After DOMA ruling, legal quagmire for same-sex couples

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The U.S. Supreme Court ruling earlier this year striking down part of a statute barring the recognition of same-sex marriage under federal law has created confusion on the ground as same-sex couples begin applying for benefits they still may not be qualified to receive.

The problem is the number of federal regulations that use state-law rules to define marriage for a host of purposes, from employment benefits and Social Security to bankruptcy and taxation. Despite the Supreme Court’s ruling, only a fraction of states recognize marriage between individuals of the same sex, and so far federal agencies have given scant guidance as to how they will determine if couples qualify.

Those that have weighed in have come to differing conclusions. This means that for thousands of legally married same-sex couples, federal benefits are far from a certainty.

“We have been in a wait-and-see pattern,” said Seth Perretta, a partner in the Washington office of Crowell & Moring LLP, where he leads the firm’s ERISA and employee benefits practice.

And the stakes are high, with federal rules governing everything from family medical leave to 401(k) distributions and survivor benefits.

“We are watching this closely, because it’s so important that we give our clients comprehensive planning,” said Andrew Hook, president of the Virginia Beach, Va.-based Hook Law Center, whose practice includes estate, tax, retirement and financial planning. “It’s very important that we educate clients as all the developments come down so we can help them understand. I think the Supreme Court will have to make the ultimate decision, but we don’t want to wait until then to act.”

Benefits based on geography

The Supreme Court’s June ruling in U.S. v. Windsor struck down a section of the Defense of Marriage Act that barred recognition of state-sanctioned same-sex marriages for federal purposes. But the provision of the law giving states the right to refuse to recognize out-of-state same-sex marriages remains on the books, creating a legal quagmire for some same sex-couples seeking to take family-related employment leave, file joint taxes, obtain Social Security spousal benefits or otherwise avail themselves of the federally-regulated benefits available to heterosexual married couples.

Currently 13 states and the District of Columbia recognize same-sex marriage, while 35 states ban marriage between persons of the same sex. New Jersey and New Mexico have neither banned nor legalized same-sex marriage.

Couples living in states where same-sex marriage is legal should have little problem qualifying for federal spousal benefits once agencies begin processing requests. But couples living in other states are now facing a legal landscape that one attorney described as “a complete mess.”

Only a handful of agencies have issued guidance on how they will determine whether a marriage is valid for the purpose of receiving benefits after Windsor, and those that have addressed the issue are taking different approaches. For example, some agencies have adopted a “state of celebration” rule, which means that marriages performed in states like Maryland, Massachusetts, Minnesota, New York and Rhode Island, where same-sex marriage is legal, will be recognized regardless of where the couple resides.

Other agencies have adopted a “state of domicile” rule, which relies on the state law where a couple lives, even if they were legally married in a state authorizing same-sex marriage.

The means a same-sex married couple residing in Rhode Island will be treated as married for the purpose of federal laws governing spousal benefits. But if that same couple moves to Oklahoma, where same-sex marriage is not recognized, they could lose at least some federal protections, such as the ability to take leave under the Family and Medical Leave Act.

If one spouse is a federal employee, the other spouse may still be able to receive health care and other benefits. But if the couple files for bankruptcy, it is unclear whether their marital status would be recognized. In some states, like Oklahoma, the couple could argue that they are covered by common law marriage rules. That option wouldn’t be available in a state like South Carolina, where even common law marriage is defined as being between a man and a woman.

A couple could still seek to have their property and inheritance rights protected through wills and other contractual tools — but not in Virginia, which has a constitutional amendment banning same-sex marriage and also prohibits contractual arrangements that bestow marital privileges on unmarried couples.

Litigation and planning

Most agencies have yet to issue any guidance, leaving couples and their lawyers with few answers.

Some attorneys say they are advising their clients to head to court.

Hook is representing one of several plaintiffs seeking to overturn Virginia’s same-sex marriage ban, one of the most restrictive in the country. Lawsuits challenging bans in other states, including Michigan and North Carolina, are also pending.

“If you want to litigate, we think there is an opportunity to clarify the law,” said Hook.

Other lawyers are using planning tools such as domestic partnership agreements to help couples preserve as many spousal benefits as they can if they live in a state that doesn’t recognize same-sex marriage. But there is a risk that such contracts will be deemed unenforceable.

“There is … a lot of uncertainty, but some clients are still willing to do that,” Hook said.

Another issue, even for couples who do qualify for federal benefits, is conflicting state rules.

“One of the issues we continue to have is the disconnect between federal and state taxation laws,” Perretta said. For example, federal tax law may allow an individual validly married in Massachusetts but living in Michigan to claim a deduction for their same-sex spouse as a dependent, while state law may prohibit such a deduction.

Any of these issues could send the remaining parts of DOMA back to the Supreme Court to sort out, Perretta said.

“I think the Supreme Court is going to have to address the Full Faith and Credit clause” with regard to DOMA, he said.

That is, of course, if the justices don’t take up a challenge to one of the state laws banning same-sex marriage first.

“I believe the Supreme Court will ultimately get a number of suits [challenging same-sex marriage bans] including the one from Virginia, and they will rule,” Hook said. “But it may take several years for the litigation to work its way up there.”

In the meantime, there’s no easy solution to benefits eligibility that hinges on geographic location.

“We are still a ways away from the point in time where you are going to see all same-sex spouses, regardless of domicile, being treated as married,” Perretta said. “Until that point, this is going to be a very complicated regime.”