In two separate decisions issued on July 8, 2010, the United States Federal District Court of Massachusetts held that Section 3 of the Defense of Marriage Act ("DOMA"), which defines the terms "marriage" and "spouse," for purposes of federal law, to include only the union of one man and one woman, is unconstitutional. These rulings, along with the recent California Federal District Court ruling finding Proposition 8 unconstitutional, are likely to continue on appeal until they reach the Supreme Court. In the meantime, married samesex couples should consider revisiting their estate planning documents in light of this new case law.
In Gil v. Office of Personnel Management, the Court found that DOMA violates the equal protection principles embodied in the Fifth Amendment and in Commonwealth of Massachusetts v. U.S., the Court found that DOMA violates both the Constitution's spending clause and state sovereignty under the Tenth Amendment. Although both Massachusetts cases are currently being appealed, the rulings indicate that same-sex couples who marry in a state or country where same-sex marriage is legal (including, Massachusetts, Connecticut, Vermont, Iowa, New Hampshire and the District of Columbia), may be entitled to federal benefits afforded to married couples both during lifetime and upon death.
Under current federal tax law, an individual may leave an unlimited amount of assets to a surviving spouse estate tax free, provided only that such spouse is a U.S. citizen and that such assets are left either outright or in a special marital trust called a qualified terminable interest property trust ("QTIP Trust"). Historically, same-sex couples have not qualified for this unlimited estate tax marital deduction because they were excluded from the definition of spouses under Section 3 of DOMA. However, if the recent rulings are upheld on appeal, then same-sex couples who are legally married should qualify for the unlimited federal estate tax marital deduction provided that the surviving spouse is a U.S. citizen and that such assets are either left outright or in a QTIP Trust. For now, legally married same-sex couples should consider updating their estate planning documents to ensure that any assets left to the surviving spouse would qualify for the federal estate tax marital deduction to the extent available.
In addition, if the recent rulings are upheld on appeal, then the unlimited federal gift tax marital deduction should also be available to same-sex couples who are legally married and such couples should consider implementing additional proactive estate planning during their lifetimes to maximize this deduction.