The U.S. Supreme Court has ruled that a key provision of the Defense of Marriage Act (DOMA) is unconstitutional, clearing the way for the surviving spouse of a lesbian couple to receive a refund of the taxes she was forced to pay because the federal government did not consider her married to her spouse.

Although the ruling does not create a national constitutional right to same-sex marriage, it does allow same-sex couples in states that legally recognize their marriages to receive a host of federal benefits that were previously denied them, such as being able to inherit from a spouse without paying federal estate tax.

Edith Windsor and Thea Spyer became engaged in 1967 and were married in Canada in 2007, although they lived in New York City. When Ms. Spyer died in 2009, Ms. Windsor had to pay Ms Spyer’s estate tax bill because of DOMA, a 1996 law that denies federal recognition of gay marriages. Although New York State considered the couple married, the federal government did not and taxed Ms. Spyer’s estate as though the two were not married. Ms. Windsor sued the U.S. government seeking to have DOMA declared unconstitutional and asking for a refund of the more than $363,000 federal estate tax she was forced to pay. As previously reported, a federal court judge from the U.S. District Court for the Southern District of New York ruled that there was no rational basis for DOMA’s prohibition on recognizing same-sex marriages.

In a 5-4 decision, the U.S. Supreme Court declared that DOMA is an unconstitutional deprivation of equal liberty under the Equal Protection Clause of the Fifth Amendment. Noting that states have the power to define and regulate marriage, the Court held that DOMA discriminates against same-sex couples who are legally married in their state. According to the court, “DOMA instructs all federal officials, and indeed all persons with whom same-sex couples interact, including their own children, that their marriage is less worthy than the marriages of others. The federal statute is invalid, for no legitimate purpose overcomes the purpose and effect to disparage and to injure those whom the State, by its marriage laws, sought to protect in personhood and dignity.”

The ruling will have many implications for same-sex couples with regard to federal estate taxes, gift taxes, Social Security benefits, and IRA beneficiary rollover rules, and more than 1,000 other federal benefits.  The decision means that same-sex couples who are legally married must now be treated the same under federal law as married opposite-sex couples, at least in states that recognize same-sex marriage.

Complicating matters is that the case brought to the Supreme Court did not challenge another provision of DOMA that says no state must recognize a same-sex marriage from another state.  If a couple married in a state that recognizes same-sex marriage moves to a state that does not, not all federal rights and benefits accorded married couples will apply because some benefits — like Social Security, for example — are contingent on whether the marriage is considered valid in the state where the couple currently lives.

For this to change, Congress will have to pass new laws and/or President Obama will have to change regulations.  But in the meantime, Edith Windsor can expect a check from the U.S. Treasury for $363,053 — plus interest.

ELA

Annuities Bought for Medicaid Applicant’s Spouse Are Neither Income Nor Resource

A U.S. district court has held that the annuities a Medicaid applicant purchased for his wife cannot be considered as either assets or income when determining Medicaid eligibility.   Jackson v. Selig (U.S. Dist. Ct., E.D. Ark., No. 3:10–CV–00276–BRW, March 13, 2013).

Richard Jackson lived in a nursing home and applied for Medicaid benefits. The state denied Mr. Jackson’s application because he had more than $300,000 in available resources. Mr. Jackson purchased an annuity for his wife for $248,949.09 and a smaller annuity for himself, and then reapplied for benefits. The state found Mr. Jackson transferred resources for less than fair market value and issued a 69-month penalty period

Mr. Jackson sued the state in federal court. The state filed a motion to dismiss, but the district court denied the motion. Both parties asked for summary judgment. (Mr. Jackson died during the pendency of the lawsuit.)

The U.S. District Court for the Eastern District of Arkansas grants summary judgment to Mr. Jackson. The court holds that because the annuities complied with federal Medicaid law, they cannot be considered as assets when determining Medicaid eligibility. In addition, the court rules that the annuity payments were made to Mr. Jackson’s wife, so the annuity payments are not income or resources available to Mr. Jackson.

For the full text of this decision, click here.
ela

If you choose to write your own will, you run the risk of not having your estate distributed the way you want, as a recent Pennsylvania case illustrates.

George Zeevering apparently wanted his estate to go to two of his five children. Instead of seeking out an elder law attorney to advise him on drawing up an estate plan, he decided to write his own will. The will gave his pickup truck to his daughter Diane and his summer property to his son Wayne. Mr. Zeevering also wrote in the will that he was intentionally leaving out his other three children.

The problem with the will was that Mr. Zeevering did not specify what to do with the remainder of his estate (called a “residuary clause”). While Mr. Zeevering probably intended that the rest of his estate – which totaled $217,000 – would go to his favorite children, he didn’t state that in the will. Because the will had no residuary clause, the remainder of Mr. Zeevering’s estate passed under the state law that specifies who inherits when there is no will. Under Pennsylvania law, this meant that the rest of Mr. Zeevering’s estate would be divided equally between his five children.

A state court confirmed this result, but only after the children had spent much more in attorney fees than their father would have paid a lawyer to have his will done properly.  While you may save some money drafting your own will, you are in danger of making mistakes that can cause unneeded conflict and don’t get the result you want. Always seek the advice of your elder law attorney before creating an estate plan.

To read more about this case, click here.

A U.S. court of appeals holds that a nursing home patient was not entitled to coverage from her health insurance plan for her nursing home stay because she received primarily custodial care, not skilled nursing services. Becker v. Chrysler LLC Health Care Benefits Plan (7^th Cir., No. 11-2624, Aug. 20, 2012).