Designating Your Same-Sex Spouse as the Sole Beneficiary in Your Will

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By David K. Goldfarb (Summer Associate)

Question: If your will designates your same-sex spouse as the sole beneficiary, will your relatives have a valid (and potentially successful) claim against your estate?

Estate planning can be a very stressful time for all married couples, especially when children and other relatives need to be considered.  However, under normal circumstances, one need not be overly concerned with the validity of his will and the possibility of relatives bringing claims against a surviving spouse that has been designated as the sole beneficiary under that will. It is typically very difficult to challenge a will. Approximately 99% of wills are enforced without any issues. Courts interpret wills as the voice of the testator (the person who wrote the will). Since that person is deceased and no longer able to express his wishes, courts are extremely hesitant to alter the terms of the will.

As a general rule, a party must have an interest in order to challenge a will, and that interest must be substantial, direct, and immediate. It is very likely that a court would conclude that close relatives, like children, have a substantial, direct, and immediate interest in your will. Thus, your relatives would likely be able to bring a claim against your estate. However, such a claim is unlikely to prevail.

As an initial matter, Pennsylvania law expressly allows you to disinherit (deprive someone of inheritance) every individual other than your spouse.  Furthermore, your relatives, or any other challenger, would have a very limited number of grounds for bringing a claim against your same-sex spouse. Most grounds address the procedural process for the creation of a will and are easily addressed by retaining an attorney to assist in your estate planning. The two substantive grounds are that the individual lacked the mental capacity necessary for creating a valid will and that the will was procured by fraud, forgery, or undue influence.

In order to challenge a will based on mental capacity, the challenger must prove that the testator did not understand the consequences of making the will at the time of the will’s creation. Adults are presumed to have the necessary mental capacity required for the creation of a will, thus this argument is usually limited to the context of an individual diagnosed with dementia who revises their will towards the end of their life.

In order to challenge a will based on fraud, forgery or undue influence, the challenger essentially must prove that the will was not created by the deceased or that the deceased was forced via threats to create the will. No matter the situation, it would be wise to have several witnesses, including an attorney, present during the creation of your will. Most states require a typed hard copy of the will signed by the testator in the presence of at least two adult witnesses who are not named as heirs in the will.

It is advisable to consult with a Trusts & Estates attorney as part of your estate planning to ensure that no potential claimant could prevail against your same-sex spouse in challenging the will.

 

Marriage Equality List

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There is much confusion about which states have what types of same-sex relationship laws.  We’ve compiled the list below to make it a bit easier to understand.  We will continue to update the list as the laws change.

If you have questions about the laws or the impact that they may have on you or your partner,  please contact us or post a comment below.  We really appreciate your feedback!

Allow marriage (listed by date of recognition, notwithstanding stays and/or appeals):Marriage Equality List

  1. New York (learn more)
  2. New Hampshire (learn more)
  3. Vermont (learn more here and here)
  4. Connecticut (learn more)
  5. Iowa (learn more)
  6. Massachusetts (learn more)
  7. Maryland (learn more)
  8. Maine (learn more)
  9. Washington (learn more)
  10. Washington DC (learn more)
  11. Delaware (learn more)
  12. Rhode Island (learn more)
  13. Minnesota (learn more)
  14. California (learn more)
  15. New Jersey (learn more)
  16. Hawaii (learn more and more)
  17. Illinois (learn more)
  18. Utah (enforcement stayed pending anticipated appeal – learn more and more)
  19. New Mexico (learn more)
  20. Virginia (learn more)
  21. Texas  (enforcement stayed pending appeal - learn more and more)
  22. Oklahoma (enforcement stayed pending appeal - learn more)
  23. Michigan (learn more)
  24. Arkansas  (as of May 16, 2014, there is a stay on same-sex marriages pending appeal)
  25. Idaho (enforcement stayed pending appeal – learn more)
  26. Pennsylvania (learn more)
  27. Oregon (learn more)
  28. Wisconsin (learn more)
  29. Indiana (learn more)
  30. Colorado (enforcement stayed pending appeal - learn more)

Provide same-sex couples can enter into a domestic partnership:

  1. Nevada (learn more)

Ruling that trial courts have the ability to hear divorce procedings terminating same-sex marriages created in other jurisdictions:

 

 

First Read on Same-sex Spouse Health Benefits Post Windsor

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by:  John H. Wilson

The issues of same-sex spousal rights to benefits is now largely resolved; however, substantial questions about same-sex spouse health and welfare benefits remain.

To see the full story, click on the link below:

http://www.bipc.com/files/media/misc/11e4d4de9ce2b59482c528e2d1c3f3a0.pdf

John H. Wilson is a Shareholder of Buchanan Ingersoll & Rooney PC whose practice is primarily focused on employee benefits, ERISA and deferred compensation matters.

Attorney General Eric Holder Memo on Federal Benefits Post-Windsor

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“This is what we have been waiting for from the attorney general.”

Maureen Cohon, Esquire

Attorney General Eric Holder has issued a memo on how the Windsor decision will effect federal programs. This is a result of the year long review after Windsor. The memo can be found here by clicking on the link below:

http://www.justice.gov/opa/pr/2014/June/14-ag-653.html
 

Gift tax Consequences of Real Estate Transfers

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By Lauren Sweeney

Often times, one partner in a same-sex couple owns real property and seeks to add the other partner to the title or deed for no consideration (i.e. when no money or other type of payment is received in return).  Though this may appear to be a straightforward process, it is important to keep in mind that there are tax consequences for so doing. This type of one-sided property transfer constitutes a taxable gift for federal gift tax purposes.  Under the federal tax laws, there is a gift tax reporting obligation to the extent that the fair market value of the gifted interest, exceeds the available annual exemption in the year of the gift.

This reporting obligation does not necessarily imply a tax liability.  According to The American Taxpayer Relief Act, each American taxpayer has a $5 million cumulative lifetime gift and estate tax exemption.  This means that any amounts given during life or transferred upon death that total less than $5 million will be transferred free of tax.  Additionally taxpayers are allowed to make annual gifts up to $14,000, per recipient, which gift does not count towards the $5 million lifetime maximum exemption.   Any gift amount to an individual that exceeds $14,000 is considered a taxable gift, and the taxpayer who made the gift is required to file a gift tax return.  Gifts that exceed the annual exemption amount accumulate from year to year and count toward the $5 million lifetime maximum exemption, as do any assets that are part of an inheritance.

The use of a “tenancy in common” may be a beneficial means for gifting the other partner into ownership with minimal gift tax consequences. Because the shares of ownership do not have to be equal in a tenancy in common, the partner may choose to gift a share of the property to the other partner each year (up to the annual exclusion amount) until the desired property apportionment is received.   Best-practices compliance involves not only a gift tax return filling, but also a real estate valuation of the fractional interest being gifted.

Since the repeal of DOMA, legally married spouses can transfer property to their spouses free of the gift tax.  For federal tax purposes, the terms “spouse,” “husband,” and “wife” includes individuals of the same sex who were lawfully married under the laws of a state whose laws authorize the marriage of two individuals of the same sex and who remain married.  However, the terms “spouse,” “husband and wife,” “husband,” and “wife” do not include individuals (whether of the opposite sex or the same sex) who have entered into a registered domestic partnership, civil union, or other similar formal relationship recognized under state law that is not denominated as a marriage under the laws of that state, and the term “marriage” does not include such formal relationships.  Gifts to your spouse are eligible for the marital deduction.

Due to the complexity of both real estate and tax law, it is advisable that individuals consult with an attorney prior to adding his or her same-sex partner to a title or deed to ensure proper reporting of both the real estate transfer and gift tax reporting.

Adoption Tax Credit for Same Sex Couples

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About the Adoption Credit

Under The Internal Revenue Code Section 36C, an individual taxpayer may claim an adoption credit for qualified adoption expenses paid or incurred by the taxpayer. The total qualified adoption expenses that may be claimed as a credit for all taxable years is limited to $10,000 adjusted for inflation (the 2013 amount is $12,970).  The amount of the credit is reduced proportionately if the taxpayer’s modified Adjusted Gross Income is between $194,580 to 234,580. The credit is nonrefundable, if a taxpayer owes no federal taxes, he or she cannot receive a refund; however the taxpayer can carry the balance of the credit forward for up to five years.  A non-refundable credit can reduce the amount of tax the taxpayer owes to zero, but not below. On the other hand, a refundable tax credit can reduce the taxpayers to zero and the IRS refunds remaining balance to the taxpayer.

Same Sex Adoptions and the Adoption Tax Credit

Both same sex partners (if each is an adoptive parent) may qualify for the adoption credit on the amount of qualified adoption expenses paid or incurred for the adoption. The same sex partners may not both claim credit for the same qualified adoption expenses and neither partner can claim more than the amount that he or she incurred. If two same sex partners each paid qualified adoption expenses, to adopt the same child and those expenses exceed the $12,970, the maximum credit available is still $12,970. The partners may allocate this amount between them any way they agree, but the amount allocated may not be more than the amount paid or incurred.

Traditionally, qualified adoption expenses do not include the cost of adopting a spouse’s child.  If a couple is in dire need of the tax credit, it may be beneficial to postpone marriage until the potential spouse’s child is legally adopted. In addition, the law specifies that the adoption credit is not available to the biological parent, so the credit should be claimed by the non-biological parent.  In cases like this, it is extremely important that the non-biological parent be able to prove that he or she is the one who paid for it – for example, by using separate banking accounts and credit cards.  (Click here for additional IRS answers to FAQ’s regarding same-sex adoption credits).

Now that same sex marriages are recognized under both federal and Pennsylvania law, a married couple can claim the credit by filing a joint tax return as long as neither spouse is a biological parent and the child is adopted by both parties after the marriage.

For more information on the adoption tax credit or tax return preparation in general, please contact Lauren Sweeney in our Pittsburgh office at (412)-562-1530. Lauren is a tax specialist with over 8 year preparing both simple and complex individual income tax returns.

 

Wisconsin Court Held that Same Sex Couple is Permitted to File Joint Bankruptcy Petition

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In In re Matson, 2014 BL 118411, Bankr. E.D. Wis., No. 2:13-bk-35362, 4/29/14, the U.S. Bankruptcy Court for the Eastern District of Wisconsin held that a same sex couple married in Iowa are spouses for purposes of the Bankruptcy Code and are permitted to file a joint bankruptcy petition even though Wisconsin would not recognize the marriage.

Click this link to read: In re Matson.

Governor Corbett Won’t Appeal Judge Jones’ Decision

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To read the statement from Governor Corbett regarding the Opinion of Judge Jones in the Whitewood Case, please click on the link below:

 

http://us5.campaign-archive2.com/?u=3ed2245624205d05f255b8683&id=c4e64dfad2&e=e3c1e12387

 

 

 

 

Read the Memo that Changed PA History

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Here is the Court’s full Memo and Order regarding Whitewood v. Wolf, et al case.  The case that made it possible for same-sex marriage in Pennsylvania.

Read the Order first!  This is so exciting!

Click here to download and read the full memo and order.

Judge finds Pennsylvania Ban on Same-Sex Marriage Unconstitutional!!

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U.S. District Judge John Jones ruled Tuesday that Pennsylvania’s ban on same-sex marriage is unconstitutional.

To see the full story, click on the site below:

http://www.huffingtonpost.com/2014/05/20/pennsylvania-gay-marriage_n_5358491.html

 

 

Whitewood v. Wolf: Navigating the Sea of Change for Marriage Equality

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By Kate Paine

It has been a momentous year for marriage equality in our country.  The U.S. Supreme Court’s landmark June 2013 decisions overturning the Defense of Marriage Act and upholding the ruling on Proposition 8’s unconstitutionality opened the proverbial floodgates, ushering in a sea of change for same-sex marriage more quickly than anyone could have imagined.  Even more unexpectedly, the changing tides have flowed to states long viewed as bastions of social conservatism.

When I first wrote about Whitewood v. Wolf (formerly known as Whitewood v. Corbett) – the July 2013 case filed by the American Civil Liberties Union of Pennsylvania in a Harrisburg federal court – for the August 2013 issue of Equal Magazine, same-sex marriage was legal in twelve states (plus Washington, D.C.): California, Connecticut, Delaware, Iowa, Maine, Massachusetts, Maryland, Minnesota, New Hampshire, New York, Rhode Island, and Vermont.

Since that time, another four states legalized marriage for same-sex couples (New Jersey, Hawaii, Illinois, and New Mexico), bringing the number of jurisdictions actually performing same-sex marriage at the time of publication to seventeen – nearly one-third of all states in the U.S.  In the past four months, federal judges in five additional states (Utah, Oklahoma, Virginia, Texas, and Michigan) have declared unconstitutional their states’ laws forbidding same-sex marriage.  However, same-sex marriage in those states has been placed on hold (apart from a limited number of marriages performed in Utah and Michigan), pending the outcome of those cases on appeal to the federal Circuit Courts.  Judges in four other states (Tennessee, Kentucky, Ohio, and Oregon) were also active in pushing equality forward, although their limited rulings decided only the unconstitutionality of refusing to recognize citizens’ valid same-sex marriages performed out of state.

If the decisions out of Utah, Oklahoma, Virginia, Texas, and Michigan are affirmed on appeal, the number of Americans living in a state issuing marriage licenses to same-sex couples will jump from approximately 38% to more than 50%.  Recent polls show support for same-sex marriage now exists among more than half of all Americans, so the latter number is quite fitting.

Substantial progress has also occurred for married same-sex couples seeking federal recognition of their marriage and the same protections, rights, and responsibilities afforded married opposite-sex couples.  Initially, it was unclear whether DOMA’s demise meant that federal benefits would extend to all lawfully-married same-sex couples, irrespective of where they live, to only those same-sex couples residing in states that recognize their marriage, or a combination of both.

In February 2014, United States Attorney General Eric Holder removed much of this uncertainty when he announced that the Department of Justice will consider “married” all same-sex couples with a valid marriage license, regardless of where that couple chooses to live.  Now, all same-sex couples who marry in, for example, Maryland will be treated the same for matters like prison visitations, survivor’s benefits, bankruptcy petitions, and even trial testimonial privileges, whether that couple actually lives in Maryland or instead in neighboring West Virginia or Pennsylvania.

Still, certain federal agencies, perhaps most notably the Social Security Administration and (in certain instances) the Department of Labor, continue to determine eligibility for benefits based on the status of same-sex marriage in a couple’s state of residence.  Consequently, married same-sex couples living in states where their marriage is not recognized remain unable to enjoy rights like being named beneficiaries under a same-sex spouse’s social security plan and taking job-protected leave to care for a same-sex spouse, pursuant to the Family and Medical Leave Act.  But, given the Obama Administration’s pledge to secure equal treatment for all same-sex married couples, it will hopefully be only a short time until these agencies board the ship of full equality.

Amidst this sea of transformative progress, however, Pennsylvania floats somewhat adrift.  As of publication, the Keystone State regrettably remains the only state in the Northeast not to allow same-sex marriage and recognize its citizens’ out-of-state same-sex marriages.  Even after removing himself as a defendant in Whitewood and unsuccessfully attempting to have the case dismissed, Governor Corbett has remained staunchly committed to defending Pennsylvania’s same-sex marriage ban.  Not only are such views out of touch with the majority of Pennsylvania voters who now support legalizing same-sex marriage, they swim against the current of progress flowing in other states.

But that could all change soon.  On April 21, 2014, attorneys for the Whitewood plaintiffs submitted motions asking the Court to decide the case as soon as all papers have been filed on May 12, 2014.  The case, which seeks a ruling that the state’s same-sex marriage ban violates a fundamental right to marry and unlawfully discriminates against same-sex couples, was originally scheduled for trial in Harrisburg, Pennsylvania on June 9, 2014.  Recently, the attorneys realized a trial was unnecessary when the defendant (technically, the Commonwealth of Pennsylvania) stated it would not call any experts to argue in favor of the state’s same-sex marriage ban – a significant case development that many have viewed as signaling the Commonwealth’s decision to stop defending the (hopefully) doomed law.

Though many appear certain that the Judge presiding over Whitewood will swim with the current of progress and overturn Pennsylvania’s law prohibiting same-sex marriage, the question of the breadth of his decision lingers. It is possible Judge James will decide that Pennsylvania’s law does not further any legitimate purpose and thus does not have a “rational basis,” as some post-DOMA judges have continued to do, and strike the law down on this ground alone.  Those advocating for marriage equality are hopeful, however, that the Judge will adopt the position of the Obama administration that laws which discriminate based on sexual orientation deserve “heightened scrutiny,” meaning that the government must have an important goal that is furthered by the discriminatory treatment – a near-impossible standard for Pennsylvania to meet in this case.  Adopting “heightened scrutiny” would also pave the way for increased protections against sexual-orientation discrimination in other areas, like employment and housing.

Still, some have questioned whether, at this point, the outcome of the numerous same-sex marriage cases pending in courts throughout the country even matters.  In their view, the ripple effect of progress elsewhere – particularly in conservative states like Texas and Oklahoma – is enough of a victory to sustain morale until the Supreme Court legalizes marriage nationwide.  What is more, they say, same-sex couples wanting to marry are free to do so and will receive many of the same federal benefits their opposite-sex counterparts.  That is, of course, so long as the couple is willing to travel in search of equality by marrying out of state.

Pose the question of whether the fight still matters to any of the 23 Whitewood plaintiffs (ten couples, two children, and one widow) fighting for equality, and the answer will undoubtedly be a resounding “yes.”  The same can surely be said for the plaintiffs in the four other same-sex marriage cases currently proceeding through Pennsylvania courts, two of which address issues surrounding the marriage licenses that Montgomery County’s Register of Wills, Bruce Hanes, issued for several months after DOMA’s timely death.

There are thousands of same-sex Pennsylvania couples anticipating the day they can marry in the state they call home and be treated equally under Pennsylvania law.  They are proud that the fight is taking place on home turf.  And, given that, just recently, the Alabama House of Representatives approved a resolution calling for a convention to discuss adding a nationwide same-sex marriage ban to the U.S. Constitution, lawsuits like Whitewood remain a critical component of the fight for marriage equality in the United States.

In light of that importance, though, some have expressed frustration over Whitewood’s comparatively slow advancement through the court.  Whitewood was, in fact, the first federal post-DOMA lawsuit filed challenging a state same-sex marriage ban.  Vic Walczak, lead Plaintiffs’ attorney from the ACLU of Pennsylvania, appreciates that the wait is trying for Pennsylvanians anxious for their state to get on the right side of history.  But, he also wants people to understand that Whitewood’s careful, steady progress was purposeful.  According to Attorney Walczak, the lawyers have always “felt the need to develop a full record, both by presenting our clients’ compelling stories to show that same-sex couples are just like other couples who marry, and by presenting expert testimony to debunk all arguments that the discrimination can be justified in any way.”  He adds that, because of this methodical approach, “Whitewood may be an especially attractive candidate, when and if the Supreme Court selects a same-sex marriage case for review.”

Ultimately, Whitewood could be the case in which the Court decides, once and for all, to untether states’ same-sex marriage bans from their unconstitutional moorings and embrace marriage equality for all.  First to set sail, Pennsylvania’s same-sex marriage case may end up making the biggest wave of all.

A substantially similar version of this article was published in on pages 102-105 of Equal Magazine’s June 2014 edition, which can be found online at http://issuu.com/pittsburghpride/docs/equal_magazine_may_june_issuu.  This article is published here with express permission from the Delta Foundation.