May 27, 2017

Estate Planning for Same-Sex Couples in Pennsylvania

Legalization of Gay Marriage in Pennsylvania—The Impact on Estate Planning

Nearly one year ago, a federal district court judge in Pennsylvania threw out the state’s 18-year-old ban on same-sex marriage, finding that it violated provisions of the U.S. Constitution. That decision has changed the estate planning for gay couples significantly.

Under Pennsylvania law, there are different inheritance tax rates based on where estate property goes. For assets that pass to children of the deceased, the estate tax is 4.5%, and for siblings, it’s 12%. All other distributions, except to a surviving spouse or a charitable organization, are taxed at 15%. As long as gay marriage was illegal, partners in a same-sex relationship faced the maximum inheritance tax if assets passed to the partner. Now, if same-sex partners legally marry, the surviving party is entitled to the marital deduction under federal law, which allows all property or assets passed to a spouse to do so without any tax consequences.

In addition to the benefits of the marital deduction, married gay couples in Pennsylvania also get the benefit of the state’s intestacy laws, which govern the distribution of estate property when a person dies without a valid will. Under Pennsylvania law, one-half of an intestate estate passes to a surviving spouse, and the other half to surviving children. Before the legalization of gay marriage, a same-sex partner would be entitled to nothing if his or her partner died without a will.

Spouses in a gay marriage may also hold real property as “tenants by the entirety,” a legal term that essentially means as joint tenants. As a tenant by the entirety,  a surviving spouse is automatically entitled to ownership of any real property so held. This type of ownership also provides protection against creditors.

Contact Halligan & Keaton

We bring more than 60 years of combined legal experience to people in and around Media, Pennsylvania. Every new client receives a free initial consultation. To discuss your estate planning needs with an experienced lawyer, call our office at 610-566-6030 or contact us online. We will travel to your home, a long-term care facility or the hospital to meet with you.