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Defense of Marriage Act (DOMA): Impact on Same-sex Marriage in Maryland & Washington, DC

Posted by attorney Carlos Lastra
Filed under: Estate tax Family law

DOMA’s Implications and Effects

On September 21, 1996, President William Jefferson Clinton signed into law federal statutory provisions known as the Defense of Marriage Act (“DOMA"), which requires the federal government to define marriage as a legal union between a man and woman. Congress had passed the law in both houses by large majorities. Under this law, no state, territory, possession, etc. of the United States shall be required to acknowledge a same-sex marriage otherwise considered a marriage in another state.

The overall impact of the act is that no same-sex marriage is recognized under federal law nor is any State compelled to recognize such a union. Of course, this has implications for same-sex couples in both Maryland and Washington, DC. The effect is drastically different between the two locations because one recognizes same-sex marriages, Washington, DC, while the other, Maryland, currently defines marriage as only between a man and a woman.

DOMA and Same-sex Marriage in Maryland

Currently, a law as passed by the Maryland House of Delegates almost 40 years ago states “only a marriage between a man and a woman is valid in this state." This Maryland law is consistent with Section 3 of DOMA (1 U.S.C. § 7). Other than that specific legislation, the Maryland House of Delegates has not passed any other laws concerning the definition of marriage and nothing approaching the scope of DOMA. In short, Maryland’s legislature has passed no law dictating how DOMA will be applied in Maryland. However, looking at Section 2 of DOMA (28 U.S.C. § 1738C), it would seem that Maryland could be required to ignore same-sex marriages issued under the law of other States.

In 2010, Maryland’s Attorney General issued an opinion concluding that Maryland law may and should recognize same-sex marriages performed in other jurisdictions. However, this opinion does not carry the weight of law. In Maryland, only court rulings and legislative enactments can legalize marriage for same-sex couples. Recent legislative action in Maryland sought to change this law. In 2011, a bill in front of the Maryland General Assembly that sought to redefine marriage from “between a man and woman" to “between two individuals" failed to secure any traction for passage. Further, the cases proceeding through the Maryland courts have focused on securing the ability to have a valid same-sex marriage in Maryland and none have dealt with DOMA issues.

This leaves the application of DOMA in Maryland very unclear. On the one hand, Maryland law affords eleven protections for domestic partners, such as funeral arrangements, additions and removals to residential deeds without tax penalty, and hospital visitation. This has been the law in Maryland since July 1, 2008, which coupled with the Maryland Attorney General’s opinion on the issue of same-sex marriage provides some hope to same-sex couples. On the other hand, Maryland has very specifically excluded same-sex marriages out of its definition of marriage.

Maryland, through its legislature, has sidestepped the issue; ostensibly, applying one portion of DOMA and not the other. In short, Maryland will not grant marriages for LGBT couples, but will not go as far as to ignore their validity if legally secured in another state.

For same-sex couples in Maryland this means the situation is very fluid and without much clear guidance. In essence, same-sex couples in Maryland should protect their interests through domestic partnership agreements and other legal contracts otherwise provided to them under Maryland law.

DOMA and Same-sex Marriage in Washington, DC

The District is the polar opposite of Maryland, essentially because it not only recognizes same-sex marriages issued in other states, but permits same-sex couples to marry, thus treating them no differently from heterosexual couples. Thus, the practical effect of the District’s laws for same-sex couples should be no different in the District compared to heterosexual couples. The battleground in the District as it relates to DOMA will be limited to situations where same-sex couples deal with an application of federal law versus the laws of the District of Columbia.

This is a substantial problem in the areas where federal law preempts state law and governs irrespective of what legislation exists in the District that would intend to protect same-sex couple from DOMA’s application.

DOMA’s Application Under Federal Law

The effects of DOMA will likely be greatest felt, as it has been to date, in its application in matters of federal law, such as the application of federal statutes and laws involving same-sex married couples. This would span the gamut from the application of tax and estate laws, to those dealing with health and retirement benefits. The common denominator being whether the federal government can ignore valid same-sex marriages issued by one of the states of the union or a foreign jurisdiction.

A. Estate & Tax Issues

In the areas of tax and estate law it could mean the difference between the imposition of tax based on returns filed as “married filing jointly" or as was experienced in the Windsor, supra, case wherein a surviving same-sex spouse was divested of her estate tax exemption, and otherwise paid substantial taxes of $363,000 on an inheritance from her deceased partner. In matters of retirement, a surviving spouse may be divested of a surviving spouse benefit plan annuity payment after the death of the decedent spouse, or continuing coverage under a health insurance plan. It would not be hard to imagine the impact in other areas such as Social Security and government funded health plans.

The application of federal law has significant implications for same-sex couples. Not the least of which are significant tax liabilities. For heterosexual couples the transfer of assets in a divorce is not a taxable event. In a same-sex divorce the transfer of assets is subject to federal tax law as ordinary income.

B. Retirement Income & Assets

Federal law governs the main aspects of the handling of retirement income and assets and in the majority of cases domestic partners and same-sex couples are viewed as “non-spouse" beneficiaries, which can substantially affect a couple’s plans for retirement. Some of the assets most importantly impacted are Social Security Benefits. Every same-sex couple and domestic partner are not qualified as “spouses" for federal purposes and thus are not able to receive continuation of Social Security benefits after the death of their partner or spouse.

C. Health Insurance & Benefits

Employer provided health insurance is considered a non-taxable fringe benefit under federal law when provided to their employees, their federally accepted spouses and children. The IRS does not consider the same type of insurance for an employee’s same-sex spouse or domestic partner to be exempt from income tax liability. Therefore, except in California, employers who grant insurance to the same-sex spouses of their employees are required to report the value of the benefits bestowed as taxable income to their employees.

D. Immigration Status

Marriages between same-sex couples will not grant the same opportunities for change of immigration status for the non-federally accepted same-sex spouse as compared to the heterosexual spouse of a United States citizen or permanent resident.

Six Steps to Protect Same-Sex Couples from Federal & State Law

Same-sex couples in D.C. and Maryland should consider what private contracts and other legal constructs they might choose to implement a work around the prohibitions created by DOMA and to otherwise provide practical solutions to those that cannot be avoided.

Even though the issue is convoluted and uncertain, same-sex couples in Maryland and Washington, DC can still take steps to protect themselves and their property. The legal remedies will vary based on location. As always, a licensed attorney should be consulted in regards to each individual situation. However, appropriate legal constructs may include:

1) Domestic Partnership Agreements. Legal contracts that dictate how income, expenses, assets and liabilities will be handled during the parties’ lives together and how they will be dealt with during a dissolution of the relationship. Essentially, they are the Same-Sex equivalent of a Pre- or Post-Nuptial Agreement. They can address how real property will be titled, how retirement accounts will be set up, including beneficiary designations and methods of distribution, as well as how to best establish health and life insurance policies. The solutions afforded to the same-sex couple around DOMA will depend on their unique needs and goals, which will dictate the specific terms and provisions of their Agreement.

2) Health Directives. Provides the same-sex spouse or partner access to their injured/hospitalized partner, as well as the ability to be there to make the tough decisions during moments of crises, such as whether or not to administer life-sustaining medical care.

3) Trusts. Affords for the handling of property both during the lives and after the death of the same-sex spouses and partners.

4) Titling of Property. Real property could be titled as Joint Tenants with Rights of Survivorship (“JTWROS") to ensure seamless transfer upon death of one of the same-sex spouses to the other without the necessity of probate.

5) Designation of Beneficiary. Same-sex couples should be certain to designate their beneficiaries and review their designations annually to confirm they state their current intentions.

6) Death Benefits. Consider whether a life insurance policy can provide the same protections afforded under a Survivor Benefit Annuity Pension Plan.

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