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Julie Garber

Federal District Court Rules That Married Same Sex Couples Do Not Have to Pay Estate Taxes

By June 11, 2012

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Back in November 2010 Edith Windsor filed a lawsuit against the federal government seeking reimbursement of over $363,000 in estate taxes that she paid as the result of the death of her partner of 44 years, Thea Spyer. The New York residents were legally married in Canada in 2007 and Ms. Spyer died in 2009, leaving her entire estate to Ms. Windsor. Since U.S. federal law does not legally recognize same sex marriages due to a 1996 law called the Defense of Marriage Act ("DOMA"), which only recognizes marriages between one man and one woman, Ms. Windsor's inheritance of Ms. Spyer's estate resulted in a $363,053 federal estate tax bill. This would not have been the case had Windsor and Spyer been considered legally married under U.S. federal law, since no federal estate taxes would have been owed due to the unlimited marital deduction. Windsor paid the estate tax bill in a timely manner (in order to avoid interest and penalties that would accrue during the course of the lawsuit) and then the ACLU filed the lawsuit on her behalf.

Fast forward to the present and on June 6 United States District Court for the Southern District of New York Judge Barbara Jones declared that Section 3 of DOMA, which bars the federal government from recognizing marriages between same sex couples who are seeking federal benefits tied to being married, is unconstitutional as it relates to the Windsor case and ordered the government to pay back the taxes paid by Windsor plus interest. In response to the decision, Ms. Windsor released the following statement through the ACLU: "It's thrilling to have a court finally recognize how unfair it is for the government to have treated us as though we were strangers."

This ruling comes on the heels of two other federal court decisions that have found Section 3 of DOMA to be unconstitutional. If the case is appealed, it will be heard by the U.S. Court of Appeals for the Second Circuit.

So how does this case affect the legal rights of married same sex couples? The ACLU has a list of frequently asked questions addressing just that: Windsor v. United States - Frequently Asked Questions (FAQ). Of particular interest is the fact that assuming Ms. Windsor wins the case after all appeals have been exhausted, then married same sex couples will be able to take advantage of the unlimited marital deduction just as heterosexual married couples can, which will open the door to a vast array of gift tax and estate tax planning opportunities that were previously unavailable to same sex married couples.

July 24, 2012 at 8:57 pm
(1) Rudy Molinet says:

Julie is an excellent estate attorney. She has helped my husband and I manage through the legal maze related to same sex couples. We appreciate her knowledge and most of all her empathy in dealing with our issues. The case mentioned if upheld, will be an historic change in the way our relationships are treated by our government. It’s about time!

Rudy Molinet, Key West, FL

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