The Ripple Effect of US v. Windsor on Planning

     Today marks a milestone for Plainly Legal. This is our 100th post, and we would like to thank everyone who has supported this venture and visited our Blog. That said, let's move on to today's topic, as recent weeks have produced significant news that affects our practice and those of our associated professionals.

     As we discussed in July, the Supreme Court's decision in the case of US v. Windsor, holding Section 3 of the Defense of Marriage Act (DOMA) unconstitutional, impacts planning for married same-sex clients. Since that decision, other departments of the Federal government have announced responses to this holding.

     On August 29th the US Department of Treasury and the Internal Revenue Service ruled that same-sex couples, legally married in states that recognize their marriages, would be treated as married for federal tax purposes. This ruling applies to all married same-sex couples regardless of whether their state of residence recognizes same-sex marriage. This ruling applies to all forms of federal taxation including income, gift, and estate tax. Because of this ruling, legally married same-sex couples may file their 2013 federal income tax return using either the married filing jointly or married filing separately filing status. These couples may, but are not required to, file amended returns for the tax years 2010, 2011, and 2012, choosing to be treated as married for those years. However, Michigan has yet to weigh in on whether legally married same-sex couples may file joint returns. 

     While the IRS has readily complied with the Supreme Court's decision, other departments of the Federal government are not as quick to change their policies. The Department of Veterans Affairs Secretary Eric Shinseki announced that the Supreme Court ruling did not specifically strike down a federal regulation defining a spouse as someone of the opposite sex, and therefore the Department of Veterans Affairs would continue to limit VA benefits to opposite sex spouses. This decision was almost immediately challenged, and on August 30th US District Judge Consuelo Marshall of Los Angeles ruled that based on the Supreme Court's decision in US v. Windsor, the regulation in question was unconstitutional and approved an injunction permanently barring the VA from applying that regulation.

     In contrast to the Department of Veterans Affairs, the Pentagon has announced that as of September 3rd same-sex spouses of military members will now be eligible for the same health care, housing, and other benefits enjoyed by opposite sex spouses. This decision has been met with some resistance, especially from the State of Texas, where the Texas National Guard currently refuses to process requests from same-sex couples.

As events unfold and the scope of the Supreme Court's decision becomes clearer, we at Plainly Legal will continue to provide you with commentary that may assist you in new planning for clients covered by the decision. 

     Again, thanks to all of our readers for their regular visits to the site, and we look forward to continuing to provide you with useful and insightful information regarding estate, tax, and business planning.

Matt Ferrara

Planning for College-bound Children

     With the beginning of a new school year, today is a perfect opportunity to address the subject of Powers of Attorney and Patient Advocate Designations for a client’s adult children. As we previously discussed, despite their parent’s perception, once a child reaches the age of eighteen they are an adult in the eyes of the law, and therefore their parents no longer have the right to make decisions on their behalf should they become incapacitated.

     This can be corrected by having children execute Durable Powers of Attorney and Patient Advocate Designations, naming their parents to make decisions, and parents can continue to care for their children should they become incapacitated. These documents provide both parent and child with peace of mind that, in the event of an emergency that causes the child to be incapacitated, the parent will have the ability to assist their child without needing to petition the probate court for that authority.

     It is important the clients’ children understand how the documents they sign will protect them should their parent need to use them. The Patient Advocate Designation allows their parent to make medical decisions in the event that the child is unable to make those decisions because of illness or injury. A Durable Power Of Attorney is more complex, because it allows the parent to make legal and financial decisions, including paying bills, dealing with landlords, and filing lawsuits on the child's behalf if the child is incapacitated and unable to take these actions for themself. Both the parent and child should know that without these documents, if the child becomes incapacitated, the Probate Court must be petitioned to name a party to make decisions, which can be expensive and time-consuming.

     The process of drafting and executing these documents also has the added benefit of providing the opportunity to introduce clients’ children to the client’s legal and financial advisors. While discussing the importance of these documents with their children the client also has the opportunity to begin to explain their own planning.  This early introduction to both the estate and financial planning can set the children on a path to a more secure future as well as act as a stepping-stone to understanding their parents’ planning. While some clients balk at the idea of introducing their children to the planning process at such a young age, taking the time to execute a patient advocate designation and durable power of attorney can save the client and their child from significant inconvenience, time delays and cost in the event of an emergency.

Matt Ferrara