Our firm presented in Lorman Seminars’ Key Issues in Business Tax Planning in New Jersey…
Laws May Cause Issues for Owners In Civil Unions
When civil unions became legal for same-sex couples in New Jersey last year, the lesbian, gay, bisexual and transgender community celebrated a hard-won victory. But conflicting laws for LGBT partners at the state and federal levels have some business owners who live with same-sex partners worried about how the conflict may affect their estate planning.
Each member of a civil union must file separate federal tax returns because federal law doesn’t recognize civil unions. There is a burden on small business owners because of the time spent on all the paperwork.
Under federal law one member of a civil union who gives the other more than $13,000 in one year as a gift will eat into a $1 million lifetime gift-tax exclusion.
The $1 million lifetime federal gift-tax exclusion counts toward the federal estate-tax exemption, a tax levied upon death that is currently capped at $2 million but scheduled to jump to $3.5 million next year.
Meanwhile, members of a traditional marriage can gift each other unlimited amounts of money without being federally taxed, and can take federal-tax deductions on all assets left to each after death. Gay and lesbian couples don’t have that right.
For state taxes such as the inheritance-transfer tax and the estate tax, same-sex partners in civil unions get the same exemptions as married couples.
In New Jersey, an estate in excess of $675,000 is subject to the state’s estate tax, however civil-union couples and married couples pay no tax on assets they leave to their spouse. Same-sex couples in domestic partnerships are exempt from the state’s inheritance-transfer tax but not from the estate tax.
LGBT business owners in New Jersey should assemble a team comprised of a lawyer, an accountant and a financial adviser who are familiar with the laws surrounding same-sex couples.