In June, the U.S. Supreme Court ruling in United States v. Windsor invalidated the federal Defense of Marriage Act (DOMA). The Windsor ruling has led to a number of recent federal rule changes from the IRS, Social Security Administration and other agencies that provide new estate planning opportunities for legally married same-sex couples.
Earlier this month, the IRS ruled that legally married same-sex couples would now have the same status as opposite sex married couples for income, estate and gift tax purposes. This new rule applies to all married same-sex couples no matter where they live, provided they were wed in states that recognize same-sex marriage.
These rule changes open up a whole new estate planning landscape for married same-sex couples, including:
Portability – a deceased spouse’s unused estate tax exemption may transfer to the surviving spouse’s estate tax exemption.
Marital deductions – ability to make unlimited transfers to each other without incurring federal gift or estate tax, during life or after death.
Gift splitting – spouses can combine their annual gift tax exemptions of $14,000 per year to make a gift to anyone up to $28,000 without incurring a gift tax.
Retirement plan and IRA beneficiary designation – married same-sex spouses can be the sole beneficiary of qualified retirement plans and IRAs; surviving spouse can now take advantage of special rules when it comes to rollovers and delayed distribution of retirement account assets.
Community property – married same-sex spouses living in community property states can retitle assets to get a full step-up in income tax basis following the death of one spouse.
Tax refunds – married same-sex couples may be entitled to income, gift or estate tax refunds for 2011, 2012 and 2013.
Life insurance – couples with individual life insurance policies may want to consider changing to survivor policies to maximize death benefits.
If you would like to discuss this further, call our office at 530-581-5455 today to schedule a Family Wealth Planning Session with Jill Gregory, your local Tahoe City Personal Family Lawyer®. Jill will guide you through all of the tips mentioned above.
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