Berman & Asbel, LLP

DOMA does not stop everything: Steps that same-sex and unmarried couples can take to build rights and protections around their relationship

There has been much news about legal challenges against the federal Defense of Marriage Act (DOMA) which defines marriage under federal law as a union of one man and one woman and which allows states to refuse to recognize same-sex marriages legally entered under the law of another state.  The Obama Administration is dropping defense of this law but House Republicans are retaining counsel to defend it.  These are important developments but  in the meantime, same-sex couples and their families need to get on with life now so what can they do to protect themselves and their families if they live in a state such as Pennsylvania which will not recognize them as a married couple?

One issue faced by same-sex couples is access to medical information and the right to make medical decisions for a partner who is unconscious or incapacitated. The partner is not automatically recognized because Pennsylvania does not recognize gay marriage or civil unions. However, Pennsylvania law does allow any competent adult to sign a document stating who is to make medical decisions and to have access to information. This document is sometimes called a "Medical Power of Attorney" or a "Medical Decision Making Surrogacy" document. Pennsylvania law specifies an order of priority  of persons who can decide in the absence of a signed document - spouse, adult child, parents, siblings and so on - but if the patient has a signed document stating who they want, that document is to prevail. So for gay couples, whether married or not, to ensure they can see to each other's medical needs and decisions if needed, it is an imperative but simple matter to have an attorney prepare a medical power of attorney.

In addition, gay couples may wish to consider signing durable powers of attorney to enable each partner to engage in necessary financial transactions in the event that one partner becomes incapacitated. Such a power of attorney can prevent a dispute with a partner's family over control of personal assets in the event of incapacity.

Wills - under Pennsylvania law, if there is no will, a person's assets that do not carry their own separate beneficiary designation go to relatives in a priority order set by state law.  Because same-sex partners cannot be recognized in Pennsylvania as married under current law they are not included in this order of priority,  so if partners wish to leave their estates to each other, they must do so with a will. An attorney practicing in the area of wills, trusts and estates can prepare a will to achieve this objective.

Joint ownership of property - In addition to a will, same-sex partners and other unmarried individuals can help ensure that certain assets go to the person they choose through joint ownership of assets.  The idea is to set up the ownership so that if one partner dies, the survivor becomes the sole owner.  With real estate, care must be taken that the deed makes it clear that the surviving owner is to become the sole owner as this is not the automatic legal presumption as it is in the form of title for those who are legally married who own property together.  An attorney with experience in preparation of deeds will know how to do this.  With other assets, care should be taken to either have a clear beneficiary designation or designation of ownership that the surviving owner is to become the sole owner.

Joint ownership has the benefit in Pennsylvania of mitigating inheritance taxes.  Unlike other types of taxes, the inheritance tax rate is determined not by the amount of money involved but by the relationship of the recipient to the deceased.  The rate for a spouse is 0 percent; for children and descendants 4.5 percent; for siblings 12 percent and for anyone else it is 15 percent.  Because same-sex marriages are not recognized in Pennsylvania, a bequest to a same-sex partner, no matter how long the relationship, would be taxed at the highest 15 percent rate.  However,  if an asset is owned jointly by two people and that ownership was established more than 1 year before the date of death, then only one-half of the value of the asset is counted as part of the estate for purposes of calculating the inheritance tax.  This can be a major savings when leaving a house to a partner through joint ownership rather than a bequest in a will.

There is a downside, however to joint ownership of assets.  Unlike a will which can be unilaterally changed at any time, once someone is made a joint owner of an asset like a home, one cannot take that back unilaterally.  This can become a problem if the relationship breaks up.  Therefore, when such joint ownership is created, the partners may wish to consider having a contract drawn up to specify what happens to such assets in the event the relationship ends.

Beneficiary designations on life insurance policies, retirement accounts and annuities - such accounts generally allow a person to choose who should receive it in the event of their death.  Making sure these designations are up to date with one's wishes are an effective way to direct important assets to a partner. 

Lifetime gifts - Same-sex couples cannot take advantage of the provisions in the federal tax code that exempt unlimited amounts of gifts between spouses from estate and gift taxation.  However, they can make use of the provision that allows anyone to give to annual lifetime gifts.  Currently, a person can give up to $13,000.00 per year per recipient.  Over time, if used consistently, this provision can enable one to gradually transfer significant sums to a partner.  Of course, with a gift, once that money is given away, it cannot be taken back if the relationship ends.

Readers should not solely rely on this note for planning but should consult with a competent attorney licensed in their state. You can also find more information in my firm's websites on Family Law and Wills and Estate Planning and Administration.

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