Minnesota recently joined the eleven other states that recognize same-sex marriages. This can seem like a huge win for those who would like to take advantage of certain estate planning benefits that are afforded to married couples.
Clearly, when you are legally married in a particular state you gain certain benefits that are not afforded to you when you are in a committed relationship that is not recognized by the state.
One of these is the ability to utilize the unlimited estate tax exemption that exists between legally married partners. In the state of Minnesota, we have a state-level estate tax. The exclusion is $1 million, but if you are legally married you can leave any sum of money to your surviving spouse without incurring any Minnesota estate tax liability.
On the federal level the estate tax carries a $5.25 million exclusion in 2013. The maximum rate of the tax is 40%.
Legally married people, per Federal law, have an unlimited estate tax exemption on transfers between one another on the federal level just like they do on the state level in Minnesota. Plus, the federal estate tax exclusion is portable. So, if you predecease your spouse, he or she could use his or her own $5.25 million exclusion, and the survivor could use yours as well.
None of the above is true for LGBT individuals who are legally married in one of the twelve states that now recognize LGBT marriages. The federal government does not recognize those marriages because of provisions contained within the Defense of Marriage Act.
The Supreme Court will soon rule on the constitutionality of this Act, but for now legally married LGBT couples must still contend with the potential imposition of the estate tax.
It should be noted that the newly passed law in Minnesota actually takes effect on August 1, 2013.