Estate Planning on the Streets of Philadelphia

I discovered a hidden historical gem on the streets of Philadelphia this week.  13th Street, right in downtown Philadelphia, has been re-named in honor of Philly native and local hero Edith “Edie” Windsor.  Edie Windsor was a LGBT civil rights activist.  After her wife Thea died in 2009, Windsor, as Executor and beneficiary of Thea’s estate, was required to pay $363,000 in federal estate taxes on the assets she inherited.  Had Windsor been married to a man, the assets would have passed to Windsor completely estate tax free because they would have qualified for the unlimited Federal estate tax marital deduction.   Windsor could not benefit from the unlimited marital deduction even though she and Thea were legally married under state law because the Defense of Marriage Act (DOMA) limited marriage to a union between a man and a woman.  DOMA prevented same-sex married couples from receiving federal benefits available to heterosexual married couples.

Windsor sued the federal government alleging that DOMA was unconstitutional.  She asked the court to order the IRS to extend the estate tax marital deduction to same-sex married couples and refund her the estate taxes.

In 2013, the Supreme Court agreed with Windsor.  The court found that DOMA was unconstitutional.  It held that assets left after death to a same-sex spouse are eligible for the federal marital deduction and should not be subject to estate tax.  Windsor was entitled to an estate tax refund in full.  

In 2017, the IRS issued a Notice that provided some retroactive relief for same-sex taxpayers.  A taxpayer who had used estate tax exemption or allocated generation skipping transfer tax exemption to gifts to a same-sex spouse can now apply to the IRS to restore his or her exemptions.  Same-sex marriage became legal in Massachusetts in 2004.  Massachusetts same-sex married couples can obtain this relief retroactive to the Windsor decision.

Edie Windsor advocated for same-sex marriage for the rest of her life.  She died in 2017 at the age of 88.

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