Same-Sex Couples and Estate Tax

10/23/2012

In late 2010, Edith Windsor filed a lawsuit against the federal government.  The suit sought reimbursement of over $363,000 in estate taxes that was paid when her partner of 44 years, Thea Spyer, died.

Edith and Thea lived in New York and were legally married in Canada in 2007.  When Thea died, she left her entire estate to Edith.

Under the Defense of Marriage Act or "DOMA", current federal law does not legally recognize same sex marriages.  To be married for purposes of federal law the marriage must be between one man and one woman.  

Edith's inheritance of Thea's estate resulted in a $363,053 federal estate tax. This would not have been the case if they were considered legally married under U.S. federal law, since no federal estate taxes would have been owed due to the unlimited marital deduction. Thus, Thea had no choice but to timely pay the estate tax in order to avoid interest and penalties.  After payment, she filed a lawsuit against the federal government.

On October 18, 2012, the United States Court of Appeals for the Second Circuit upheld a lower court decision that declared 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, unconstitutional as it relates to this case. 

Since there is now disagreement among the federal circuits when it comes to DOMA, it is likely that the U.S. Supreme Court will take up one or more of the cases and come to a decision on the constitutionality of DOMA once and for all.