Trust and Estate Counsel

Tennessee Estate Planning Law

Insight and commentary on estate planning issues impacting affluent residents of Tennessee

Same-Sex Spouses Are Married for U.S. Tax Laws

On Thursday, August 29, 2013, the IRS issued Revenue Ruling 2013-17 regarding the tax treatment of same-sex spouses. Effective immediately, same-sex spouses will be treated the same as a heterosexual married couple for federal tax purposes. The District of Columbia and 13 states now allow same-sex spouses to become legally married. Prior to the issuance of the Revenue Ruling, the IRS did not recognize a same sex marriage for purposes of federal tax laws. The change in policy does not apply to civil unions or registered domestic partnerships.

There are numerous tax ramifications to this change. One consequence is that same-sex couples are now required to file a joint income tax return, even if they live in a state that does not recognize same-sex marriages. For 2012, they have an option to file as two single persons or as a married couple. However, if they want to file as two single persons, they must file or amend their 2012 income tax returns on or before September 16, 2013. If they file their 2012 income tax returns after September 16, 2013, they are required to file as a married couple. Due to the so called "marriage penalty," it is hard to predict whether it is better to file together or separately. In general, if there is a wide disparity between the amounts of income earned by the spouses, it will be better to file a joint return. If the spouses earn approximately the same amount of income, it will probably be better to file as two single persons.

In addition to the very quick decision that must be made with respect to 2012 income tax returns, a decision also needs to be made about filing claims for refund. If it would result in a tax refund, the spouses can amend their tax returns for 2011 and 2010, and perhaps 2009 (depending upon when their 2009 tax returns were filed), to file their returns as married filing joint. They do not have to amend their returns if it would cause additional taxes to be paid.

A gift or bequest to your spouse now qualifies for the federal gift or estate tax marital deduction. If taxes have been paid on a gift or bequest to a same-sex spouse within the last 3 years, or if gift tax exemption has been used, you should consider filing a refund claim. If your Will makes a bequest to a trust for your spouse, you should consider modifying the trust to qualify for the estate tax marital deduction. If you are not married, have an estate of more than $5.25 million, and plan to make a bequest to a same-sex partner, you should consider getting married in one of the states that allows same-sex marriages.