13 June 2011

Estate and Tax Planning For Same Sex Couples In 2011

SSRN has a new paper entitled "Planning For Same Sex Couples in 2011" that provides a nice overview of the estate planning and tax issues involved, including a state by state survey that covers recent legislative changes in this area.


Michael Malak said...

I find the legal and financial issues surrounding same-sex couples interesting because, as the linked paper notes, they apply to other family structures as well such as blood sisters or religious sisters.

It seems like a lot of problems could be solved by just eliminating the gift and estate taxes -- or greatly increasing their limits to e.g. $100,000 and $5m respectively. The taxes only account for 1.2% of federal revenue anyway.

Andrew Oh-Willeke said...

The current combined gift, estate and generation skipping transfer tax exemption is $5 million per person, per lifetime and unused estate tax exemption may be inherited by a surviving spouse. The law sunsets in two years but is likely to be made permanent or renewed indefinitely.

Michael Malak said...

Right, but the gift tax is supposed to prevent estate tax avoidance and the current $13,000/year/person limit is not commensurate with the $5m/person estate tax limit. The article you linked enumerates all permutations of complicated trusts designed to avoid the gift tax associated with one adult "gifting" half a house to another adult.

Since the estate tax limit is $5m/person, the gift tax should be more like $100k/year/person.

Andrew Oh-Willeke said...

UPDATE: A bankruptcy judge has recently ruled at the trial court level that a legally married same sex couple may file a bankruptcy petition jointly.

Traumeel said...

Policies need to be revised for such marriages and separate law is needed.


Michael Malak said...


I respectfully disagree. As a libertarian, I feel government should get out of the way of agreements that people want to make amongst themselves. The linked academic paper focused a lot on sharing the purchase of a home with only a single income earner and how that incurred gift taxes. That's why I suggested eliminating gift taxes or increasing the annual gift limit to $100,000.

I also advocate the government getting out of marriage completely, which was pretty much the way it was in the 19th century. (Marriage licenses were originally invented to prevent mixed-race marriages.)

Andrew Oh-Willeke said...

"Marriage licenses were originally invented to prevent mixed-race marriages."

Not really. Both the Orthodox Christian and Roman Catholic Church and its Protestant successors had the equivalent of marriage licenses when they were established churches, and the function was transferred to the secular state at various points over the last couple of hundred years, a tradition that Americans follows intermittently. The civil law practice of having the marriage itself conducted by town officials and then merely solemnizing marriages in a religious ceremony also arose at a time when the communities involved were monoracial.