Yesterday’s election results in Maryland included the passage of a referendum approving same-sex marriages. This means that same-sex couples can marry in Maryland and take advantage of certain Maryland laws, including the ability to pass assets to their spouses without the imposition of Maryland inheritance tax. Moreover, a surviving spouse of a same-sex couple will have the same right to elect against their deceased spouse’s Will and to take a share of the deceased spouse’s estate, if he or she dies without a Will.
One unanswered question is whether or not same-sex couples in Maryland will be able to avoid Maryland estate tax on assets passing to the surviving spouse. The answer should be simple, but because of how the Maryland tax law is written, it is not. Maryland estate tax law follows the Federal estate tax law. Since a same-sex couple is not considered to be married under Federal law (and DOMA), a surviving spouse of a same-sex couple is not entitled to a marital deduction for Federal estate tax purposes. Since Maryland’s estate tax law piggybacks on the Federal law, then a surviving spouse of a same-sex couple would not be entitled to a marital deduction for Maryland estate tax purposes.
However, this is not the final answer, as DOMA has been declared unconstitutional by some lower courts. It is expected that the Supreme Court may rule on whether DOMA is unconstitutional in its current or next term. Therefore, until the Supreme Court rules, or Congress changes the law, or Maryland changes it law, apparently the surviving spouse of a same-sex couple will be able to avoid Maryland inheritance tax, but not Maryland estate tax.
We work with many same-sex couples and can help such couples prepare or revise their estate plan to take advantage of the changing laws in this area. In any event, say tuned to future developments.