What did the Windsor case do for LGBT planning?

United States v. Windsor is a United States Supreme Court case that became a landmark civil rights case for the LGBT community. This post will give some background on Windsor and what is has done for LGBT planning.

For the full text of the case you can find it here. For more information than what is in this post, please visit oyez.org’s page on Windsor for their analysis and links to the audio of the supreme court argument if you are interested.

Background of Windsor

In the late 90’s, the US congress passed The Defense of Marriage Act, sometimes referred to as (DOMA). This law made the words marriage and spouses in all federal laws to refer to a legal union between a man and a woman. Since this law was passed we have seen the LGBT civil-rights movement grow in our country and other Western countries. Since this law, many states and other countries have legalized same-sex marriages. The Windsor case was a challenge to DOMA based on a same-sex Canadian marriage by a New York state resident.

Edith Windsor married her wife Thea Spyer legally in Canada in 2007. At Spyer’s death, Spyer left her entire estate to Windsor, her widow. During the probate of Spyer’s estate, the federal government imposed approximately $360,000.00 in estate taxes on Spyer’s estate because the federal government didn’t recognize that Windsor and Spyer were married.

If the government recognized them as married, then Spyer’s estate would not have owed any estate taxes due to a concept referred to as the “unlimited marital deduction” that lets spouses pass their property to the surviving spouse free of estate taxes. (The idea being that the surviving spouse will still own the property when the surviving spouse dies, and will then pay estate taxes).

Because of this, Windsor filed a lawsuit seeking to have DOMA declared unconstitutional. President Obama and Attorney General Holder announced that they would not defend the lawsuit. The Bipartisan Legal Advisory Group (“BLAG”) of the US House of Representatives tried to intervene and defend the lawsuit. The jduge denied BLAG’s motion and held DOMA to be unconstitutional. The US Court of Appeals for the 2nd Circuit agreed with the trial court. (There were some technical legal procedures going on in the background due to the BLAG, the Department of Justice, and Windsor’s counsel that amounted to BLAG stepping into the appeals process and Windsor’s lawyers tried to get to the US Supreme court early because of Windsor’s old age.)

The case was argued in the United States Supreme Court and the court found that DOMA violates both due process and equal protection principles of the US Constitution. Justice Kennedy, authored the majority opinion:

… DOMA seeks to injure the very class New York seeks to protect. By doing so it violates basic due process and equal protection principles applicable to the Federal Government.

When New York adopted a law to permit same-sex marriage, it sought to eliminate inequality; but DOMA frustrates that objective through a system-wide enactment with no identified connection to any particular area of federal law. DOMA writes inequality into the entire United States Code. The particular case at hand concerns the estate tax, but DOMA is more than a simple determination of what should or should not be allowed as an estate tax refund. Among the over 1,000 statutes and numerous federal regulations that DOMA controls are laws pertaining to Social Security, housing, taxes, criminal sanctions, copyright, and veterans’ benefits. …

Impact of Windsor

The main impact of Windsor to my Law Practice is that all same-sex couples who become legally married in a state that recognizes same-sex marriage will be recognized as married for federal tax purposes even if the state they live in does not recognize the marriage.

Texas Impacts

Texas, at the time of writing this article, does not recognize same-sex marriage. But, since most tax planning for estates involves federal taxes only (Texas does not currently have an estate nor an inheritance tax), Texas same-sex spouses can still take advantage of the tax planning tools available to hetero spouses.

For Texas same-sex spouses, they may miss out on a few protections at probate such as the family allowance and the allowance in lieu of exempt property; but, high net worth same-sex spouses can still implement many if not all of the same federal tax planning strategies that a hetero couple could implement.

Other Impacts

Other impacts include federal employees in same-sex marriages being able to apply for health, dental, and other employment and retirement benefits that are available to hetero spouses. Same-sex married seniors are eligible for joint placement in nursing homes under Medicare. Social security death benefits should be paid to the survivor of a same-sex marriage and so forth. Same-sex spouses can file joint tax returns with the IRS, seek spousal military benefits, and even immigration benefits.

Even the above issues are being litigated as we speak; we’ll have to see what the courts, the legislature, and the people do in the next 5 to 10 years to see more of Windsor’s impact on LGBT civil rights.