Part of DOMA Is Gone, But Benefits for Same-Sex Couples Are Far From Clear
Written by Jacque Mingle
It’s rare when a case centering on the federal estate tax case reaches the Supreme Court. It’s even rarer when the result of such a case has sweeping national consequences. We are, of course, referring to United States v. Windsor, in which the Supreme Court struck down a section of the federal Defense of Marriage Act (DOMA).
In Windsor, the surviving spouse of New York lesbian couple argued that the couple should be afforded the marital deduction on the deceased spouse’s estate tax return – just like an opposite sex couple. DOMA stood in the way, and the Supreme Court ruled that Section 3 of the Act, which defined marriage as only between a man and woman, was unconstitutional on both states rights (they get to define marriage) and equal protection grounds. The result is that the federal government must recognize same-sex marriages that are valid according to state law. The decision, however, did not involve Section 2 of DOMA, which allows states to deny recognition of other states’ same-sex marriages. So, states are free, for now, to ban same-sex marriage and deny those married in other states the benefits (or responsibilities) of being married. (Lawsuits are already under way to challenge some state bans.)
When it comes to federal benefits, the combination of recognition for federal law purposes and allowing non-recognition for states has created a lot of confusion. There are more than 1,000 federal laws, regulations and rules that consider a person’s marital status in some fashion, including income-tax filing status, health-care benefits, bankruptcy protection, burial rights in veterans’ cemeteries, and even financing political campaigns. Each is governed by different legislation and agencies, and may or may not tie “marriage” to a state’s definition. The feds are currently assessing each one and arriving at what the bottom line will be for same-sex couples.
This much is clear: For same-sex couples who were married in and live in one of the states that recognizes same-sex marriage, they now are considered married in every instance, for both state and federal purposes. These “recognition” states currently are California, Connecticut, Delaware, Iowa, Maine, Maryland, Massachusetts, New Hampshire, New York, Vermont, Washington, and Washington, D.C. Minnesota and Rhode Island join that group on Aug. 1.
The landscape is murky for those who married in a recognition state and now live in one of the thirty states (which include Arizona) that ban gay marriage or the states that recognize civil unions or domestic partnerships. (Colorado, Hawaii, Illinois, and New Jersey have civil unions, and Oregon, Nevada, and Wisconsin have domestic partnerships.)
Arizona same-sex couples can’t skip out to California to get hitched and expect to see full federal benefits when they get back, but they may see some. A law, regulation, or agency may base its marriage determination on where someone resides (or is “domiciled”) or where the marriage took place – or may not specify at all. So there is a lot of sorting out to do.
President Obama has suggested that his administration will, wherever it can, recognize a marriage regardless of place of residence. He has said, “It’s my personal belief — but I’m speaking now as a president as opposed to as a lawyer — that if you’ve been married in Massachusetts and you move someplace else, you’re still married, and that under federal law you should be able to obtain the benefits of any lawfully married couple. But I’m speaking as a president, not a lawyer.”
Note that he emphasized – twice – that he was not speaking as “a lawyer,” which suggests his “lawyer” answer would be very different. Legally, it’s just not possible in some cases to change whether residence or celebration governs without legislative action (or litigation). Here’s just a sampling of the issues:
Social Security: Whether a spouse can receive spousal or death benefits hinges on the law of the state in which the wage earner was domiciled OR whether he or she could inherit property from the wage earner without a will under the domiciled state’s laws of intestacy. Here, those in civil unions and domestic partnerships may qualify because of the intestacy alternative because those states include property inheritance rights. Spouses of wage earners domiciled in non-recognition states appear to be out of luck. But the agency is studying what to do. Go here for more on Social Security.
Taxes: IRS practice also determines marriage by the state of domicile rather than the state of celebration. However, the IRS recognizes common-law marriages, even when couples relocate to states that do not recognize the marriage. It remains to be seen whether the federal government will adopt a similar policy for same-sex marriages. This is a very big determination, as it affects nearly 200 tax code provisions that have something to do with a person’s marital status, including many income tax deductions and credits. For the estate tax, “married” couples enjoy exemptions for transfers of property between them and can use their deceased spouse’s unused exemption under the “portability” provision. (See this month’s article on portability.) The IRS has promised to issue guidance soon.
Active Duty Military: Their benefits are governed by the Department of Defense, and it plans to offer full employment benefits to married same-sex couples, no matter where they live. So, spouses will get medical care, military base privileges, pension rights, burial in national cemeteries, and more.
Veterans: Not so with Veterans, governed by the Department of Veterans Affairs. Veterans’ marital status is determined by state of residence at the time of the marriage, or state of residence when benefits accrue. It’s unclear whether the VA will apply one of the definitions or both and allow same-sex marriages in recognition states to cross state lines into non-recognition states.
Immigration: The U.S. Citizenship and Immigration Services focuses on the place of celebration, regardless of residency, which means a same-sex spouse in any state can sponsor his or her foreign national spouse for visas and those engaged can file for fiancé petitions. Go here for more on USCIS policies. The Department of Homeland Security will also grant permanent visas to the foreign-born spouses of U.S. citizens, even if living in a non-recognition state.
Medicaid Long-Term Care (ALTCS in Arizona): Care is based on need, and married couples are treated differently than single people in terms of income and amount of property that may be retained. Because the programs are federal-state partnerships, state of domicile will govern. This could help some same-sex couples because if a “spouse” is not recognized as such, his or her income won’t be considered in determining eligibility. On the other hand, a couple whose marriage is not recognized will be penalized for transferring property to one another, whereas a “married” couple will not. (Similarly, having a “spouse” with income may disqualify a person from receiving or cause a reduction in other federal needs-based benefits because a spouse’s resources are counted.) For more on this issue, go here.
Medicare: Like Social Security, “marriage” can be based on two factors: whether validly married under the law of the state of residence when applying for benefits; OR whether he or she has the right to inherit under the laws of intestacy of the state of residence upon application.
Employee and Retirement Benefits: Many employee benefit plans recognize “domestic partners” and provide benefits to them, but it depends on the provisions in the plan. DOMA required such benefits to be taxed as income, and whether that ceases for all married same-sex couples depends on whether the IRS chooses to recognize out-of-state marriages. Other aspects of employee benefits include continuation of health insurance under COBRA, requirement of spousal approval to name non-spouse beneficiaries, availability of a spousal annuity, and certain qualified withdrawals for a spouse. Some aspects of benefits are governed by the Department of Labor, which may issue guidance soon. As for benefits not covered by federal law (like IRAs), definitions and choice of law provisions in the plans will determine whether a same-sex spouse may be considered a spouse.
Bankruptcy: Federal law determines a lot of what happens in bankruptcy, but state law governs other aspects, such as the amount and type of property a person can retain. Married couples often can retain more. There is no federal statute or regulation that addresses whether a marriage is valid, so this is an area where guidance is needed.
Federal Student Aid: Students with same-sex parents or spouses will now need to include both parents (or spouse) for income and size of household on the Free Application for Federal Student Aid, which is used to determine whether a student is eligible for federal aid.
For more on specific issues, see the fact sheets at http://www.nclrights.org/site/PageServer?pagename=DOMA_FAQ_2013
Other related issues:
Divorce: Same-sex married couples may not be able to get divorced if they live or move to a non-recognition state. For that reason, a prenuptial or postnuptial agreement can be useful to divide property should the union not last.
Estate Planning Documents: Do you have any provisions for spouses of your children, dependents, or other beneficiaries? If so, you may want to consider adding a definition of “spouse” to specifically include (or exclude) same-sex spouses. Under current Arizona law, any same-sex spouse would be excluded, but if Arizona law someday changes, it would also change under your will, trust, or power of attorney.