On June 26, the United States Supreme Court handed down two decisions addressing same-sex marriage. One case dealt with Proposition 8, an initiative adopted by California voters in 2008 banning same-sex marriage in the state. The second case was a constitutional challenge to the Defense of Marriage Act (DOMA), a 1996 act of Congress prohibiting federal recognition of same-sex marriages.
In each case a divided Supreme Court provided relief in favor of same-sex couples. The Proposition 8 case was decided on a procedural issue, however, while the Court emphatically held a portion of DOMA to be unconstitutional. Both decisions present important legal and estate planning questions for same-sex couples going forward.
Federal Government Must Recognize Valid Same-Sex Marriages
The DOMA case actually has its roots in a common estate planning situation. Edith Windsor and Thea Spyer were a same-sex couple who lived together as partners in New York for many years. In 2007 the couple traveled to the Canadian province of Ontario, where same-sex marriages have been legally recognized since 2003, and married. New York State subsequently recognized the marriage as valid. Spyer died in 2009 and left her estate to Windsor.
Normally, any part of a person’s estate that passes to his or her spouse is exempt from federal estate tax. The Internal Revenue Service concluded that Windsor was not a surviving spouse entitled to this marital exemption, however, because DOMA only recognized marriages of opposite-sex couples. Absent the marital exemption, Spyer’s estate paid the federal government $363,053 in estate tax.
Windsor sued the federal government. A district judge in New York agreed with her that DOMA was unconstitutional and ordered the IRS to refund the improperly assessed estate tax. Although the Obama administration agreed that DOMA was unconstitutional, it did not comply with the district court’s judgment and instead appealed the decision to the Supreme Court.
By a 5-4 vote, the Supreme Court agreed with the lower court that DOMA was unconstitutional. Justice Anthony M. Kennedy, writing for the Court, said the Fifth Amendment guaranteed all persons equal liberty, including the freedom to marry, and the federal government had no right to discriminate against marriages deemed lawful by individual states, where marriage has traditionally been regulated.
The Court’s decision does not legalize same-sex marriage in individual states where it is not presently legal. It simply requires the federal government to honor those same-sex marriages that are validly recognized under state law. The decision did not invalidate the portion of DOMA dealing with the full faith and credit clause. Therefore, if a same-sex couple is married in a state where it is legal and moves to a state where it is not recognized, the new state does not have to recognize the marriage.
In Windsor’s case, that means the Federal Government and the IRS must recognize her as a surviving spouse for purposes of determining estate tax.
Same-Sex Marriages to Resume in California
Unlike the DOMA decision, the Proposition 8 case dealt with the legality of same-sex marriage in a single state-California. In 2008, the California Supreme Court held it was a violation of the state constitution to deny same-sex couples the right to marry. Later that year, Proposition 8 passed, amending the state constitution to require such discrimination. As in the DOMA case, a federal district court held Proposition 8 unconstitutional and issued an injunction prohibiting state officials from enforcing any ban on same-sex marriage.
What happened next created significant confusion. California Gov. Jerry Brown and Attorney General Kamala Harris were the named defendants, in their official capacities, in the Proposition 8 lawsuit. They chose not to appeal the district court’s injunction. The original Proposition 8 supporters instead intervened and appealed to the Ninth Circuit Court of Appeals in San Francisco. That court affirmed the district judge’s decision.
The Proposition 8 supporters then appealed to the Supreme Court, which agreed to hear the case. Ultimately, another 5-4 majority decided to dismiss the appeal because the Proposition 8 supporters lacked standing. Although the California Supreme Court said Proposition 8’s supporters might have standing to defend the law in state court, the U.S. Supreme Court said that was insufficient for purposes of federal standing. Chief Justice John G. Roberts, Jr., writing for the Court, noted, “We have never before upheld the standing of a private party to defend the constitutionality of a state statute when state officials have chosen not to.”
The Supreme Court only dismissed the appeal of the district court’s decision, not the decision itself. Thus, California officials are enjoined from enforcing the Proposition 8 ban on same-sex marriage. Shortly after the Court announced its decision, the California Department of of Public Health issued a memorandum to county clerks stating same-sex couples must be allowed to marry once the Ninth Circuit officially dissolves its stay of the district court’s injunction.
Preparing for a New Legal Reality
With California poised to resume same-sex marriages and DOMA’s ban on federal recognition now consigned to history, same-sex couples in the state now face the same types of estate planning issues as other married couples. It’s important to work with an experienced California estate planning attorney who can advise you on issues like dealing with the federal estate tax. Contact the Law Office of Scott C. Soady today if you have any questions.