Category: Family Law

DOL Issues Final Rule Amending FMLA Definition of “Spouse” to Include Same-Sex Marriages

The U.S. Department of Labor has issued a final rule amending the regulatory definition of “spouse” under the Family and Medical Leave Act (“FMLA”).  We earlier reported on the DOL’s proposed rule to this effect, which is now final and will become effective on March 27, 2015.

The amendment changes the definition of “spouse” to include individuals in same-sex marriages if the marriage was valid in the place it was entered into regardless of where they live.  Before the new rule was issued, the FMLA and its accompanying regulations defined “spouse” as a husband or wife as recognized under the laws of the state in which the employee resides.  The new definition of spouse instead looks to the law of the jurisdiction in which the marriage was entered into and expressly encompasses same-sex married couples.  The final rule thus adopts a “place of celebration” rule rather than a “state of residence” rule for the definition of “spouse” under the FMLA.

According to the DOL, the amended regulatory definition of spouse permits “eligible employees in legal same-sex marriages [to] be able to take FMLA leave to care for their spouse or family member, regardless of where they live.”  The DOL has also suggested that the new rule will reduce the administrative burden on multi-state employers, who no longer have to consider an employee’s state of residence and the laws of that state in determining the employee’s eligibility for FMLA leave.

The new rule was prompted by the United States Supreme Court decision in United States v. Windsor, which found unconstitutional those provisions of the Defense of Marriage Act that prohibited federal recognition of same-sex marriages.

Some of the other features of the new rule include:

  • The new rule encompasses an employee in a same-sex marriage entered into abroad as long as the marriage is valid in the place it was entered into and could have been entered into in at least one state in the United States.

  • The new rule encompasses employees in a common law marriage as long as the common law marriage became valid in a state that recognizes such common law marriage.

  • An employee in a legal same-sex marriage can now take FMLA leave to care for his or her stepchild whereas before, an employee in a legal same-sex marriage could only take FMLA leave to care for his or her stepchild for whom the employee stood in loco parentis.

  • Similarly, an employee can now take FMLA to care for his stepparent who is the employee’s parent’s same-sex spouse, even if the stepparent never stood in loco parentisto the employee.

ARTICLE BY

Shira Forman
Sheppard, Mullin, Richter & Hampton LLP

Same Sex Marriage and Tax Law…A Rough Landscape

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Another tax season is upon us, and the hardships of complying with another annual tax return filing requirement affects most of us. However, for same sex couples, the hardships are further exacerbated by the different tax laws at the state level. At the time this post is published, same-sex marriage bans remain in place in Alabama, Arkansas, Georgia, Kentucky, Louisiana, Michigan, Mississippi, Missouri, Nebraska, North Dakota, Ohio, South Dakota, Tennessee and Texas. These bans and various appeals cause uncertainty for some same sex couples with regard to their filing status. Fortunately, though, clarity (we hope) is just around the corner as the U.S. Supreme Court has finally agreed to take up the matter of same-sex marriage in April 2015.

ARTICLE BY

Joseph Tamburello
OF
Horwood Marcus & Berk Chartered

Oregon’s Same-Sex Marriage Ban Unconstitutional, Judge Rules

Jackson Lewis Law firm

 

Oregon’s prohibition on same-sex marriage conflicts with the United States Constitution’s guarantee of equal protection, newly appointed U.S. District Court Judge Michael McShane has held in a case filed on behalf of four couples in Multnomah County. Geiger v. Kitzhaber, No. 6:13-cv-01834-MC (May 19, 2014).

Judge McShane explained the measure discriminates against same-sex couples. “The state’s marriage laws unjustifiably treat same-gender couples differently than opposite-gender couples. The laws assess a couple’s fitness for civil marriage based on their sexual orientation: opposite-gender couples pass; same-gender couples do not. No legitimate state purpose justifies the preclusion of gay and lesbian couples from civil marriage.”

A state Constitutional amendment, enacted pursuant to a 2004 ballot initiative organized and sponsored by the Defense of Marriage Coalition, had prohibited same-sex marriage, stating that only “marriage between one man and one woman shall be valid or legally recognized as a marriage.” This initiative and the subsequent Constitutional amendment were in response to the Multnomah County commissioner’s decision to issue marriage licenses to same-sex couples. During the Geiger litigation, Oregon’s Attorney General stated she found it impossible to legally defend the ban because “per- forming same-sex marriages in Oregon would have no adverse effect on existing marriages, and that sexual orientation does not determine an individual’s capacity to establish a loving and enduring relation- ship.” With Geiger, and the U.S. Supreme Court’s 2013 decision in United States v. Windsor invalidating the federal Defense of Marriage Act, same-sex marriage is valid under Oregon state and federal law.

Further, although Oregon enacted a domestic partnership law in 2008, the Family Fairness Act, granting domestic partners similar rights and privileges to those enjoyed by married spouses, the Legislature acknowledged domestic partnerships did not reach the magnitude of rights inherent in the definition of marriage. For example, same-sex couples in Oregon were not entitled to the rights or benefits under the federal Family and Medical Leave Act because Department of Labor guidance recognizes same-sex marriage only if valid under the employee’s state of residence. The DOL, however, has proposed a rule expanding the term “spouse” and, if implemented, will recognize same-sex marriages when recognized in the couple’s state of residence or if performed in a state recognizing same-sex marriage. According to the Secretary of Labor, “The basic promise of the FMLA is that no one should have to choose between succeeding at work and being a loving family caregiver. Under the proposed revisions, the FMLA will be applied to all families equally, enabling individuals in same-sex marriages to fully exercise their rights and fulfill their responsibilities to their families.” No changes have been proposed, however, for purposes of the Employment Retirement Income and Security Act (“ERISA”), the federal law governing employee benefit plans. The DOL counsels employers that, for purposes of ERISA, same-sex marriage should be recognized if valid in the state it is performed.

While Geiger will simplify the legal landscape, employers should review policies, procedures, and benefit plans closely to ensure that same-sex spouses are treated equally in all respects. In addition, Oregon law further prevents employment discrimination based on sexual orientation and family status. Requiring same-sex couples to “prove their status” or take other similar measures that are not required of opposite-sex couples may increase the risk of potential litigation under these laws.

Mei Fung So contributed to this article. 

ARTICLE BY

Scott Oborne
Bryan P. O’Connor
Roger S. Kaplan
 
OF
Jackson Lewis P.C.

Wisconsin Federal Court Recognizes Same-Sex Marriage: How Does This Affect the Administration of an Employer’s Employee Benefits?

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On Friday, June 6, 2014, Judge Crabb of the U.S. District Court for the Western District of Wisconsin issued a decision finding that Wisconsin’s constitutional amendment recognizing marriages only between men and women violates the Equal Protection Clause of the U.S. Constitution.

Unlike several other federal judges who have considered the issue, Judge Crabb did not make her ruling immediately effective. Instead the Court asked the plaintiffs’ lawyers in the case to help her fashion an injunction to implement her ruling. The plaintiffs have until June 16, 2014, to submit this proposal. The State asked for clarification on the June 6, 2014 ruling and requested that the court stay its decision until it made a final decision on the scope of the injunctive relief. On June 9, 2014, the court denied the State’s motion. In response, the State appealed Judge Crabb’s decision to the U.S. Court of Appeals for the Seventh Circuit in Chicago and requested an immediate stay of Judge Crabb’s order. The Seventh Circuit has solicited arguments from the parties to determine whether it has jurisdiction of the matter.

In response to Judge Crabb’s decision, many of the State’s counties have begun issuing marriage licenses to same-sex couples in the state. Others have declined to do so and have, instead, sought guidance from counsel or the Attorney General.

Addressing the Change

Judge Crabb’s decision, and issuance of Wisconsin same-sex marriage licenses, has injected some uncertainty into benefit plan administration in Wisconsin. Based upon the state of the prior law, it is likely that a Wisconsin employer will have more employees with domestic partners than employees with same-sex spouses through legal marriages formed elsewhere. Nevertheless, same-sex benefits are certainly an evolving issue for employers.

Family and Medical Leave

Registered and unregistered domestic partners were already covered under the Wisconsin Family and Medical Leave Act. Because an unregistered domestic partnership does not require a formal filing with a county clerk, it appears that the state law in this context is relatively unaffected.

On the other hand, the federal FMLA is substantially affected. The definition of spouse under the federal regulations requires that the marriage must be recognized by the state of residence. Most FMLA policies do not distinguish between same-sex and opposite-sex partners. Consequently, if Judge Crabb’s decision stands, requests for FMLA leave relating to same-sex spouses must be recognized under both federal and Wisconsin law if the leave is otherwise appropriate under the law.

Until the ramifications of the injunctive language are known, employers should pay particular attention to the language of their FMLA policies before making any determination about FMLA requests. Depending on how the courts ultimately rule, an employer’s FMLA policy may or may not require amendment. Regardless, if an employee asks about leave for a same-sex spouse, legal counsel should be consulted.

Benefits

The status of the law will remain uncertain until Judge Crabb makes a decision regarding whether to issue an injunction and the form such an order would take. If an injunction is issued and then stands following the anticipated appeal, employers who employ employees who have a same-sex spouse would no longer impute Wisconsin income tax for health coverage, and would otherwise recognize such spouse for all legal purposes. Because of the uncertainty in the current climate, employers should consider whether to continue imputing income for benefits provided to same-sex spouses until such time as transitional guidance is issued by the Wisconsin Department of Revenue on this issue.

Nothing has changed as it relates to unmarried domestic partners—these individuals are still subject to imputed income where the individual obtains coverage on behalf of his or her domestic partner.

Because employee benefits rules are largely governed by federal law, many same-sex marriage changes in employee benefits have been observed already since the U.S. Supreme Court’s Windsor decision of last year. If the Judge Crabb ruling stands, the most significant change for Wisconsin employers will likely pertain to Wisconsin tax treatment of family health coverage.

What should employers do in response?

  • Account for those same-sex couples who may have been married in a state that permitted same-sex marriage or who are newly married in Wisconsin following Judge Crabb’s decision;
  • Examine if modification of FMLA policy/forms is warranted based upon the changes; and
  • Examine if modification to benefit plan materials may be necessary.
Article By:

Charles P. Stevens
Kirk A. Pelikan
Of:
Michael Best & Friedrich LLP

Keeping Current – Recent Changes in Employment Laws

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Is your FMLA policy up to date?

The federal Family Medical Leave Act regulations were revised in 2013, primarily to expand the circumstances under which employees can take military leaves. For example, leave is now available to care for covered veterans and for service members or veterans who aggravated an existing illness or injury while on active duty (as opposed to suffering a new injury while on duty). Qualifying exigency leave is now also available to care for a covered service member’s parent.

The Department of Labor is increasing the number of complaint-driven on-site audits it conducts under the FMLA. Auditors will come in with a checklist of updates they expect to see in an employer’s FMLA policy to comply with the 2008 and 2013 regulatory changes, as well as the DOL’s informal guidance. Having updated policies will show an auditor or investigator that you are up to speed on the latest changes in the law and may lend credibility to your FMLA practices.

If you are a federal contractor, are you preparing to comply with the new OFCCP regulations regarding veterans and individuals with disabilities?

The Office of Federal Contract Compliance (“OFCCP”) issued regulations in 2013 substantially increasing the obligations of federal contractors relating to veterans and individuals with disabilities. Many of these new requirements, including language to be included in all job postings and subcontracts, go into effect March 24, 2014. Additional requirements go into effect at the start of an employer’s next plan year after March 24, 2014, but may require substantial planning in advance. For example, federal contractors will now be required to conduct statistical analysis of the number of veterans and disabled individuals in their workforce, much like what was already required for race and gender. This requires inviting individuals to self-identify as a veteran or disabled. The regulations require this invitation be made to all applicants and again to those offered jobs. It also requires that an employer’s existing work force be invited to self-identify as disabled every five years. Tracking this information can be complicated, as it must be kept separate from general personnel files and treated as confidential. This is not only required by the regulations but is also essential to avoid increased risk of discrimination claims on the basis of disability.

Companies that provide products or services under contracts with the federal government should review their obligations to ensure they are complying with these new OFCCP regulations.

Was your employee terminated for misconduct or “substantial fault” on the job?

Wisconsin’s 2013 Budget Bill made changes to the statutes governing unemployment insurance, which took effect January 5, 2014. Even before these changes, employees would be ineligible for unemployment insurance benefits if they were terminated for misconduct. The definition of misconduct previously came from case law. The new statute defines misconduct and includes examples, which include:

  • Two or more absences (without notice or without valid reason) in 120 days, unless employer policy is more generous
  • Falsifying business records

The statute also adds a second basis under which employees may be disqualified for benefits, if they are terminated for “substantial fault” in their performance. This still does not disqualify an employee from unemployment benefits for minor infractions or inadvertent errors, but on its face it would disqualify an employee who was terminated for major failures. This basis is largely undefined and untested, so we will have to monitor the decisions of administrative law judges and the courts to determine how it will be defined in practice. The updated statutes also narrow the circumstances in which an employee can quit his/her job and still qualify for unemployment benefits.

These changes may mean that employers are more likely to prevail if they challenge a former employee’s unemployment compensation claims. This may be of particular benefit to non-profit employers who participate in the unemployment insurance system as reimbursing employers, and therefore pay dollar-for-dollar on each unemployment claim.

Article by:

Sarah J. Platt

Of:

von Briesen & Roper, S.C.

Same Sex Marriages: Are You Filing Your Taxes Properly?

Poyner Spruill

 

In late 2013, I met with my first same sex couple clients since the U.S. Supreme Court overruled the Defense of Marriage Act (DOMA) last year.  If you recall, DOMA  was the federal law barring the federal government from recognizing same sex marriages legalized by states.  It was ruled unconstitutional by the U.S. Supreme Court as violative of the Fifth Amendment.  The IRS issued a statement on August 29, 2013 that provided that same sex couples legally married in a jurisdiction that recognizes their marriage would be treated as married for federal tax purposes regardless of the laws of their domiciliary state.  As a result, same sex couples married in a state that legally recognizes their marriage will be entitled to the estate and gift tax marital deduction, and they must also file their federal income tax returns with the status of married or married filing separately.  (The Department of Labor issued a similar statement in Technical Release No. 2013-4, meaning that for purposes of ERISA, legally married couples are treated as married, regardless of the laws of their domiciliary state.)

North Carolina does not recognize same sex marriage as valid, so for purposes of North Carolina taxes, where does that leave our North Carolina-residing same sex couple clients that were legally married in another state?  NCDOR directive PD-13-1 provides that “Because North Carolina does not recognize same-sex marriage as valid… individuals who enter into a same-sex marriage in another state cannot file a North Carolina income tax return using the filing status of married. Such individuals who file a federal income tax return as married must each complete a separate pro forma federal return for North Carolina purposes with the filing status of single  to determine each individual’s proper adjusted gross income, deductions and tax credits allowed under the Code for the filing status used for North Carolina purposes.”

My clients are considering getting married in a state that recognizes same sex marriage, but they want to understand the legal implications for them if they do.  They are concerned about the “marriage penalty” for federal income tax purposes and the complexity of having different laws and rules for federal and  state purposes. They do not have an estate tax problem, so the availability of the unlimited estate tax marital deduction is of no consequence to them. However, they are considering retitling the house currently owned by one of them into their joint names.  I cautioned them that such transfer would constitute a taxable gift to the extent the value of the interest transferred exceeded the donor owner’s $14,000 annual exclusion. In fact, one partner’s use of funds for the benefit of the other in excess of the donor-partner’s annual exclusion in any year will require the donor-partner to file a gift tax return. If they are legally married, there would be no taxable gifts in those circumstances due to the unlimited marital gift tax deduction. My clients each have a 401(k) plan, so if they were to marry, under ERISA, they must be designated beneficiary of each other’s accounts unless the spouse waives that right.

As an advisor, if you have same sex couple clients who have been married in a state that recognizes same sex marriage and they have paid taxes or used exemptions (income, gift or estate tax) based on separate status, you may consider whether they can and should file amended returns based on married filing status to recoup taxes or exemptions. And they should be advised to revisit their beneficiary designations and their estate planning documents if they have not done so already.

Article by:

Westray B. Veasey

Of:

Poyner Spruill LLP

Varying Maternity Leave Policies Within the Same Company

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Is it permissible for a company to have separate maternity policies for a corporate office from that of a store location? The concern is of course that a claim of discrimination would be made if different policies were used, and it was right for the question to be asked.  However, what may be surprising is that there is no requirement that employees at different company locations all be offered the same benefits. In fact, it is common for employees in a corporate office to receive different employment packages than those at other locations, such as the company’s retail store or restaurant. In fact, an employer does not have to have the same policies for all employees in the same location in many instances. The key is that a policy not have an adverse impact on any protected groups or result in unintentional discrimination.

Maternity leave can involve a combination of sick leave, personal days, vacation days, short-term disability, and unpaid leave time. Thus, exactly how a maternity leave will be structured for any one employee will likely vary.  It is important to note that if your policy allows women to take paid leave beyond what’s considered medically necessary after childbirth (for instances, to arrange for childcare or bond with the child), then you should also allow male employees to take paternity leave for similar purposes. Not allowing a male to take leave under the same terms and conditions as females, if the leave is not related a pregnancy-related disability, can be considered sex discrimination.  So, realize that in some cases your maternity leave may also require a mirroring paternity leave.

The Family and Medical Leave Act (“FMLA”) should also always be considered. If FMLA eligible, a new parent (including foster and adoptive) may be eligible for 12 weeks of leave (unpaid or paid if the employee has earned or accrued it) that may be used for care of a new child.

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IRS Guidance on Employment and Income Tax Refunds on Same-Sex Spouse Benefits

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Employers extending benefit coverage to employees’ same-sex spouses and partners should review their payroll procedures to ensure that such coverages are properly taxed for federal income and FICA tax purposes.  Employers also should review the options in Notice 2013-61 and consider filing claims for refunds or adjustments of FICA overpayments.

Employers that provided health and other welfare plan benefits to employees’ same-sex spouses prior to the Supreme Court of the United States’ June 2013 ruling in U.S. v. Windsor may be interested in filing claims for refunds or adjustments of overpayments in federal employment taxes on such benefits.  To reduce some of the administrative complexity of filing such claims, the U.S. Department of the Treasury and the Internal Revenue Service (IRS) recently issued Notice 2013-61, which outlines several optional procedures that employers can use for overpayments in 2013 and prior years.

String of pearls and champagne glass with wedding rings

In Windsor, the Supreme Court ruled Section 3 of the Defense of Marriage Act (DOMA) unconstitutional.  Section 3 of DOMA had provided that, for purposes of all federal laws, the word “marriage” means “only a legal union between one man and one woman as husband and wife,” and the word “spouse” refers “only to a person of the opposite-sex who is a husband or wife.”

Federal Taxation of Same-Sex Spouse Benefits

The Windsor ruling thus extends favorable federal tax treatment of spousal benefit coverage to same-sex spouses.  The IRS issued guidance in July clarifying that this tax treatment would extend to all same-sex couples legally married in any jurisdiction with laws authorizing same-sex marriage, regardless of whether the couple resides in a state where same-sex marriage is recognized.  This IRS approach recognizing same-sex marriages based on the “state of celebration” took effect September 16, 2013.

Prior to the ruling, an employer that provided coverage such as medical, dental or vision to an employee’s same-sex spouse was required to impute the fair market value of the coverage as income to the employee that was subject to federal income tax (unless the same-sex spouse qualified as the employee’s “dependent” as defined by the Internal Revenue Code).  The employer was required to withhold federal payroll taxes from the imputed amount, including federal income and the employee’s Social Security and Medicare (collectively FICA) taxes.  In addition, employers paid their own share of FICA taxes on the imputed amount, as well as unemployment (FUTA).

As a result of the ruling, an employee enrolling a same-sex spouse for benefit coverage under an employer-sponsored health plan no longer has imputed income for federal income tax purposes; may pay for the spouse’s coverage using pre-tax contributions under cafeteria plans; and may take tax-free reimbursements from flexible spending accounts (FSAs), health reimbursement accounts (HRAs) and health savings accounts (HSAs) to pay for the same-sex spouse’s qualifying medical expenses.  This same favorable federal tax treatment does not extend to employer-provided benefits for an unmarried same-sex partner, unless the same-sex partner qualifies as the employee’s dependent.

Overpayments of Employment Taxes in 2013

Employers that overpaid both federal income and FICA tax in 2013 as a result of income imputed to employees for benefit coverage for a same-sex spouse may use the following optional administrative procedures for the year:

  • Employers may use the fourth quarter 2013 Form 941 (Employer’s Quarterly Federal Tax Return) to correct overpayments of employment taxes for the first three quarters of 2013.  This option is available only if employees have been repaid or reimbursed for over-collection of FICA and federal income taxes by December 31, 2013.

Alternatively, employers may follow regular IRS procedures to correct an overpayment in FICA taxes by filing a separate Form 941-X for each quarter in 2013.  Notice 2013-61 provides detailed instructions for each of the alternative options, including how to complete the Form 941, as well as Form 941-X, which requires “WINDSOR” in dark, bold letters across the top margin of page one.

Overpayments of FICA Taxes in Prior Years

Employers that overpaid FICA taxes in prior years as a result of imputed income for same-sex spousal benefit coverage may make a claim or adjustment for all four calendar quarters of a calendar year on one Form 941-X filed for the fourth quarter of such year if the period of limitations on such refunds has not expired and, in the case of adjustments, the period of limitations will not expire within 90 days of filing the adjusted return.  Alternatively, employers may use regular procedures to make such claims or adjustments.  The regular procedures require filing a Form 941-X for each calendar quarter for which a refund claim or adjustment is made.  Note that under the alternative procedure provided by Notice 2013-61 or under the regular procedure, filing of a Form 941-X requires either employee consents, or repayment or reimbursements, as well as amended Form W-2s to reflect the correct amount of taxable wages.

Employee Overpayments of Federal Income Taxes

Employers who provided benefits to employees’ same-sex spouses in 2013 may adjust the amount of reported federally taxable income on each employee’s Form W-2 (Wage and Tax Statement) to exclude any income imputed on the fair market value of the coverage and to permit the employee to pay for the coverage on a pre-tax basis.

Employees who overpaid federal income taxes in prior years as a result of same-sex spouse benefit coverage may claim a refund by filing an amended federal tax return for any open tax year.  Refunds are available for overpayments resulting from income imputed on the fair market value of the coverage and from premiums paid on an after-tax basis for the coverage.  An amended tax return generally may be filed from the later of three years from the date the return was filed or two years from the date the tax was paid.

Employers that file Form 941-X are required to file Form W-2c (Corrected Wage and Tax Statement) to show the correct—in this case reduced—wages.  Employers that do not file Form 941-X may want to begin preparing for employee requests for a Form W-2c for each open tax year in which benefit coverage was offered to employees’ same-sex spouses.

Next Steps

Employers extending benefit coverage to employees’ same-sex spouses and partners should carefully review their payroll processes and procedures to ensure that such coverages are now properly taxed for federal income and FICA tax purposes.  In addition, employers should review the options in Notice 2013-61, and consider filing claims for refunds or adjustments of overpayments of FICA taxes for any prior open tax years and issuing Form W-2c to allow employees to claim refunds of federal income tax.  Most importantly, by acting promptly, employers can correct the 2013 over-withholdings for both FICA and federal income tax and overpayment of the employer portion of FICA tax, without the necessity and burden of filing a Form 941-X.

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A Quick Reference Guide to Preparing for a Divorce

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It’s hard to dismantle and disentangle a shared life. Fear and anxiety about divorce, the legal process and personal transition, frequently keep people in marriages that are abusive, plagued by infidelity, or fraught with friction. If you reach the (sometimes startling) conclusion that your marriage may end, here are five things to consider in preparing for divorce.

1. Compile Documents. Collect your last three years’ tax returns, and the past six months’ credit card statements, bank account statements, medical care invoices, and business expense records. Also collect any prenuptial or post-marital agreements, wills, disclaimer deeds, and trust documents. Whether or not you were involved in managing family finances during the marriage, understanding the debts and assets involved in the divorce is critical for the proceedings and for your attorney’s understanding of the issues, and will empower you to make informed decisions.

2. Know When To Act Quickly. Divorces can be contentious, and some marriages are characterized by verbal, emotional, or physical abuse. Obtain an Order of Protection if you are threatened or fear for your safety or that of loved ones. If your spouse is excessively spending or incurring debts detrimental to the marriage, filing for divorce sooner rather than later can help you preserve resources needed during and after the divorce.

3. Consult With An Attorney. Consult with at least one family law attorney before filing for divorce. There is no substitute for an experienced family law attorney with expertise in dealing with the issues in your case. Additionally, there are immediate consequences to filing for a divorce, such as the issuance of a preliminary injunction that will prohibit you from removing funds from bank accounts, traveling with children out of state, and selling items or property, among other restrictions. Knowing the process before you begin can help you plan.

4. Understand the Alternatives. There are alternatives to divorce that may better suit your situation, including legal separation and conciliation services. Consulting with a family lawyer can help you make the best decision for your circumstances.

5. Talk to Your Kids. Spouses who are parents must also address a tough question: how to tell the kids? Children may experience anxiety or blame themselves if parents fail to communicate. When appropriate, work with your spouse or third-party counselor in developing a plan to discuss the situation with your children.

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The IRS/Treasury Department Announcement & Estate Planning Ruling Re: Same-Sex Marriage

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On August 29, 2013, the Treasury Department and the Internal Revenue Service (“IRS“) issued Revenue Ruling 2013-17. The ruling establishes that the IRS will recognize same-sex marriages for all federal tax purposes regardless of where the couple lives, as long as the couple was married in a jurisdiction that recognizes such marriages. So, for example, if a couple was married in Connecticut (a recognizing state), but now live in Kentucky (a non-recognizing state), they will receive the same federal tax treatment as heterosexual couples residing in Kentucky. The ruling clarifies that a “state of celebration” approach will be used versus a “state of residence” rule. Treasury Secretary Jacob J. Lew says the decision “[a]ssures legally married same-sex couples that they can move freely throughout the country knowing that their federal filing status will not change.” It is important to note that, according to the ruling, “marriage” does not include a registered domestic partnership, civil union or other similar arrangement. The ruling applies to all federal tax provisions where marriage is a factor, including: filing status, estate tax exemptions, personal and dependency exemptions, the standard marriage deduction, IRA contributions, earned income tax credits and employee benefits.

The ruling came on the heels of the Supreme Court’s June 2013 decision in United States v. Windsor and is meant to address some of the confusion that Windsor left in its wake. As background, before Congress enacted the Defense of Marriage Act (“DOMA“), marital status for federal income tax purposes was defined by state law. Section 3 of DOMA banned same-sex couples from being recognized as “spouses” for all federal law purposes. Windsor ruled Section 3 of DOMA unconstitutional; however, the decision did not require states to recognize same-sex marriages. Thus, since June, state and federal agencies have been wondering how to deal with same-sex marriages in non-recognizing states. With the Revenue Ruling, much-needed guidance has arrived.

From the estate planning perspective, there are now several more options that same-sex couples can use to their advantage. First, same-sex spouses are now eligible for the marital deduction, which means that they may transfer as much as they want to their spouse (in life and in death) without incurring federal estate or gift tax, provided that the recipient spouse is a U.S. citizen.

Another benefit is the use of “gift-splitting.” Any individual can give up to $14,000 each year to as many people as they choose without incurring gift tax. Heterosexual spouses, and now same-sex spouses, can combine their $14,000 to jointly give $28,000 to individuals tax-free.

Same-sex spouses will also now get to take advantage of an estate planning tool known as “portability.” Portability allows a widow or widower to use any unused estate tax exclusions (capped at $5.25 million for 2013) of their spouse who died in addition to their own. The unused exclusion must be transferred to the surviving spouse and an estate tax return must be filed (by the executor) within nine months of the spouse’s death, even if no tax is due.

The ruling also has a myriad of other implications for taxes and employee benefits that should be carefully considered by same-sex couples. There are still lingering questions about how other agencies, such as the Social Security Administration, will address benefits post-Windsor.

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