taxes

Supreme Court eliminates state tax-filing hassles for same-sex married couples

Estate taxes, too

The latest Supreme Court ruling also should simplify state estate and inheritance tax issues.

Two years ago, the IRS noted in its announcement that its treatment of same-sex couples as married for all federal tax purposes includes estate tax provisions. It was, after all, an estate tax issue filed by a New York widow following her wife's death that led to the invalidation of the DOMA definition of marriage.

Few filers are affected by the federal estate tax because estates valued at up to $5.43 million for 2015 are exempt from taxation. Separate state estate and inheritance taxes, however, remained costly for same-sex couples living in states that do not recognize their marriages.

Twenty states collect estate tax, inheritance tax or both. As with the federal law, most exempt a portion of an estate, typically $1 million or less, from taxation.

Of the states that collect taxes after death, most already recognized same-sex marriages.

Taxation of estates or property left to heirs

17 jurisdictions recognize same-sex marriage and collect estate tax, inheritance tax or both
Connecticut: estate tax
Delaware: estate tax
District of Columbia: estate tax
Hawaii: estate tax
Illinois: estate tax
Iowa: inheritance tax
Maine: estate tax
Maryland: estate tax and inheritance tax
Massachusetts: estate tax
Minnesota: estate tax
New Jersey: estate tax and inheritance tax
New York: estate tax
Oregon: estate tax
Pennsylvania: inheritance tax
Rhode Island: estate tax
Vermont: estate tax
Washington: estate tax
3 states did not recognize same-sex marriage, civil unions or domestic partnerships before the high court ruling but do collect inheritance tax. Now same-sex heirs here will receive the same treatment as all married heirs.
Kentucky: inheritance tax
Nebraska: inheritance tax (county level)
Tennessee: inheritance tax

Sources: State tax departments and Bankrate.com

Where an estate or inheritance tax is in place, most states follow the federal lead and allow spouses and, in some cases, certain other family heirs to inherit property without any limits.

This will make for an easier transfer of assets during a difficult time. It also should save same-sex couples money on estate planning, because they will no longer have to implement often complicated structures to ensure that their property goes as they wish to their spouses.

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