Last year’s landmark U.S. Supreme Court decision making same-sex marriage legal in all 50 states affects estate planning for many same-sex married couples.
Now, like opposite-sex married couples, same-sex married couples may be able to take advantage of gift and estate tax breaks such as:
The marital deduction. This allows one spouse to transfer an unlimited amount of property to the other, during life or at death, without triggering federal gift or estate taxes (as long as the recipient spouse is a U.S. citizen). Also, certain estate planning vehicles, such as qualified terminable interest property trusts (or qualified domestic trusts for non-U.S. citizens), qualify for the marital deduction.
Exemption portability. This allows a surviving spouse to take advantage of the deceased spouse’s unused gift and estate tax exemption (provided the deceased spouse’s executor makes a portability election on a timely filed estate tax return). For 2016, the exemption is $5.45 million, so portability can be used to shield as much as $10.9 million from tax.
Gift splitting. This allows married couples to combine their exemptions to give away up to $10.9 million (for 2016) tax-free, regardless of which spouse owns the gifted assets. It also allows couples to combine their annual gift tax exclusions (currently, $14,000 per recipient), enabling them to give away up to $28,000 per year to any number of recipients without using up any of their exemption amounts.
These and other gift and estate planning breaks make it much easier for many affluent same-sex couples to reduce or eliminate gift and estate taxes.
If you’re part of a same-sex couple — married or not — contact me at email@example.com or your Berdon advisor to learn more about your estate planning options.
Marco Svagna, a tax partner at Berdon LLP, advises high net worth individuals and family/owner-managed business clients on estate and income tax issues, succession and financial planning, and other matters relating to the preservation of wealth.