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August 07, 2014 Articles

Why Same-Sex Couples Will Be Moving to Florida (and Other Low Tax Cost States)

By Alan S. Gassman

Before the IRS issued Revenue Ruling 2013-17 in 2013, a same-sex couple would not receive full married couple benefits under the estate and gift tax laws unless they: (1) were married in a state that recognizes same-sex marriages, and (2) resided in a state that also recognizes same-sex marriages.

The above interpretation is based upon the Supreme Court's decision in United States v. Windsor, 133 S. Ct. 2675 (2013), as discussed in a July 30, 2013, newsletter article published by Steve Leimberg, entitled "Many Affluent Same-Sex Couples Will Be Leaving Florida and Where They Should Go." This piece was premised upon the court's decision to the effect that a same-sex couple would not be considered as married for tax purposes if the state where they resided did not recognize the marriage. That changed very quickly!

On Thursday, August 29, 2013, the IRS took a very big step forward in ruling that same-sex couples will be considered married for federal income, estate, and gift tax purposes. Any same-sex marriage legally entered into in one of the 13 states enumerated in the chart below that allow same-sex marriages, the District of Columbia, or a foreign jurisdiction with appropriate authority, is covered under this ruling; notwithstanding whether the spouses reside in a state or other jurisdiction that recognizes their marriage at the time of the marriage or thereafter.

This brings forth a new era for same-sex couples who are married or are considering marriage, and opens the door for a complete review of their assets, taxes, marital agreement, and life planning. Planners will need to be able to address a number of important issues that can influence whether a same-sex couple should marry, stay married, divorce now, or take other steps to make the most of their situations. In many cases, each person should have separate legal and financial counsel in order to help determine what is in their best interests.

Revenue Ruling 2013-17 provides that Internal Revenue Code § 6511 gives same-sex married couples the option of amending their prior tax returns, going back three years from the time the return was filed or two years from the time the tax was paid, whichever is later. Same-sex couples may also choose to leave the prior returns intact or to amend one or more prior tax years. Time is already running as statutes of limitation march before us!

As the result, affluent married couples should reinvestigate where they should domicile, and the author hopes that many of them who like lawyers, and tax lawyers in particular, will move to Florida to avoid state inheritance taxes, state estate taxes, and state income taxes, because Florida has none of these taxes and is also a pretty darned neat place to live (when it is not 100 degrees outside with 100 percent humidity, and the power is not working because of a lightning storm). The author may set up a generator distributorship as well.

This gives same-sex couples some very good choices for income tax planning purposes. Almost all affluent same-sex couples (or couples where one spouse is affluent) will want to go to a good income tax advisor with the right software, to help determine which years they should amend.

Any gift tax return that involved a transfer to a spouse that used up any portion of the donor spouse's estate tax exemption should probably be amended to regain the exemption amount, unless there are other items on the gift tax return that are best not reopened, such as large gifts with questionable values to nonspouse individuals.

Amending a gift tax return will give the IRS three years after the date of the amendment to revisit all aspects of the amended gift tax return.

Same-sex couples who are not formally married in one of the recognition states should consider whether the estate, gift, and income tax advantages of getting married outweigh potential disadvantages. These disadvantages can include:

  • Having to leave qualified plan benefits to a surviving spouse who will not sign a waiver associated therewith;
  • Having alimony and property settlement rights vest in a new spouse if the new spouse will not sign a binding prenuptial agreement as requested by the other spouse;
  • Having the new spouse on the healthcare plan of an employed spouse whose employer requires this;
  • Having to inform an employer that a same-sex marriage exists in order to comply with personnel, office, and associated requirements (which may occur in states that do not prevent discrimination against homosexual individuals, such as Florida; however many cities and counties in Florida have enacted ordinances prohibiting sexual orientation discrimination in the workplace); and
  • Having to decide who to invite to the ceremony and who is going to pay for it.

Advisors who represent one or both members of an affluent same-sex couple will need to let them know that if and when they are married, they can have a new estate tax plan that includes marital deduction planning, QTIP trust planning, and associated rights and responsibilities.

When the couple resides in Florida, it is also useful to have them consider a prenuptial agreement, even though Florida law will not give either spouse "marital rights or responsibilities" in the event of a divorce at the present time. This could change in the not too distant future, and if so, alimony and property settlement rights might date back to when the couple was originally married, as opposed to dating back to when the Florida legislature and a future governor might sign such legislation into existence.

Also consider some advantages versus disadvantages of marriage, as shown below:



Savings with sharing a single health insurance plan. While the rules vary by state and employer, many health insurance companies already offer benefits to domestic partners and same-sex unions; others require marriage for shared coverage.

Responsibility of healthcare. Depending on the state in which you live, you may be liable for your spouse's healthcare costs if your spouse cannot pay their healthcare bills.

Security benefits go to the surviving spouse. Widowed spouses are entitled to their spouse's social security benefits if they are greater than their own.

Loss of benefits if you get remarried. If you are widowed and receiving a deceased spouse's retirement benefits or social security benefits, you may lose those benefits if you get remarried.

No employer taxes. If you work for your spouse, he or she does not have to pay social security taxes or unemployment taxes on your behalf.

Spousal debt responsibility. In community property states, most debt incurred by either spouse during marriage is owed jointly by the couple, even if only one spouse signed for the debt.


Because of Revenue Ruling 2013-17, Florida is now a viable and exciting option for same-sex couples. The IRS has stated that additional guidance on the ruling will be provided with respect to other federal programs. Look out for this information as it will be helpful in planning your future in the wonderful sunshine state.

Keywords: litigation, LGBT, same-sex marriage, tax implications, estate planning, Florida, income tax planning

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