later, Ms. Spyer died leaving her entire estate to Ms. Windsor. Although New York did not permit same-sex marriages until 2011, its courts recognized the validity of those which were celebrated in other countries. Accordingly, Ms. Spyer’s estate claimed that federal estate taxes did not apply due to the unlimited spousal marital deduction. Bound by the 1996 law denying federal recognition of same-sex marriages, IRS disagreed.

The Supreme Court ordered that the Government refund the estate taxes which had been previously paid, finding that the failure to allow the marital deduction was unconstitutional as the couple was legally married under state law. The Supreme Court did not deal with a second provision in DOMA, allowing states to deny recognition to same-sex marriages occurring in other states. Accordingly, until clarified by the Court or dealt with through Congressional action or executive proclamation/regulation, the applicability of certain federal benefits linked to one’s state of domicile rather than the state of marriage is unclear. Maryland and the District of Columbia are among the 14 jurisdictions that have granted recognition to same-sex marriages; Virginia is among the majority of states which have not. Accordingly, an individual married to a spouse of the same sex in Maryland or the District who moves to Virginia might still not be considered married for tax and social security purposes, but would be married for immigration purposes.

At least for married gay and lesbian couples living in a state recognizing same-sex marriage, here are some of the implications:

  • Married filing status on tax returns (amended returns for “open” years should be possible);
  • Unlimited estate and gift tax marital deduction;
  • Ability to receive social security benefits based on a spouse’s contributions;
  • Ability for spouses to enjoy certain employer-provided fringe benefits such as health insurance;
  • Ability to utilize the Family and Medical Leave Act in the case of a covered employer in order to care for a spouse;
  • Requirement of a spousal annuity on distributions from employer-sponsored retirement plans unless waived by the spouse;
  • Ability of the survivor on death of a spouse to rollover retirement plan balances; and
  • Treatment as a spouse for immigration purposes.

Affected employers must be conscious of their responsibilities to treat married gay and lesbian couples under the same rules affecting heterosexual couples for benefit and other purposes.

Not all is necessarily positive for same-sex couples. Where both spouses work, the couple will almost certainly pay more in taxes. And if the marriage terminates, divorce laws will apply.

The Estates + Trusts, Business Law, Tax Law and Family Law departments at Stein Sperling can assist all couples in drafting wills, nuptial agreements and other documents, as well as in explaining employer responsibilities and tax strategies.

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