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Estate PlanningLegal AnalysisMarriage Equality

Windsor: An Update on the Same-Sex Marriage March

By November 14, 2012No Comments

I wrote about this case in the “Love & the Law” series.  It has huge estate planning implications for the LGBT community and recently, the Obama Administration has recommended it instead of other same-sex marriage cases that the U.S. Supreme Court is deciding whether to hear.

Factual synopsis: When Thea died, the federal government refused to recognize her marriage to Edie (they were legally married in Toronto, Canada) and taxed Edie’s inheritance from Thea as though they were strangers. Under federal tax law, a spouse who dies can leave her assets, including the family home, to the other spouse without incurring estate taxes.

The Tax Wall

Photo: Royalty Free Images

Traditionally, whether a couple is married for federal purposes depends on whether they are considered married in their state. New York recognized Edie and Thea’s marriage, but because of a federal law called the “Defense of Marriage Act,” or DOMA, the federal government refuses to treat married same-sex couples, like Edie and Thea, the same way as other married couples.

Edie challenged the constitutionality of DOMA and sought a refund of the estate tax she was unfairly forced to pay. The Southern District Court of New York (“SDNY”) agreed with Edie and granted summary judgment, stating that it could find no rational basis for Section 3 of DOMA and therefore, Section 3 violated the Equal Protection Clause of the U.S. Constitution.

The Bipartisan Legal Advisory Group (“BLAG”), hired by the House of Representatives to defend the government, appealed to the Second Circuit setting forth 3 basic legal arguments and additional non-legal arguments. The legal arguments were as follows:

  1. Federal estate tax law provides that the state of domicile determines marital status and because at the time of Thea’s death, New York didn’t perform same-sex marriages, the lower court’s decision should be overturned. The Second Circuit stated that it could predict that New York would have recognized the marriage at the time of Thea’s death, so that argument was defeated.
  2. Congress can prohibit same-sex marriages like states can per Baker v. Nelson. The Second Circuit reminded BLAG that state regulation and federal regulation are different. So Baker wasn’t applicable in this case.
  3. Section 3 of DOMA should be analyzed using the rational basis or “rational basis plus.” The Second Circuit stated there is no such thing as “rational basis plus” yet and set out a four-prong test for heightened scrutiny per Bowen v. Gilliard and City of Cleburne v. Cleburne Living Center and established that the LGBT community passed this test and should be considered a quasi-suspect class.

After reviewing the non-legal arguments to provide rhetorical dicta, the Second Circuit affirmed SDNY’s decision, holding that “Section 3 of DOMA violates equal protection and is therefore unconstitutional.”

The thorny part of this case is that the Second Circuit’s decision reads like a roadmap for the Supreme Court to punt the cases on DOMA back to the states. However, the argument against the proposition that state and federal regulations are different and, therefore, this should be an issue left for the states to decide, is that many regulations may be different but many state and federal regulations also overlap, if not in substance, in application. Hence, parsing the overlap of the rules and regulations that DOMA implicates may be more burdensome with respect to costs for both the states and the federal government than simply ruling that DOMA is unconstitutional.

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