Blog #9: Taxation and Homosexuals

There is a tax time bomb ticking away for California Registered Domestic Partners and Same Sex Married Couples. It is often said by opponents of same-sex marriage that present-day registered domestic partnership agreements offer the same benefits as an "opposite-sex" marriage. This may be true in some respects, but as far as federal, income gift and estate taxes are concerned, there are vast differences. There is a tax-free transfer of property from one spouse to another is called the "unlimited marital exemption”. There is no marital exemption for same-sex married couples or registered domestic partners, unlimited or otherwise. For the majority of registered domestic partners and same-sex married couples this does not matter for now. Five million dollars is a lot of money. The vast majority of people will not leave estates that large when they die. So the "good" news is that persons dying before Jan. 1, 2013, who have estates valued at less than $5 million will generally be exempt from estate tax. This exemption applies to individuals by right of their own personhood and is not affected by marital status. Therefore, most people will not have to worry about paying estate tax if they plan on dying before next year. For opposite sex surviving spouses, it doesn’t matter if the deceased spouse was worth $1 billion dollars: Code Section 1041 allows a tax-free transfer of unlimited property between spouses in death as well as life. Since the federal government does not recognize same-sex marriages or domestic partnerships, this is not the case for these couples. Assuming no other estate planning, once the $5 million estate and gift tax exemption amount is exceeded, every dollar in the estate is subject to estate tax. What is generally not an issue in estate planning for heterosexual partners due to the marital exemption is a huge issue for gay ones.

                Though America is ahead of some other countries when it comes to same-sex marriages, it seems the government always finds a way to get around things; especially when it comes to money. Our government is supposed to be ran “by the people, for the people”, but is it really? Or is it ran by money for money? Personally, I feel that everything revolves around money and people say they want equality, but do they really? Nearly seventy percent of people in the U.S. oppose gay marriage, almost the same proportion as are otherwise supportive of gay rights. Which means that many of the same people who are in favor of gay rights oppose gay marriage? That doesn’t seem fair. But, as we learned in class, people as a species, will always find someone else to target. For example, first it was African Americans, then it was women, then it was Latinos, now its homosexuals. Even if it gets to the point where things are completely equal, we’ll find someone else to blame.

http://www.edgeonthenet.com/business_finance/finance/news/131247/marriage_inequality:_surviving_gay_spouse_had_better_plan_for_big_tax_bite