Same-Sex Partner Estate Tax Case

A recent ruling by a New Jersey tax court illustrates that the legality of same-sex marriage does not solve all estate difficulties for same-sex couples who were not able to get married previously.

In 2004 New Jersey passed a domestic partnership law giving same-sex couples who registered as domestic partners some of the legal protections married couples enjoy. For example, the law exempted a surviving partner from paying the state's inheritance tax, but not the estate tax.

New Jersey is one of the few states with both taxes and requires that the higher of the two be paid. Long time partners Rucksapol Jiwungkul and Maurice R. Connolly Jr. registered as domestic partners in that same year.

In 2007 New Jersey passed a civil union law exempting same-sex couples from both the estate tax and the inheritance tax. Jiwungkul and Connolly did not enter into a civil union as a matter of principle.

Same-sex marriage became legal in the state in 2013 and the two made plans to wed according to Bloomberg BNA in "Same-Sex Partner Not Spouse for New Jersey Estate Tax Break."

Six days before the planned wedding Connolly passed away unexpectedly. Jiwungkul was the executor of the estate. In that capacity he paid approximately $100,000 to the state for the estate tax.

Later he filed an amended tax return and asked to have the amount refunded, claiming that he should be exempt from it. The state refused and the case went to tax court.

The law in the case was clear. As Jiwungkul was a domestic partner he was not entitled to the estate tax exemption. The court could have granted him an exemption by citing extraordinary circumstances, but the judge declined to do so.

The case illustrates that same-sex couples still need to be mindful about what different legal statuses mean for their estates.

No matter what your preference is, if you have a family and/or significant other, you should have a trust in place for when the time comes. For more information or to meet with an estate planning attorney in Orange County, please visit our website at www.OCElderLaw.com, or call 714-525-4600 to schedule a private consultation. We have offices conveniently located in Fullerton and Corona.

Reference: Bloomberg BNA (May 17, 2016) "Same-Sex Partner Not Spouse for New Jersey Estate Tax Break."