Marriage, Registered Domestic Partnerships, and Your Rights: Where Does the Overlap Between California and Federal Law Leave You?

This post is based on a talk I gave recently at Cal Poly, San Luis Obispo. My goal for the talk, and for this post, is to give you an overview of relevant law in order to increase awareness and give you a enough of a background that you can seek out more information in the areas that affect you. This is especially important where your rights are at stake and there are ways that you can protect yourself and your loved ones.

The overlap between California’s Proposition 8 and the federal “Defense of Marriage Act,” or DOMA, has resulted in a lot of confusion and uncertainty. This is only increased by the constant changes in this area of the law. However, the good news is that most of the recent changes have been positive ones - several states have enacted marriage equality in the last year, bringing the total to twelve states plus the District of Columbia. (MarriageEquality.org has a good map showing State-Level Marriage Equality.) Two more opportunities for positive change are currently under consideration by the United States Supreme Court: Hollingsworth v. Perry (the California Prop 8 case), and United States v. Windsor (challenging Section 3 of DOMA). A decision could be issued in these cases any day now, and I will address the potential outcomes of these cases towards the end of this article. 

First, I want to start with some information on current California and federal law affecting same-sex couples, and some of the issues that arise, including tax returns and immigration. I also want to mention some areas that require special attention, including medicare, spousal social security benefits, self-employment tax, and divorce.

Then I’m going to get into estate planning, which is likewise full of issues to be aware of, but offers several ways to protect yourself and your family. I will give you an overview of what estate planning is, I’ll explain some of the reasons that estate planning is esepcially important for same-sex couples, and finally I’ll discuss some of the ways that preparing an estate plan can help protect you and your loved ones.

I will wrap up by discussing the Prop 8 and DOMA cases currently in front of the United States Supreme Court, and what we can expect from those decisisons.

CURRENT AND PAST CALIFORNIA LAW

California currently allows same-sex couples to register as registered domestic partners with the state of California. The state does not currently allow same-sex couples to marry, though it did for a short period of time in 2008, until Proposition 8 was approved at the ballot (those marriages performed in 2008 are still valid in California). Though California law does not currently allow for same-sex marriage, it does grant all of the rights and privileges of marriage to registered domestic partners and spouses validly performed in other states and counties.

There have been many versions of registration allowed in recent years in California. Many partners may have originally registered with their city, county, or even their employer to obtain health insurance or other benefits. It’s very important to note that none of these qualify as “registered domestic partnerships.” In order to be considered registered and to receive all of the rights and responsibilities of marriage in California, you must have registered with the secretary of state of California. If you are not 100% sure that your partnership is registed with the Secretary of State of California, please double-check, otherwise you may not be covered by the “rights and privileges” that you think you are.

Federal law is very different from state law in this area, and same-sex marriages and registered domestic partnerships are not recognized under federal law for most purposes. As of 2003 there were 1,138 federal code provisions which include marital status as a factor in determining eligibility for benefits, rights, or privileges. This is why overturning DOMA is so important; no matter what rights and privileges the state of California - or any other state - grants with respect to marriage, same-sex couples will not be recognized under federal law until DOMA is overturned.

Rights and Benefits of Registration/Marriage under California Law

Despite the lack of federal recognition, there are still many benefits to marriage or registration in California. Now, marriage (or registration) is a very personal decision. I believe that this decision is between you and the person you love - it is not up to your lawyer, or up to your accountant. But I also believe in having all of the information so that you can make an informed decision. My purpose in sharing this information is not to convince you to get married, but to give you information, which you can then use to make your own decision.

First, I think a quick primer on community property law is in order. In California, wages earned during marriage or registered domestic partnership are community property. That is to say, your spouse or registered domestic partner automatically owns a 50% interest in everything you earn, and everything that is purchased with your earnings, and you automatically have the same 50% interest in everything your partner earns or purchases with earnings. Anything that you earned or purchased before marriage or registration is separate property, and anything that you inherit or receive as a gift during marriage or registration is separate property (though there is a presumption of community property, so if it is important to you to keep your separate property separate, get a new bank account that you only use for separate property, or otherwise keep it separate from community assets). Your rights with respect to community property can be affected by a valid pre- or post-marital agreement (including pre-nups), which I am not going to address here - you’ll want to see a family law attorney if you want more information on pre- or post-marital agreements.

If you purchase or otherwise own real property jointly with someone else, there are several forms that ownership can take. Some forms of ownership are only available to married or registered couples.

Married or registered partners may also have access to spousal property petitions after the death of the first spouse or partner, which can help avoid full probate and save you time and money.

If you die without an estate plan, or if your estate plan is successfully challenged or otherwise invalidated, intestate succession will determine who inherits from your estate. Intestate succession provides for inheritance by a spouse or registered domestic partner; it does not provide for inheritance by an unmarried and unregistered partner.

Some state pensions and other retirement benefits are only available to spouses or registered partners.

This is not an exhaustive list; there may be other benefits to registration or marriage, depending on your situation. There may also be tax consequences; some couples will experience a decrease in federal or state income tax liaiblity upon marriage or registration, and others will experience an increase. It might also vary from year to year. There are other tax consequences to consider as well, so if you are concerned, you may wish to speak to a tax professional about your financial situation.

CONFLICTS BETWEEN CALIFORNIA AND FEDERAL LAW

Because of the differences between California and federal law when it comes to recognition of same-sex relationships, a lot of issues arise. While there are way too many to address in one post, there are two key areas where problems arise which I would like to discuss here.

Tax Returns

As mentioned, California recognizes same-sex marriages and registered domestic partnerships, but the federal government does not. Until 2010 that meant that same-sex couples had to file a joint income tax return with the Franchise Tax Board in California, and completely separate federal income tax returns with the IRS.

However, in 2010 the IRS began recognizing that California’s community property laws apply to same-sex couples, which, while a step towards equality, complicated things even further - one more symptom of the problems with administering DOMA. As a result of this change, in order to prepare their federal income tax returns each year, same-sex married or registered couples living in California must add up their income and credits, combine them, and then each report half on their separate federal tax returns.

Then, to prepare California income tax returns, these couples must first prepare another federal tax return - this one a “mock” joint/married return - because California income tax returns are based on federal taxes. Finally, the joint/married California income tax return must be prepared, using the mock federal joint return as the basis for the California return.

And to top it all off, this still can’t be done through any of the widely available tax preparation software, because none of the e-file systems have been successfully set up to deal with this yet. Many CPAs and tax preparers don’t really know how to handle this yet either. In addition, the IRS still has to review these types of returns by hand, increasing the chance of an audit.

Immigration

In the U.S. it is much easier to get a green card if you are married to a U.S. citizen. There are two main ways to get a green card: you can either 1) apply independently, essentially proving to the U.S. government that you have special skills which are needed by U.S. employers, and that nobody in the U.S. is available to do the job you do, which is a very long, difficult, expensive process, with no guaranteed results; or you can apply under the sponsorship of a spouse, which is much faster and easier and more likely to be successful. However, if the federal government doesn’t recognize your marriage, this second option isn’t available to you.

Likewise, if you’re applying for a visa to come work in the U.S., and your relationship is recognized by the U.S. government, you get to bring your family. But immigration is entirely federal, and since DOMA precludes recognition of same-sex relationships, applications for visas by same-sex couples have to be completed as if each of them were single, which makes the odds that both of them will get to travel to the U.S. pretty slim, especially if only one of them has a job secured ahead of time.

There is an immigration reform bill under consideration which has been in the news a lot lately. It does not include provisions for recognizing same-sex couples for immigration purposes. An amendment was proposed which would have addressed this problem, but the amendment was abandoned. However, if DOMA is thrown out, the lack of provisions specifically addressing same-sex couples may be moot - if the federal government begins recognizing same-sex spouses, they will be able to apply under existing provisions for married couples.

Tricky Areas to be Aware Of

There are a couple of things I want to mention which I’m not going to get into in detail, but I want to point them out. If these come up for you I recommend consulting an attorney experienced in the applicable area of law.

Social Security. This is one of many areas where same-sex couples are not eligible for spousal or survivor’s benefits while DOMA remains law, because Social Security is a federal program. However, it is likely still worthwhile to apply when you would otherwise become eligible, in hopes of preserving the benefits and receiving them retroactively once DOMA falls.

Military Veterans’ Benefits. The same thing applies here. If your application for military veterans’ spousal benefits is denied, it is important to file timely appeals. You have the right to apply, even though under current law your application will be denied. If you would be eligible but for DOMA, keep appealing to preserve your benefits retroactively.

Self-employment tax. There are a lot of unanswered questions here, and you may wish to consult an expert in same-sex tax issues if you deal with self-employment tax.

Divorce. If you are considering divorce, I recommend consulting a divorce attorney who has experience with same-sex couples’ divorce. Because federal tax law does not recognize same-sex couples, transferring or dividing up property upon divorce could result in a signficant federal tax bill which might have been avoided with better planning.

ESTATE PLANNING

Estate planning is yet another area where complications arise due to DOMA, but it’s also an area where you can take several steps to protect yourself and your loved ones. First I am going to talk about some key benefits to having an estate plan, and then I’m going to address a few reasons why estate planning is even more important for same-sex couples. Then I’ll explain some of the standard estate planning tools.

There are several reasons why everyone in California over the age of 18 should have an estate plan. Some key parts of estate planning, no matter how big or small your estate, include:

  • Nominating a guardian to care for your kids if you die or become too ill to do so. While this is not something most people want to think about, if it does happen, don’t you want to be the one who chooses who raises your kids? Planning ahead can give you peace of mind now, and make things easier on your kids and on your family if anything does happen.
  • Enabling someone to manage your finances if you become ill or disabled, temporarily or permanently.
  • Probate takes from one to two years in California, and it’s expensive. Some types of estate planning avoid probate and the associated costs, and some don’t - your plan should be customized to fit your situation and priorities.
  • Choosing someone to care for you if you become to ill or disabled to care for yourself, temporarily or permanently.
  • Making sure that your spouse or partner can stay in the home you share together, and can pay the bills short or long term.
  • Caring for any pets you have now or may have in the future.
  • Communicating your wishes to your family. Scared, grieving people need guidance. They need to know that they’re doing things the way that you would have wanted, and giving them this guidance can help avoid a lot of fear, hurt, anger, and arguments. It will also make the process easier for your loved ones in practical ways, by avoiding the need for a stressful, expensive, time consuming court process to appoint a conservator.

So creating an estate plan isn’t just about deciding who will inherit your stuff when you die. I actually think that is one of the least important parts of estate planning. Esate planning is about planning for illness, disability, or other incapacity. But more than that, it’s about making very difficult, emotional, complex situations easier and less stressful for you and your loved ones, because these situations are hard enough without adding complications such as “How do I pay the bills when I can’t access this bank account or online bill pay account? And how do I take care of this quickly so that I can spend more time with my loved one?”

Estate planning is even more important for same-sex couples for many reasons. If you are married or registered in California, many of the laws that apply to heterosexual couples also apply to same-sex couples. But none of the federal rights and responsibilities of spouses apply, and if you travel to another state, that state may not recognize your relationship. Even if you spend 100% of your time in California, it never hurts to have extra protections in place. Some of the reasons that estate planning is especially important for same-sex couples include:

  •  If you’re not married or registered, and you die without an estate plan, your house, your bank accounts, your personal items, etc. will not go to your spouse. They will be governed by the laws of intestate succession, and may go to your children, if you have biological or legally recognized children, then your parents, then your siblings.
  •  If you’re not married or registered, your partner may or may not be allowed to make health care decisions or financial decisions for you while you’re incapacitated, and may or may not be able to serve as administrator of your estate.
  •  Even if you are married or registered, if you move or travel outside of California, your relationship with your spouse or partner may or may not be recognized by other states or countries.
  •  If you have kids together but your partner is not the biological parent and has not legally adopted your children, your partner may not be able to continue to raise your children.

So clearly, estate planning is extremely important for same-sex couples. But what is involved in an estate plan? There are several elements to a standard estate plan: a will and/or trust, a durable power of attorney for finances, an advance health care directive, and a plan for your digital assets. I want to address this last one first, as planning for your digital assets is easy to do on your own, no attorney required.

Digital Assets

When I say digital assets I am talking about your digital photos (stored both on your computer and in online accounts such as Flickr, ShutterFly, Picasa, etc.), your email accounts, your social media accounts, anything stored on your computer, and any online accounts.

These days most of us have quite a few photos on our computers. If your computer is set up to require a password on login or to access certain files, or if you store your photos in an online account, you’ll need to find a way to safely store your account information so that it’s secure, but accessible when needed. Otherwise chances are high that your photos and other digital assets will be lost forever if anything happens to you; even if your family is eventually able to access your files, it will be a lot easier on them if you’ve made a plan.

The same thing applies to any online bill pay accounts that may need to be accessed to pay your bills if you become incapacitated or hospitalized for more than a few days. You should also think about online backups, facebook accounts, email, anything you don’t want lost forever if something happens to you.

There are a few ways to deal with this. Two options that I recommend (one or both together, depending on what you’re comfortable with) include:

  •  Writing down all of your usernames, passwords, password hints, and other login information, and putting them in a safe place where they can’t be accessed by prying eyes or burglars. One idea is to put this information in an envelope that you’ve sealed and signed across the flap and place the envelope in your safe deposit box or home safe, then tell someone you trust completely how to access the information in an emergency.
  •  Using a digital password tool such as LastPass which saves all of your passwords for you - you only have to remember or share one password, and it stores all the rest for you. Then you can order a small dongle which fits on your keychain and plugs into the USB port on your computer, which allows you to use two factor authentication - combining something you know (your password) with something you have (the LastPass dongle). Then your accounts can’t be accessed without having both the password and the dongle, which provides for much better security than just a password.

Health Care Directives

An advance health care directive (AHCD) allows you to choose someone (your healthcare agent) to make healthcare decisions for you if you become temporarily or permanently unable to make them for yourself. Under state and federal law there is nobody who automatically has the right to speak for you or make these decisions for you, so it is important to appoint someone. Situations where the need may arise include long-term illness, dementia, etc., but also short-term injuries, illness, or surgical procedures.

An AHCD also enables you to give your agent guidance, so that you are treated the way you want to be, and so that your healthcare agent knows how best to care for you. This can include anything from whether you want pain medication and life support, to tips for making you comfortable, such as music, massage, and chapstick.

An AHCD also allows you to clarify your rights, as some hospitals may be unfamiliar with the rights of domestic partners and same-sex spouses. Under federal regulations, as of January 2011 all hospitals participating in Medicare must:

  •  inform patients of their visitation rights;
  •  inform patients of their right to receive visitors, including but not limited to a spouse, partner, family member, or friend;
  •  not restrict or deny visiting based on race, color, national origin, religion, sex, gender identity, sexual orientation, or disability;
  •  ensure that all visitors enjoy full & equal visitation privileges consistent with the patient’s preferences.

Hospitals that don’t comply with these regulations could be terminated from Medicare funding, and because Medicare is the largest healthcare payer in the country, this is a really big deal. Further, under the Patient Self-Determination Act of 1990, all healthcare agencies participating in Medicare, including hospitals, long-term care facilities, and home health agencies, must recognize the health care directives of a patient.

AHCDs can include language reminding hospitals of the these rights and the penalty for violating them. While every situation is different, and hopefully the need for such reminders is diminishing, this can be a simple way to move things forward when necessary.

Another important function of healthcare directives is to start the conversation with your loved ones. It is important to discuss your wishes with the people who will need to carry them out, and with others who will be by your side, because your wishes are more likely to be carefully followed if your loved ones understand what you want and that you’ve thought carefully about it. Having this conversation and providing guidance through healthcare directives will make it easier on both you and on your loved ones if you are ever hospitalized and need someone to speak for you.

Durable Powers of Attorney for Property Management

A durable power of attorney for property and financial management (DPOA) allows you to designate someone to handle your property and finances for you if you are ever unable to handle them yourself. This may include paying your bills, dealing with companies or organizations on your behalf, and anything else that needs to be taken care of while you’re hospitalized, otherwise incapacitated, or even just out of the country for an extended period of time. The person you designate should always be someone you trust completely, and preferably someone who is good with money and paperwork. DPOAs are usually made “springing,” which means they’re not effective until you become incapacitated and need help.

A DPOA can prevent the need for a conservatorship. A conservatorship is a slow, expensive court proceeding which can be very demeaning, because it generally requires proving in court, on the public record, that you are no longer capable of handling your affairs. If a conservatorship is approved, you will no longer have the legal capacity to handle your own affairs. Taking away a person’s legal capacity to make contracts, commit to payments, etc. is intended to protect that person from financial abuse, and can be an important tool. However, many times a durable power of attorney is sufficient and preferable as it is faster, less expensive, less stressful, and much more private.

DPOAs can also be used in temporary situations, such as extended trips out of the country if you need to empower someone to complete a transaction for you. DPOAs are a very flexible tool, and can be customized to meet your needs.

Wills

Most people are familiar with the concept of a will, but don’t realize how many functions a will can perform. A will can determine who gets your stuff, but you can also use a will to:

  •  nominate guardians for your children
  •  specify your burial wishes
  •  create a trust to hold your assets after you die, if for example your beneficiaries are too young or irresponsible to handle money

While wills can perform a variety of functions, they do have some limitations. Certain assets such as life insurance policies, 401ks, IRAs, and any other type of account which is controlled by the beneficiary designation form you submit directly to the life insurance company or investment firm should be dealt with through this beneficiary designation in most instances, though a will can sometimes serve as a backup plan here. You should make sure to keep these beneficiary designations up to date, be sure to specify an alternate beneficiary, and make sure that your current beneficiary designation accurately portrays your intentions.

Same-sex couples who are not married or registered but would like to make gifts to each other in their wills should discuss a certificate of independent review with their estate planning attorney. Any will which leaves a gift to a caregiver - including partners acting as caregivers - where the person creating the will is not married or in a registered domestic partnership with the caregiver, requires a certificate of independent review to avoid invalidation of the gift. This law is intended to fight undue influence and financial abuse of vulnerable people, but it means that estate planners must be careful where the caregiver is in a relationship with but not married or registered with the person for whom they provide care. Attorneys experienced in same-sex estate planning should be in the habit of advising clients about this scenario, but attorneys who normally deal only with married couples may forget, with devastating results.

Real Estate Titling

This is an issue that often goes along with estate planning, but can arise any time you are purchasing or transferring real estate.

If you are purchasing (or otherwise transferring/receiving) property with your spouse or partner, it is important to know that in California the same rules that apply to opposite-sex married couples with respect to real estate ownership also apply to same-sex married or registered couples. This includes the right to hold real property as community property or as community property with right of survivorship.

A home or other real property that is community property (as opposed to separate property, please see above in the section on Rights and Benefits of Registration/Marriage under California Law for a short summary of the difference between separate property and community property) may be titled as “community property” or as “community property with right of survivorship.” Title or form of ownership is found on the deed itself. Real property can also be titled in many other ways, whether or not it is community property. Each form of ownership/title has advantages and disadvantages, including tax consequences at death as well as the way the property is transferred at death. Which form is best for you and your spouse or partner will depend on your circumstances. However, it is important to be aware of the options. Not all real estate professionals are aware that same-sex spouses and partners have the option to hold property as community property, so it is important that you pay attention and make sure that you address how title should be held when you purchase property.

If you currently own real property and are considering making changes to how title is held (e.g. it’s currently held as joint tenants, and you’re considering changing title to read “community property,” or you’re considering adding your spouse or partner to the title), you need to be especially careful while DOMA remains in effect. Transfers of property are taxable events. Transfers between spouses where the marriage is recognized by the federal government are not taxed, because they fall under a tax exemption. But as long as DOMA prevents recognition of same-sex spouses, changes to the form of ownership may result in federal tax. This is not to say that changing the form of ownership always carries negative tax consequences or shouldn’t be considered; but please do educate yourself first and be cautious before making any changes so that if there are tax consequences you know about them beforehand.

Adoption

Adoption has a lot of connections to estate planning, but of course may arise separately as well.

Under California law, same-sex parents have the same rights as opposite-sex parents. However, it is critical to ensure that there is a legally recognized parent-child relationship.

Both parents have the right to - and should be - listed on the child’s birth certificate if one of the spouses or partners gives birth to the child. Under California law, there is a presumption of maternity or paternity of the non-birth parent if the child is born to a married or registered couple, whether the couple is opposite-sex or same-sex. However, although this should be enough to provide protections in California, many experts recommend a second-parent adoption. Some states won’t recognize the non-biological same-sex parent, even if the child’s birth certificate lists them as a parent. Second-parent adoptions are more likely to be recognized by other states, and thus offer increased protections to parents and their children. Even if both the parent and child live in California, a second-parent adoption can provide increased legal protection. Even if you and your child never travel outside of California, there may be situations that arise where the second-parent adoption could make all the difference. A legally-enforceable parental relationship offers greater security to both the parents and the child, and by extension relatives of the parents, and reduces the likelihood that the parent-child relationship will be questioned or litigated.

If the child is older when he or she joins your family, or for any reason neither parent’s name is on the birth certificate, both parents should be sure to adopt the child.

Ensuring that your parent-child relationship is legally recognized can secure many legal benefits, for both the parent and the child. Some potential benefits to the child include: social security benefits, medicare benefits, the right to inherit from the parent and the parent’s relatives, and others.

Additional rights that may become important to both the parent and the child include visitation rights if there is a divorce, custody rights if there is a divorce or if the other parent dies or becomes incapacitates, and hospital visitation rights.

One additional benefit that goes along with adoption while DOMA remains in effect: there is an adoption tax credit under federal law. The credit is not available for adoptions of your spouse’s child; however, DOMA makes this restriction inapplicable to same-sex couples, so until DOMA is overturned, you should be able to get this tax credit.

POTENTIAL UPCOMING CHANGES IN THE LAW

Several cases have challenged DOMA and Prop 8 since they were enacted. Many courts have ruled DOMA and Prop 8 unconstitutional, but until March of this year none of these cases had been heard by the United States Supreme Court. Decisions are due out on both the DOMA and Prop 8 cases in June, and there are many different ways the Court could rule..

Prop 8 / Perry

The Prop 8 case is currently titled Hollingsworth vs. Perry. Before that it was Perry vs. Brown, and originally it was titled Perry vs. Schwarzenegger. The case was brought by two same-sex couples in California who challenged Prop 8, which amended the state constitution to provide that only marriage between a man and a woman is valid in California.

The federal district court, in a very thorough and well-written opinion by Judge Vaughn Walker, ruled that Prop 8 violated the United States constitution in multiple ways. The case was appealed to the federal court of appeals for the Ninth Circuit, which also ruled that Prop 8 violated the federal constitution, but for different reasons.

Now Perry is before the United States Supreme Court, which heard oral argument in March, and has until the end of June to issue a decision. There are several ways that the court could rule. The American Foundation for Equal Rights (“AFER”) has a great graphic on their website which explains all of the potential outcomes. You can find it at http://www.afer.org/blog/, click on Prop 8 on the right, and scroll down to “Supreme Court to Rule on Prop 8: Decision Timing and Possible Outcomes. I’ve also linked to it from my website, at /helpfullinks/. Here’s a brief rundown of some of the possible outcomes:

  • Prop 8 does not violate the United States Constitution - no marriage in California until the amendment to the California constitution is removed. No direct effect on other states.
  • Dismissal - the U.S. Supreme Court could decide that it shouldn’t have taken the case in the first place, and dismiss it without making a decision. Result: marriage resumes in California, because the 9th circuit decision would stand, and it ruled Prop 8 unconstitutional. However, this would have no effect on other states, because the 9th Circuit decision was very narrow and only applied to California, which is the only state to have granted marriage equality and then taken it away again.
  • No standing to defend prop 8 - The group defending Prop 8 in court had no right to do so (the state government did not defend Prop 8, so supporters of the measure stepped in to argue the case in court). Result: marriage resumes in California, because the district court decision stands, and the district court rule Prop 8 unconstitutional.
  • Prop 8 violates the United States Constitution. Marriage resumes in California. Such a result could apply nationwide, but it’s much more likley that the Court would keep the decision narrow and apply it only to Prop 8. However, such a result might make it easier to win equality in other states as well.
  • Most of these possible outcomes would take immediate effect; others would have to wait 25 days while the prop 8 supporters petition for rehearing, which the Court is unlikely to grant.

DOMA / Windsor

The Defense of Marriage Act, or “DOMA,” is a federal statute enacted in 1996. Section one states the name of the Act. Section two says that states do not have to recognize same-sex marriages performed in another state. And section three defines marriage for federal purposes as being between a man and a woman. Prior to DOMA, there was no federal definition of marriage, as this area of law was left to the states to manage.

United States v. Windsor is a case challenging section three of DOMA, and it is currently under consideration by the United States Supreme Court. Edie Windsor brought the case to challenge the $363,000 estate tax bill she was left with when her wife, Thea Spyer, died in 2009. Although Edie and Thea were legally married in Canada, the federal government of the United States doesn’t recognize their marriage. If it did, Edie would not have owed a dime in estate tax because of the federal marital deduction, which allows for the transfer of property between spouses without taxation.

As with the Prop 8 case, a decision is expected by the end of June, and there are many different ways the Supreme Court could rule: 

  • Section three of DOMA could be overturned, eliminating the federal definition of marriage as between a man and a woman. States would still not be required to allow marriage equality, or even recognize same-sex marriages from other states, because of section two of DOMA, which would remain in effect. But the federal government would finally have to recognize those marriages that the states choose to allow. If you have a valid Cailfornia marriage, you would be married in the eyes of the federal government as well. Federal tax returns, immigration applications, etc. would all finally recognize same-sex marriage. 
  • There is also a chance that Edie Windsor will win the case, but the decision will only apply to her. She’ll receive a refund, but DOMA will still stand, and state marriages will not be recognized by the federal government (yet).
  • And of course, there’s the possibility that the court will rule against her. In that case the law would remain the way it is, and Edie would not get her $363,000 back.

If the court chooses this final option, there are several members of Congress who have been waiting to reintroduce the Respect for Marriage Act of 2009 to see how Windsor turns out. If the Respect for Marriage Act were enacted, it would give federal recognition to marriages valid in the state where they were celebrated, as well as to foreign marriages so long as they are valid in at least one state. Although this would take longer than a positive ruling later this month, it would answer some important questions about how to implement the change in the law, and with the increasing number of people in favor of marriage equality this at least represents a good backup plan.

After Perry and Windsor

Unfortunately, even if both Prop 8 and DOMA are overturned this month, things will not be simple and wonderful overnight. There are a lot of questions that will have to be answered and complications that will have to be worked out, whenever DOMA falls. Some of these questions include:

  • What qualifies as marriage under federal law? Only marriage? Registered domestic partnerships? Civil unions?
  • What if you’re legally married in one state, but live in another? What if that state doesn’t recognize your marriage?
  • What if the state you live in recognizes your relationship, but like California, doesn’t actually consider you married?

But even though there will be a lot of questions still to be answered, I look forward to beginning to answer the “how do we do this now that DOMA and Prop 8 are gone” questions, instead of the “how do we do this while DOMA and Prop 8 are in effect” questions.

Should You Amend Your Tax Returns?

This may be a bit late in the game, since a decision could be issued by the Supreme Court any day now, and will certainly be issued within the next two weeks, but since I covered it at the seminar at Cal Poly I will mention it here as well.

If you are married or in a registered domestic partnership and haven’t filed your federal 2012 income taxes yet, and your federal income taxes may be lower filing separately instead of married, consider filing now, before the Windsor decision is issued. When the Supreme Court issues their decision, we don’t know for sure when it will become effective. The impact may be immediate, retroactive, or take effective on some future date. If the decision is effective immediately going forward, and your tax result is better filing separately, you could save on your taxes by filing before the decision is issued. Many same-sex couples in California do get a better tax result under current law, despite the many inequalities, though not everyone does.

On the other hand, if you would have gotten a better tax result during any of the past three years if you had been allowed to file a joint federal income tax return, consider filing an amended tax return or protective tax refund claim ASAP, to preserve your right to a refund for the past three years. The statute of limitations is three years from the date the return was due (usually April 15), so each year you lose the option to amend the return filed three years prior.