Part III: How US v. Windsor Affects LGBT Clients: Estate Planning

With the fall of Defense of Marriage Act, a lot has changed in the U.S. for same-sex couples. One of the major facets for many, especially high net worth individuals, concerns estate planning. In fact, the case that was brought to the Supreme Court and ultimately led to the court finding DOMA unconstitutional, United States v. Windsor, largely concerned a dispute regarding spousal inheritance.

Here is what same-sex couples should consider when it comes to estate planning:

The importance of estate plans

Estate planning is particularly important to high net worth individuals with a variety of assets. Same-sex couples who were married in a state that recognizes their unions will now have an easier time of ensuring their wealth is transferred to their spouse post-DOMA, as estate planning is governed by the IRS and the Department of Treasury.

Before Thea Spyer died in 2009, she had named her wife Edith Windsor as her widow and the sole executor of her estate. However, due to policies enacted by DOMA, that estate was subject to more than $360,000 in taxes because the U.S. did not recognize Spyer and Windsor’s marriage at that time.

Thanks to the lawsuit Windsor brought before the Supreme Court, same-sex married couples now enjoy the ability to use the unlimited estate tax marital deduction to pass their assets to their surviving spouse. Similarly, they can make a gift or transfer property to their surviving spouse without incurring federal estate taxes.

While the removal of DOMA makes it easier for same-sex couples to transfer their estate to their surviving spouse, it’s worth noting that making a legally sound estate plan is an essential step that all individuals need to take. This provides them with the ability to control which of their family members or loved ones receive what portions of their estate, including businesses, investments, real estates and liquid assets.

Addressing estate taxes

For high net worth individuals, estate taxes are a real concern. However, for same-sex couples legally recognized by the U.S., there are a few more options available than there were when DOMA was still intact.

Currently, only estates worth more than $5.34 million are required to pay federal estate taxes. However, all couples should investigate their state’s laws to find out if there are any state-level estate taxes.

However, for married couples – same-sex or otherwise – there is an estate tax exemption.  While many spouses choose to simply leave the sum of their estate to each other, it’s worth investigation other options, as they may be setting their children up to pay a hefty tax if and when they ultimately inherit the sum of both parents’ assets.

There are also other options available, including an irrevocable life insurance trust (ILIT). An ILIT can be a smart way to transfer wealth to the next generation by providing heirs with cash to pay estate taxes, and more. Contact our Advanced Markets team at to learn more.

While same-sex couples now have a huge expanse of additional rights, they also have the responsibility to ensure their estate is properly cared for.

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Highland Capital Brokerage

Highland Capital Brokerage

Highland Capital Brokerage is committed to developing client-focused relationships with financial advisors using our core competencies of life insurance, annuities, and long-term care. We distinguish ourselves by providing point-of-sale support, advanced marketing, and creative estate and business planning techniques.
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