Recently, the Department of Justice under President Obama has stated that they will no longer defend the constitutionality of the Defense of Marriage Act in court. What many people may not know is that the current case that prompted that decision is about the estate tax.
Edith Windsor and Thea Spyer were married in Canada in 2007 after being a couple for more than 40 years, and Spyer died in 2009, and left her entire estate to Windsor (this is actually simplified as the real dispositions involved transfers to trusts).
At the time of Spyer’s death in 2009, the estate tax exemption, that is the amount an estate can be valued before being subject to tax was $3.5 million. Anything over that amount was taxed at a 45% rate. If Edith was married to Archie instead of Thea, then the tax owed would be zero. That is because of what is known as the marital deduction. Any property that you leave to your spouse is not subject to tax (it will eventually be taxed upon the second death).
Normally the federal government will treat a couple as married for estate tax purposes, if the state in which the decedent lived sees their marriage as valid. Incredibly, their marriage was recognized by New York State, and not subject to the state’s estate tax. But because of the Defense of Marriage Act, the IRS was prohibited from allowing Thea’s estate to take the marital deduction.
Edith is suing the government for a refund of the $360,000 estate tax that she (or the estate) had to pay due to the government’s use of DOMA deny the refund.
What will happen next? Stay tuned.
Here is a copy of the ACLU’s complaint filed on Edith’s behalf. http://www.aclu.org/files/assets/2010-11-9-WindsorvUS-Complaint.pdf