The Defense of Marriage Act (DOMA) & Financial Planning

The Defense of Marriage Act (DOMA) & Financial Planning

The Supreme Court stuck down many areas of the law related to same-sex marriages.  However, here in Arizona, we are still waiting for decisions about how this affects our clients and residents.

In general there are a variety of tax breaks available to legally married persons:

  • The right to file a joint return
  • The opportunity to get tax-free employer health coverage for the same-sex spouse
  • The opportunity for either spouse to utilize the marital deduction to transfer unlimited amounts during life to the other spouse, free of gift tax
  • The opportunity for the estate of the first spouse to die to get a marital deduction for amounts transferred to the surviving spouse
  • The opportunity for the estate of the first spouse to die to transfer the deceased spouse’s unused exclusion amount to the surviving spouse
  • The opportunity to consent to make “split” gifts (i.e. gifts to others treated as if made one-half by each)

Having listed the above, the major problem for Arizona persons, is that Arizona, at this point, does not recognize same-sex unions.  The Supreme Court did not strike down Section 2 of DOMA allowing states to refuse to recognize same-sex marriages even though performed in states that do recognize them.  Unfortunately this means we are all in the “wait-and-see” mode.  First IRS has not issued any procedures regarding this tricky question and second, no one knows what might be the outcome including if this is going to be retroactive.

Currently, the only thing we can suggest is that legally married same-sex couples file an amended return, if it is beneficial, and file it as a protective claim in case Arizona will recognize the union.

 

RKFIN