In the state of New York we have an estate tax on the state level. There is a $1 million exclusion on asset transfers, so only the first $1 million that you leave behind to your loved ones can pass tax-free.
The above is true for everyone except married couples. If you are legally married you can leave any amount of money to your spouse tax-free utilizing the unlimited marital exemption.
Because gay marriages are legal in New York this applies to same-sex couples who are legally married as well as heterosexual couples.
However, we also have an estate tax on the federal level. There is an unlimited marital exemption for transfers between spouses on this level as well. However, the federal government does not recognize same-sex marriages.
This is because of the verbiage of Section 3 of the Defense of Marriage Act. As a result, at the present time legally married gay couples don’t have access to this exemption.
A New York resident named Edith Windsor has challenged the federal government, contending that Section 3 of the DOMA is unconstitutional. She was forced to pay over $350,000 in estate tax after the death of her partner Thea Spyer in 2009. The pair married in Canada a couple of years prior to the death of Ms. Spyer.
This case has made it all the way to the Supreme Court after two lower courts found in favor of the plaintiff. If the highest court in the land also finds that the Defense of Marriage Act violates the Equal Protection Clause that is contained within the 14th Amendment legally married gay couples may indeed be able to start taking advantage of the unlimited marital estate tax exclusion.
Mark S. Eghrari, Estate Planning Attorney
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