Court case being watched by advisers of same-sex couples

Supreme Court asked to rule on extending marital deduction to gays living in states that recognize same-sex marriage

Aug 9, 2012 @ 11:55 am

By Liz Skinner

Financial advisers who have same-sex couples as clients need to keep abreast of a recent legal decision that's headed toward the Supreme Court.

A federal court in New York has declared that part of the federal Defense of Marriage Act, which states that a marriage must be between one man and one woman, is unconstitutional for blocking a same-sex couple from claiming the federal estate tax marital deduction.

In the Windsor v. U.S. decision, the judge ordered that Edith Windsor be refunded $363,000 that was taken from the estate of her late female spouse because she wasn't able to claim the marital deduction, even though their union was recognized by New York. Lawyers for Ms. Windsor have asked the Supreme Court to take up the case without waiting for a decision by an appeals court.

Many believe this case, as well as others where the constitutionality of DOMA has been questioned, will need to be answered by the nation's top court. If ruled unconstitutional, the federal law passed in 1996 no longer will stand in the way of same sex couples' receiving income and estate marital tax deductions, and well as other benefits, such as Social Security or pensions.

“The writing is on the wall that DOMA will no doubt be brought before the Supreme Court in the next year or two,” said Cathy Pareto, an adviser whose eponymous firm in Miami oversees $60 million in assets.

She said the Windsor case is “groundbreaking” for couples in states where she contends they should be able to take advantage of the financial benefits awarded married couples. Six states — Connecticut, Iowa, Massachusetts, New Hampshire, New York and Vermont — as well as Washington, D.C., recognize same-sex marriage.

Despite the importance of the New York ruling in June, Ms. Pareto said she isn't recommending any planning changes right now for same-sex couples.

“We're in a holding pattern,” she said.

President Barack Obama in May expressed support for same-sex marriage, and his administration has said it will stop defending DOMA from legal challenges.

Financial planner David Rae of Trilogy Financial Services Inc. specializes in the needs of the gay community, and he advises gay couples to have a wedding whenever they wish, but wait to “make it official” until they can do so at the federal level.

“I don't think you'll have to wait that long,” he wrote in a blog Thursday.


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