A recent decision by the Internal Revenue Service has made life simpler for the same-sex couples in Minnesota who are now enjoying the benefits of legally recognized marriage. In our last post on the issue, we discussed the fact that under the new state law, same-sex couples will be able to inherit without state tax liability.
At that time, the Supreme Court decision striking down the Defense of Marriage Act had already been handed down, but many federal agencies including the IRS were still developing plans to comply with the new law. Many of those agencies continue to scramble, but the IRS recently released a statement saying that same-sex couples will now be treated the same by the IRS as every other married couple, even if they do not live in the state where their marriage is legally recognized.
As we discussed in our previous post on the matter, same-sex couples can now inherit from a spouse without paying taxes on either the state or federal level. The application of this concept by the IRS will allow all those who get married in Minnesota to enjoy that federal benefit, even if they leave the state after their nuptials. However, if they live in a state that does not recognize the marriage, they will still be subject to estate tax by that state's government.
In addition, a same-sex couple who leaves the state where they were married could run into other problems with their estate plan that go beyond taxes. For example, if the spouse who passed away did not leave a will and the couple was living in a state that did not recognize the marriage, the surviving spouse may face difficulty or be barred from inheriting in the absence of a will. This is just one more reason to be sure to keep an updated estate plan with various contingencies for what the future could hold.
Source: Fox Business, "Same-sex married couples await state tax word," Kay Bell, Sept. 16, 2013.