The 1990 U.S. Census was the first U.S. Census to attempt to count unmarried couples living in the same household. In that Census, 145,130 households self-identified as unmarried same-sex couples. By the 2000 U.S. Census, 601,209 households self-identified as unmarried same-sex couples, representing less than 2% of the national population. The Human Rights Campaign estimates that the Census data may be an underreport, as the 1996 Defense of Marriage Act (“DOMA”) requires that federal agencies, including the Census Bureau, disregard or invalidate same-sex “spouse” responses. A Harris Interactive Poll in February of 2001 suggested that thirty percent (30%) of gay and lesbian couples share a household.

What is DOMA?

DOMA is a federal statute enacted in 1996, which states that “No State, territory, or possession of the United States, or Indian tribe, shall be required to give effect to any public act, record, or judicial proceeding of any other State, territory, possession, or tribe respecting a relationship between persons of the same sex that is treated as a marriage under the laws of such other State, territory, possession, or tribe, or a right or claim arising from such relationship.” This means that though Massachusetts (or future states) has a state law permitting same-sex couples to enter into marriage, other states are not required to recognize that legal relationship as a marriage. Numerous members of the legal profession question whether this provision within DOMA violates the U.S. Constitution’s Full Faith and Credit Clause, which, for example, requires North Carolina to recognize a marriage entered into in Virginia to be recognized in this state, without requiring couples who move here to re-marry. Furthermore, the U.S. Supreme Court has noted that, “decisions of this Court confirm that the right to marry is of fundamental importance for all individuals,” though it has not yet heard a case on the Constitutionality of DOMA as applied to citizens who have entered into a valid same-sex marriage.

North Carolina, like many other states, has enacted a “mini-DOMA,” by state statute: “Marriages, whether created by common law, contracted, or performed outside of North Carolina, between individuals of the same gender are not valid in North Carolina.” North Carolina’s basic requirements for marriage include, “consent of a male and female person who may lawfully marry . . .”

How does DOMA affect estate planning?

DOMA further states that for purposes of federal law, “In determining the meaning of any Act of Congress, or of any ruling, regulation, or interpretation of the various administrative bureaus and agencies of the United States, the word “marriage” means only a legal union between one man and one woman as husband and wife, and the word “spouse” refers only to a person of the opposite sex who is a husband or a wife.” This means that in interpreting all existing and future federal laws that the federal government will recognize only heterosexual marriages for the purposes of federal recognition.

For example, the Internal Revenue Code, which governs every aspect of federal taxation, cannot recognize same-sex marriages or other state-sanctioned unions (such as civil unions in New Jersey, Connecticut, New Hampshire, or Vermont). As a result, a married same-sex couple in Massachusetts might file jointly as a married couple for state income tax purposes, but file separately as single for federal income tax purposes. For estate planning purposes, a married opposite-sex couple may leave an unlimited amount of property to one another as legal spouses, while a married same-sex couple may not.

The General Accounting Office (GAO) of the Federal government published a report in 1997 illustrating the 1,049 federal laws in existence at that time which hinge upon recognizing marital status. Major categories identified by the GAO which impact estate planning considerations include, but are not limited to, Social Security benefits, Veterans’ benefits, taxation, Federal civilian and military service benefits, employment benefits, naturalization, commerce and intellectual property, and financial disclosure and conflicts of interest. For example, the HRC has illustrated the unequal income tax burden of employees receiving health care coverage for their same-sex domestic partners.

Prior to the enactment of the Pension Protection Act of 2006, only surviving spouses could inherit an IRA from their decedent spouses and treat such IRA as their own. This meant that non-spouse beneficiaries, whether an unmarried partner or a child of the decedent, were required to take a lump sum distribution in the year the IRA was inherited, often resulting in difficult income tax burdens. Since 2007, under the new Section 402 of the Internal Revenue Code, designated non-spouse beneficiaries may transfer proceeds of the decedent’s IRA into an inherited IRA, with distributions taken according to the beneficiary’s age. This is a small bright spot in federal law for those wishing to leave their qualified retirement plans to a non-spouse. For more on this important provision, read the following Wall Street Journal article reprinted online.

A Will cannot control to whom your bank accounts or life insurance policies will be paid upon your death. Every life insurance policy requires a beneficiary designation, or a policy held on your life may be paid automatically to your estate, subjecting life insurance proceeds to probate fees. Similarly, banking and investment accounts have a “Payable on Death” on “P.O.D.” designation.

For more information on the estate planning and tax implications of federal non-recognition of same-sex marriages and same-sex couples, go to:

Gift Tax Considerations

Property Ownership

Contact Us:
Dan Brady - dbrady@bradynordgren.com, 919-782-3500
Tim Nordgren - tnordgren@bradynordgren.com, 919-782-3500
Daire Roebuck - daireroebuck@bradynordgren.com, 919-782-3500

Back to Index