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Same Sex Couple Estate Planning Under Windsor Ruling

In June 2013, the United States Supreme Court invalidated the federal Defense of Marriage Act (DOMA) in the historic United States v. Windsor case. The Windsor ruling has changed a number or federal rules within the IRS, Social Security Administration, and other agencies that now provide a host of new estate planning opportunities for legally-married same-sex couples.

In September 2013, the IRS ruled that legally married same sex couples would now have the same status as opposite sex married couples for income, estate and gift tax purposes. This new rule applies to all married same-sex couples no matter where they live, provided they were wed in states that recognize same-sex marriage.

These rule changes open up a whole new estate planning landscape for married same sex couples, including:

Marital deductions – ability to make unlimited transfers to each other without incurring federal gift or estate tax, during life or after death.

Community property – married same-sex spouses living in community property states can retitle assets to get a full step-up in income tax basis following the death of one spouse.

Gift splitting – spouses can combine their annual gift tax exemptions of $14,000 per year to make a gift to anyone up to $28,000 without incurring a gift tax.

Retirement plan and IRA beneficiary designation – married same-sex spouses can be the sole beneficiary of qualified retirement plans and IRAs; surviving spouse can now take advantage of special rules when it comes to rollovers and delayed distribution of retirement account assets.

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