Last month, the California Supreme Court ruled that two individuals of the same gender are afforded the same right to marry as two heterosexual individuals under California's Constitution and equal protection clauses. As a result, same-sex couples have been able to apply for and obtain marriage licenses in the State of California since June 17, 2008.

In May, an initiative to modify the California Constitution to prevent same-sex marriages also qualified for the November ballot. Groups supporting the right of same-sex couples to marry have, however, filed suit seeking to prevent the Constitutional amendment initiative from being placed on the November ballot.

Same-Sex Marriage Under Federal Law

The Defense of Marriage Act (DOMA) became federal law in 1996. DOMA provides that only marriages meeting certain requirements will be respected for purposes of federal law, the most important of which is that the marriage be between a man and a woman. As a result, even though the California Supreme Court has ruled that parties to a same-sex marriage are entitled to the same privileges that parties to a heterosexual marriage enjoy under California law, the same-sex spouses will not be treated as married under federal law.

There are numerous tax benefits available to married individuals under federal law. For example, lifetime transfers to a U.S. citizen spouse qualify for the federal gift tax marital deduction, transfers at death to a U.S. citizen spouse qualify for the federal estate tax marital deduction, and a surviving spouse's community property interest in an asset will have an income tax basis equal to the fair market value of that interest on the date of death of the deceased spouse (frequently referred to as a "step up" in basis). Because of DOMA, same-sex spouses enjoy none of these benefits. Furthermore, because California's income tax basis rule incorporates the federal rule, a same-sex survivor will also not receive a step up in basis for California purposes following the death of his or her spouse.

On the other hand, various federal tax rules place limitations and restrictions on transfers among and involving family members. Because of DOMA, transfers between same-sex spouses are not subject to these limitations or restrictions. Thus, the same-sex spouses will have planning opportunities that are not available to heterosexual spouses.

Registered Domestic Partnerships

Although same-sex couples have only recently obtained the right to marry in California, since 2005 same-sex couples (and certain heterosexual couples) have had the ability be treated as spouses for all purposes under California law by entering into registered domestic partnerships. Thus, each registered domestic partner would be afforded all rights and subject to all responsibilities of a spouse under California law. Among the rights that a same-sex couple can obtain by either marrying OR entering into a registered domestic partnership are the right to:

• acquire community property during the registered domestic partnership
• file joint California income tax returns
• avoid a reassessment when an interest in California real property passes from one registered domestic partner to the other
• receive spousal support on a termination of the marriage or registered domestic partnership while both parties are living
• act as the health care agent for the other party if the other party has no Health Care Directive in place
• receive property as an heir upon the death of the other party

In addition, California law has recently been amended to allow a registered domestic partner whose real property was reassessed upon a transfer from his or her registered domestic partner during the years 2000 through 2005 to file a refund claim and roll-back the assessed value of the property to its earlier value. A timely claim must, however, be filed by the end of June 2009.

Greenberg Glusker's Family/Strategic Wealth Planning Group provides expertise in a full range of estate planning techniques for individuals, same-sex and heterosexual couples, and multi-generational family structures, including premarital agreements, tax, estate and gift planning, charitable foundations, family limited partnerships, and property tax assessment issues.

For more information on this and other related issues, please contact Laura A. Zwicker, Chair of Greenberg Glusker's Family/Strategic Wealth Planning Group.