Estate Planning For Same Sex Couples

In the 2006 Lewis v. Harris decision, the New Jersey Supreme Court held that, although same-sex marriage is not a right guaranteed under the New Jersey Constitution, the equal protection principles of our Constitution guarantee same-sex couples the same “right to and the rights of” marriage. 188 N.J. 415, 442 (2006). Finding that the Domestic Partnership Act has provided important rights to same-sex couples, but that it has “failed to bridge the inequality gap” in that “many benefits and privileges accorded to their similarly situated heterosexual counterparts” were still denied, id. at 448, the court held that “committed same-sex couples must be afforded on equal terms the same rights and benefits enjoyed by married opposite-sex couples.” Id. at 457.

The Lewis court concluded that it was the Legislature’s duty to provide equal protection to same-sex couples by either (1) amending the marriage statutes to include same-sex couples; or (2) enacting a parallel statutory scheme in which same-sex couples have equal rights, benefits, burdens and obligations of married couples. Id. at 463. The court gave the Legislature 180 days from its October 25, 2006 decision to make the appropriate statutory changes to comply with the equal protection provisions of the Constitution.

In response, the Legislature enacted N.J.S.A. 37:1-28 et seq., the Civil Union Act, effective February 19, 2007, in which the Legislature, expressing its intent to comply with Lewis v. Harris, “chose[] to establish civil unions by amending the current marriage statute to include same-sex couples.” In fact, the Act has been interpreted as “establishing same-sex civil unions, instead of amending the marriage laws to allow homosexual couples to wed.” Quarto v. Adams, 395 N.J. Super. 502, 511 (App. Div. 2007).

The Civil Union Act provides that “civil union couples shall have all of the same benefits, protections and responsibilities under law, whether they derive from statute, administrative or court rule, public policy, common law or any other source of civil law, as are granted to spouses in a marriage.” N.J.S.A. 37:1-31(a).  Thus, references in any law, regulation or judicial proceeding to marital or spousal relationships, such as “”marriage,’ ‘husband,’ ‘wife,’ ‘spouse,’ ‘family,’ ‘dependent,’ ‘next of kin,’ ‘widow,’ ‘widower’ [and] ‘widowed’” are now to be interpreted as including a civil union. N.J.S.A. 37:1-33.

The Act provides a non-exclusive list of such benefits, protections and responsibilities, including:

  • a. laws relating to title, tenure, descent and distribution, intestate succession, survivorship, or other incidents of the acquisition, ownership or transfer, inter vivos or at death, of real or personal property, including but not limited to eligibility to hold real and personal property as tenants by the entirety;…
  • c. probate law and procedure, including nonprobate transfer; …
  • k. advance directives for health care and designation as a health care representative;….
  • m. public assistance benefits under State law, including, but not limited to: Work First New Jersey…; medical assistance…; Supplemental Security Income…; pharmaceutical assistance…; hearing aid assistance…; and utility benefits….
  • n. laws relating to taxes imposed by the State or a municipality including but not limited to homestead rebate tax allowances, tax deductions based on marital status or exemptions from realty transfer tax based on marital status…
  • p. the home ownership rights of a surviving spouse;…[and]
  • r. laws relating to the making of, revoking and objecting to anatomical gifts…. N.J.S.A. 37:1-32 (emphasis supplied).

Of course, because federal law does not recognize civil unions, issues such as federal income, gift and estate tax are not affected by the New Jersey Civil Union Act.In addition, it is unclear how the estate plan of a civil union couple might be treated if the couple later moves and dies in another state.

Notably, under the Act, civil union couples are expressly given the right to modify “the terms, conditions or effects of their civil union in the same manner and to the same extent as married persons….” N.J.S.A. 37:1-31(d). This provision endorses the concept of cohabitation agreements and other private agreements, and should be kept in mind by practitioners when counseling clients in a same-sex relationship.

For these reasons, it is still wise to counsel clients of a same-sex relationship to create a Last Will and Testament and other estate planning documents in which they identify their partner by name and specify their testamentary wishes, rather than rely upon the state of New Jersey laws now in effect.

However, because federal law does not recognize civil unions, it appears that tax planning for same-sex couples will have limited effect. For example, a credit shelter trust might be utilized to allow $675,000 of the estate to pass free of New Jersey Estate and Inheritance taxes on the death of the second partner; however, no matter how the estate is structured, federal estate tax (which is a substantially greater issue) cannot be avoided under current law. Same-sex couples should be counseled to revise their estate documents in the event of further state or federal law changes in the law.