The Defense of Marriage Act, also known as DOMA, was struck down by the U.S. Supreme Court on June 16, 2013 thus making the passing of real estate and inheritances from one LGBT spouse to another a lot much easier.
While DOMA was active it was next to impossible for a same-sex spouse to put a partner’s name on a deed without the possibility of a huge financial penalty. Gay spouses that inherited property from a partner could only receive a $14,000.00 deduction and then after that, most would pay half the value of the inherited property in taxes. This meant that if your gay spouse passed away leaving you with a house worth two million dollars you could end up paying almost one million dollars in taxes. Not too many bereaved gay partners have that kind of liquid cash lying around in their bank accounts ready to pay the IRS. Similarly, the opposite sex couple living in the same state and city in the house next door would have to pay no taxes on the valued inheritance or property and simply get to keep that million dollar. Those who are planning to sell their inherited homes may consider reaching out to inherited house buyers for expert help.
Even though it is good news in general that DOMA was struck down the new ruling is not of much use to those that live in the 37 states in the U.S. that still do not recognize gay marriage. However, depending which state you live in; you may be able to get a tax break if you live in a state that recognizes civil unions for the purpose of the transfer of spousal benefits or properties. States that may recognize this are Connecticut, Delaware, the District of Columbia, Illinois, Iowa, Hawaii, Maine, Maryland, Massachusetts, Minnesota, Oregon, New Jersey, New York, Vermont and Washington. These states are in the process of working with the IRS to define their post DOMA rules and guidelines.
If you move with your spouse to one of the 37 states that do not recognize gay marriage, then you might be shocked to find out that the repeal of DOMA really has had little or no effect on inheritance tax or on the ability to transfer a deed into a spouse name without financial difficulty. That is because you will be met with a dead-on refusal to recognize your gay marriage by the state. Even though you and your gay partner are seen as married through the eyes of the federal government you will still be perceived as single by state government. This leads to situations where spouses are denied veteran and social security benefits that are allowed to straight couples. Gays in these states are also penalized by not being able to transfer wealth to each other without enormous financial penalties.
If you move to a state that does recognize gay marriage then you will have less of a hassle when trying to transfer assets. However there will still likely be a big snarl of bureaucratic red tape to cut through as it is going to take some time for the government to adjust all of its electronic information and application forms to help administer the benefits, tax refunds and other perks due to LGBT couples living in gay-marriage friendly states.
Always seek profession tax and legal advice, as part of any potential move ~ you may visit sites like www.GayLawyer.com or ask for a referral from your new gay realtor.
Author Jeff Hammerberg is the Founding CEO of GayRealEstate.com. Free Instant Access to the Nation’s Top Gay, Lesbian and Gay Friendly Realtors Coast to Coast. FREE Buyers Representation ~ Free Relocation Kit to any City, USA ~ Free Sellers Market Analysis for home sellers.
