How Obergefell will impact state trust and estate laws

By Marlaine Teahan

The Supreme Court’s ruling in Obergefell v. Hodges will have wide-ranging implications across the country. The impact on estate planning and the administration of trusts and estates in Michigan is staggering.

The Obergefell ruling dictates that same-sex couples may exercise the fundamental right to marry. This is a constitutionally protected right from which other rights of same-sex married couples flow. To assert these fundamental rights, individuals need not await legislative action; however, it is expected that all States, including Michigan, will update their statutes to comport with the Obergefell ruling. Once non-conforming laws are updated, exercising these rights will be easier. A summary of rights impacting trusts and estates, that flow from a same-sex couple’s fundamental right to marry, are outlined below.

Estate Planning and Tax Issues


Before Obergefell, with proper planning, same-sex couples could provide for each other and designate each other as a fiduciary, just as heterosexual married couples. Even so, married same-sex couples, even those living in non-recognition states such as Michigan, did not have equal federal estate and gift tax advantages as heterosexual married couples until after the United States v. Windsor case in 2013. After Obergefell, married same-sex couples, living in any state, will be given equal tax treatment in their state of residence. For example, same-sex married couples will no longer have to file separate state and federal tax returns but will need to prepare only one federal tax return on which to base their income tax filings. Same-sex married couples should discuss with their tax preparer if it would be worthwhile seeking refunds for prior years. In states other than Michigan, that have inheritance and state estate taxes, same-sex married couples will now be able to inherit from each other without having to pay these taxes.

Probate

Same-sex married couples will now have priority in the probate court to serve as personal representative, conservator, guardian, and, under Michigan Court Rules, will be identified as an interested person (heir or spouse) and have the right to receive notice of a variety of probate proceedings. In addition, all surviving spouses have the right to inherit under the intestacy laws, to elect against their spouse’s will, receive statutory spousal allowances, and petition for proceeds from wrongful death actions.

Medical Issues

Michigan has next-of-kin laws that allow spouses, in certain circumstances, to make medical decisions, anatomical gifts, and determine funeral and burial rights of their spouse. Before Obergefell, same-sex married couples did not qualify as their spouse’s next-of-kin because Michigan did not recognize the marriage of the couple. These rights will now be recognized for all married couples in Michigan.

Family Law


Same-sex couples may now marry in Michigan and same-sex marriages solemnized in other states must now be recognized by Michigan. All married couples in Michigan will be able to get a divorce and adopt their spouse’s child or adopt children together. Visitation, child support and custody decisions will also be impacted by Obergefell. Family law issues were specifically addressed by the Obergefell Court; having children and raising a family is a protected constitutional right of same-sex couples.

Governmental Benefits and Creditor Issues


Governmental benefits, such as Social Security, Veterans benefits, and Workers’ Compensation, in many cases depend on state law and, until now, such benefits were not available to spouses of married same-sex couples. Spousal rights, in life and as a surviving spouse, are aspects of one’s marital status that are constitutionally protected.
Creditor protection will be greater for married same-sex couples as they will be able to benefit from owning real property as tenants by the entireties and will be able to own certain other financial assets as tenants by the entireties, including membership interests in an LLC. Insurance on the life of a spouse, that names a spouse as a beneficiary, enjoys certain creditor protection that should be available to all married couples.

Real Property

There are numerous real property issues that will be affected by Obergefell; however, only a few are discussed here. Obergefell may well be the end of the archaic law of dower in Michigan. Tenancy by the entireties protection was previously enjoyed by only a “husband and wife.” Going forward, such protection will be enjoyed by any married couple. The uncapping of real property taxes will also be impacted as conveyances to spouses are generally exempt from uncapping laws.

General laws


There are numerous Michigan laws that will have to be updated given the Obergefell v. Hodges case. A cursory check on the uses of both “husband” and “wife” in all of Michigan’s Compiled Laws reveals over 300 statutes that use these terms. Perhaps each instance of “husband” or “wife” will be changed to “spouse” but, in any event, it will be a long process as all such laws will have to be carefully reviewed, bills drafted, and legislation enacted.

It may be difficult for a same-sex couple to assert the rights discussed above prior to the updating of Michigan law. This is simply because many of the laws specifically use the words “husband” and “wife” instead of “spouse.” A key passage in Obergefell addresses this issue and provides a path of action until our laws are changed [Slip Op., at 24]:
The dynamic of our constitutional system is that individuals need not await legislative action before asserting a fundamental right. The Nation’s courts are open to injured individuals who come to them to vindicate their own direct, personal stake in our basic charter.

An individual can invoke a right to constitutional protection when he or she is harmed, even if the broader public disagrees and even if the legislature refuses to act.

It will be many years before Michigan’s statutes fully comport with the recent Supreme Court ruling in Obergefell.

This process is already underway by the Michigan Law Revision Commission.

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This column serves as a general summary. Marlaine C. Teahan, a shareholder and chair of the Trusts and Estates practice at Fraser Trebilcock, focuses her practice on trusts, estates, trust administration, and probate. Contact her at 517.377.0869 or mteahan@fraserlawfirm.com.

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