Wednesday, July 4, 2012

Court Allows Estate Tax Marital Deduction for Same-Sex Surviving Spouse

In Edith Schlain Windsor v. U.S. (DC NY 6/6/2012) 109 AFTR 2d ¶ 2012-870, a district court found that the federal Defense of Marriage Act (DOMA) was unconstitutional when it denied the marital deduction for gifts passing to a surviving spouse married under Canadian law to a same-sex partner. They were domiciled in New York, a state that also now recognizes same-sex marriage. The IRS denied the application of the marital deduction to gifts passing to the surviving same-sex spouse per DOMA, and assessed $363,000 in estate tax. The surviving spouse appealed, and the court found that DOMA violates the equal protection clause of the U.S. Constitution because there is no rational basis supporting the law. As a result, the marital deduction was applied to the estate of the deceased spouse. The federal estate tax marital deduction is unlimited in amount and postpones any estate tax on assets passing from the decedent to a surviving spouse who is a U.S. citizen. Special rules apply to a spouse who is not a U.S. citizen. (IRC §2056).