estate planninglegal analysismarriage equality

What If I’m Neither: The Dual-Track Agency Dance

By March 11, 2015No Comments

In our first article in this series, unlike Illinois law, we alluded to how Windsor created tricky issues for the LGBTQ community to navigate with respect to marriage. The Illinois Marriage Fairness Act embraces the entire LGBTQ community, whereas Windsor does not.  Okay, but what does this mean?

Part of the Windsor decision required action by the IRS, which resulted in the IRS passing Revenue Rule 2013-17 (“Rev. Rule 2013-17” or “Rev. Rule-17”). The rule stated that the agency never gave much, if any, meaningful consideration to gender; so, since the Court in Windsor required IRS action, the agency the IRS mandated that, post-Windsor, its rules and regulations governing all taxation applicable to heteronormative (“straight”) married couples would also apply to lawfully same-sex married couples.  Additionally, the IRS announced that it would use the “place of celebration” standard when reviewing its matters with respect to married couples. Finally, the agency strongly suggested that other federal agencies, especially those whose benefits were governed by IRS rules and regulations, to follow suit. However, many federal agencies that used male and female descriptors in definitions involving marriage didn’t recognize same-sex marriages before Windsor.

So, post-Windsor, a number of federal agencies decided that, like the IRS, they were required to abide by the Supreme Court decision for lawfully married same-sex couples, the agencies were not required to use the same standard of review for determining benefits as the IRS and the Court would not disagree, per another seminal Supreme Court case, Chevron. Therefore, many agencies decided to use the “place of domicile” standard instead.

Explaining the “standards”

Place of Celebration: Same-gender marriages are recognized as legal as long as the place where the couple was married provides legal same-gender marriages. An agency that uses this standard will recognize your marriage even if you live in an unfriendly state.

Place of Domicile: The same-gender marriage must be legal where the married couple resides. Ergo, if the couple was married in Illinois, which provides same-gender marriages, but lives in Florida, an unfriendly state that does not recognize same-gender marriages, then an agency using this standard will not recognize the marriage as legal.

The dual-standard usage by federal agencies resulted in a dual-track federal benefit system for legally married same-sex couples. So, while Windsor was a great milestone for the LGBTQ community, the federal agency guidance that followed created an interesting path for planners to navigate, depending on the benefits the plan needed to consider.

For example, if estEP for TQ 1ate planning attorneys consider the dual-track federal benefit system strictly from a same-sex paradigm, i.e., lesbian, gay, and bigender, the decision matrix would resemble the chart to the left.

Also, if attorneys consider the dual-track benefit system when planning for a transgender person who is in transition and cannot check a gender box or a queer person who will not check a box, then we’re left with the question marks below.

 

EP for TQ 2All of the question marks are appropriate for transgender married couples who even reside in friendly states, such as Illinois, because lawyers must consider a plethora of benefits from agencies that a potential surviving spouse should receive were that spouse in a heteronormative marriage.

Still, as the chart below illustrates, agencies following Windsor and using the place of domicile standard can inadvertently preclude transgender or queer surviving spouses from enjoying benefits that surviving spouses who are in lawful same-sex marriages enjoy.

 

EP for TQ 3

 

Considering a transgender person who has completed their sexual reconstruction and resides in an unfriendly state or who would like to leave benefits to their spouse, results in several questions about the definition of ‘spouse’ as derived from a particular statute or regulation governing a particular benefit:

  • If the state defines spouse in terms of Windsor and the couple consists of a transgender man and a non-transgender woman, then is the couple a same-sex couple?
  • If a state benefit did not follow Windsor, should the couple argue that the transgender man’s identity should apply and, therefore, they are a heteronormative couple able to receive the benefit?
  • If the transgender man could transfer benefits to his spouse but a same-sex married couple living in the same state could not, is that fair?
  • If the transgender man began his transition before Windsor and completed his transition after Windsor, would a federal benefit even apply?

These and many questions are what transgender and queer couples must contend with in Windsor’s wake. Stay tuned for a few solutions and, of course, more questions.

Estate Planning for the T&Q of the LGBTQ Community: Part 1 | Part 2 | Part 3 | Part 4

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