On June 26, the Supreme Court issued a landmark decision in United States v. Windsor. In the decision, the Court ruled that Section 3 of the Defense of Marriage Act (DOMA) is unconstitutional. If a couple legally weds in a jurisdiction that allows same-sex marriages, the federal government cannot deny that couple the same benefits (and burdens) that are granted to other married individuals. The decision did not go so far as to prohibit states from defining who can be married in that state; the ruling holds that if there is a legal marriage, the federal government cannot ignore that union.
What does this mean for married same-sex couples? Following this decision, same-sex couples the IRS recognizes as married should be able to file jointly or as married filing separately. However, the IRS definition for "marriage" is awaiting further guidance. It is unclear whether the IRS will adopt its own definition or follow state law, and how civil unions will be treated. Keep in mind that the filing status may be more of a burden than a benefit if both individuals are high-income earners (the marriage penalty will now apply to all). It is not clear if there will have to be retroactive filings, and we will have to wait for additional guidance from the government.
Estate and gift tax planning also may be simplified for same-sex couples. Most married couples should be able to take advantage of the unlimited gift and estate tax marital deduction available for transfers between spouses. There may be more choices in structuring estate plans—but some techniques that have been available for same-sex couples may no longer be available. Again, how the IRS decides to define "marriage" will be key in determining which couples can take advantage of these opportunities.
Employers also may be affected by the Windsor decision. Employers in states that allow same-sex marriages may need to amend plans to cover same-sex married spouses. There may be changes to the taxation of benefits paid for same-sex partners, benefits available under Cafeteria Plans and Health Savings Accounts, and the application of COBRA and Family Medical Leave Act benefits. The IRS is expected to provide guidance on the timing of plan amendments and whether the amendments need to be retroactive or can be only prospective.
The Internal Revenue Service has said it will issue revised guidance in the near future. However, they have not indicated whether they plan to follow state laws or adopt rules of their own in defining marriage. So, while there is a lot that remains unclear, income, estate, and gift planning as well as employee benefit planning is still something that should be considered before making any large transfers or embarking on a life-changing event—by everyone.