On June 26, 2013, the Supreme Court handed down two historic decisions related to gay marriage in the cases of U.S. v. Windsor and Hollingsworth v. Perry. The effect of these decisions was to remove the long discriminatory policy of the federal government by deciding Section 3 of DOMA was unconstitutional, thereby requiring the federal government to recognize (for federal rights and benefits) lawful same sex marriages. It “punted” on the question of whether everyone in America has a fundamental right to be married and – set the stage for future litigation on a variety of issues.
U.S. v. Windsor
Edith Windsor and Thea Spyer were legally married in Canada and resided in New York during a time when, although same-sex marriage was not performed in the state, New York recognized other states’ and countries’ lawfully performed same-sex marriages. When Mrs. Spyer passed in 2009 after a long battle with MS (having been cared for by her wife for many years), leaving everything to Mrs. Windsor, there was a federal estate tax bill due of $363,000 due mostly to the appreciation of wealth on their real property. Mrs. Windsor paid the bill and sued for a refund, as there would have been no bill if their marriage was recognized federally. Ultimately, the issue was whether the definition of “marriage” for federal purposes in Section 3 of DOMA as “between one man and one woman” was unconstitutional.
In a 5–4 decision issued on June 26, 2013, the Supreme Court found Section 3 of DOMA to be unconstitutional “as a deprivation of the liberty of the person protected by the Fifth Amendment”. This decision was decided on substantive due process and equal protection grounds, meaning that the court found same-sex couples had the same right to marry as heterosexual couples, and that marriage is a certain fundamental right to which people of the United States are entitled. There were also hints of federalism in the case decision – that is, that DOMA infringed on what has traditionally been a state right to regulate marriage.
The Windsor case, although a victory for same-sex couples, was limited in scope. In the final paragraph of the opinion, the court stated that “this opinion and its holding are confined to those lawful marriages.” This seems to suggest that state sovereignty will still play a vital role in deciding whether or not a same-sex couple is lawfully married. The holding also does not address other legal same sex relationships such as domestic partnerships or civil unions. Furthermore, it does not offer any guidance on how each of the federal benefits awarded to married couples will be practically administered. We await guidance from all federal agencies – and are monitoring these issues closely.
Hollingsworth v. Perry
In this case, the California electorate enacted Proposition 8 (a “Mini-DOMA”) defining marriage as between one man and one woman for all state law purposes by amending its State constitution, after the California Supreme Court ruled that same-sex couples had a constitutional right to marry. This case was brought by interested (unmarried) couples in California to challenge the constitutionality of the ballot initiative, Proposition 8. Federal District Court Judge Walker ruled in favor of the plaintiff same-sex couples and enjoined the California Governor and Secretary of State from implementing ballot initiative. State officials chose not to appeal the decision and a Citizen’s Committee, who had brought a ballot initiative, intervened to appeal and lost that decision at 9th Circuit. Ultimately, the issue in this case became whether there is a constitutional right under the Equal Protection Clause of the U.S. Constitution for all same sex couples to have the right to marry.
In a 5–4 decision, the Supreme Court found Citizen’s Ballot Committee lacked standing to bring the case, therefore deciding the case on a procedural issue and leaving for another day the underlying question of whether the U.S. Constitution provides protection or a right for all same sex couples to marry. We believe that case may still come before the U.S. Supreme Court someday. Until then, it is clear that the issue will be decided on a state-by-state basis. As a result, California started issuing marriage licenses to same-sex couples on June 28, 2013 after the U.S. 9th Circuit Court of Appeals lifted stay of injunction on District Court’s order.
Where Do We Go From Here?
The two recent Supreme Court decisions, especially the decision in U.S. v. Windsor, took great steps towards marriage equality, and are victories to be celebrated. However, these decisions left many questions unanswered, and a country divided between “recognition” states and “non-recognition” states. Furthermore, there is very little guidance on how and when federal rights and benefits fit into this ever-increasingly complex patchwork of states, all of which have different laws on same-sex marriage. Currently, 13 states (Massachusetts, Connecticut, Iowa, Vermont, New Hampshire, New York, Maine, Maryland, Washington, Delaware, Minnesota, Rhode Island, and California) and the District of Columbia allow same-sex marriage. Certain states recognize (or are silent about) out-of-state same sex marriage; some have legislation pending; and 34 states still specifically prohibit it. The law on same-sex marriage among the state changes frequently.
Navigating the impact of U.S. v. Windsor and Hollingsworth v. Perry is complex. These decisions have given rise to many new issues which are challenging for many same-sex couples. We at Squillace & Associates, P.C. pay careful attention to these legal, tax and financial planning issues for same sex couples as these changes occur. For more information about these decisions and how they can impact your life, contact us today by phone at (617) 716-0300 or by email at info@gayestateplanning.com.
The premiere law firm of Squillace and Associates serves the gay and lesbian community with estate planning, wills, trusts, business planning, asset protection, Medicaid planning, probate and trust administration services for clients in the Boston Massachusetts area including Allston, Brighton, Back Bay, Bay Village, Beacon Hill, East Boston, Roxbury, South End, Dorchester, Roslindale, Jamaica Plain, Hyde Park, West Roxbury, Mattapan, and Charlestown and all of Massachusetts Boston Metro areas including Cambridge, Somerville, Brookline, Chelsea, Medford, Everett, Watertown; South Shore areas like Quincy, Braintree, Milton, Hingham, and Cape Cod: Metrowest areas like Lexington, Concord, Wayland; and North Shore areas like Melrose, Stoneham, Reading, Andover.
There are a wide variety of federal rights and benefits to consider. These include: social security and survivors benefits, Medicaid and Medicare, tax considerations (including income and capital gains tax issues, gift and estate tax issues, and the ability to amend past returns), military and veterans benefits, immigration status, employment, health and retirement benefits, bankruptcy eligibility, real property considerations, copyright revision and termination, family attribution rules for securities disclosure, and election contribution limits, among many others. Whether married before the decision, or after, and no matter where you reside, there is work to be done. For example, same-sex couples previously married may have to re-file their ERISA plan beneficiary designations to include a spousal waiver. Couples who previously filed income taxes separately may have the opportunity to amend past returns – but must act quickly. With every federal right and benefit awarded comes the responsibility to make sure each is handled properly.
In the wake of the Windsor case, federal rights and benefits quickly morphed into three categories – those available to same-sex couples who were married in a recognition state, no matter where they live when they apply for the benefit (“place of celebration” rights); those available to same-sex couples who live in a recognition state when they apply for the benefits (“place of domicile” rights); and the rights and benefits that were silent on the issue. Although federal agencies such as the Pentagon and Homeland Security quickly issued orders declaring their benefits based on “place of celebration” status, many others, such as the Internal Revenue Service, have not issued guidance on how they will determine if a same-sex couple is married for the purpose of their applicable benefit.
Deciding this case was a matter of urgency. Mr. Arthur’s health was rapidly deteriorating and the couple sought guidance on their marital status, as a couple married in a “recognition state” and living in a “non-recognition” state, in terms of the rights and benefits they would be allowed at Mr. Arthur’s death.
The Pennsylvania federal court ruled July 29, 2013 that the same-sex spouse of a deceased profit-sharing plan participant was entitled to spousal death benefits under the plan and under the Employee Retirement Income Security Act, even though the couple was residing in a non-recognition state. According to the court, 
On July 18, 2013 the New York State Department of Taxation and Finance released a technical memorandum explaining the effect the