New Hampshire Authorizes Civil Unions

By: Jan P. Myskowski

On May 31, 2007, Governor Lynch signed House Bill 437, the Civil Union Act, authorizing same sex couples in the State of New Hampshire to enter civil unions. The Act, which becomes effective on January 1, 2008, creates new Chapter 457-A of the New Hampshire Revised States Annotated, immediately following Chapter 457, which governs traditional marriage. In general, the Act expressly purports to extend the same rights and obligations to civil union couples as are extended and imposed on married couples. Parties who enter into a civil union “… shall be entitled to all the rights and subject to all the obligations and responsibilities provided for in state law that apply to parties who are joined together pursuant to RSA 457.” RSA 457-A:6 (emphasis added).

In theory, the attempt to put civil union couples on equal footing with married couples should be a simple proposition. However, because equal footing will apply only to state law, and New Hampshire state law in particular, important distinctions between the status of married couples and civil union couples will persist.

In order to provide important and timely information on these distinctions, Wiggin & Nourie, P.A. will publish several newsletters from our practice groups that represent clients most directly affected by the Act, including our Domestic Relations, Employment and Estate Planning and Probate Law Groups. We will also host roundtable events on the topic (see the schedule in the margin), during which members from each of these groups will be available to answer questions.

This issue of our Estate Planning and Probate Law Group newsletter will focus on the trust and estate issues affected by the Act.

Estate Tax Marital Deduction

For federal estate and gift tax purposes, an unlimited marital deduction is available for lifetime and testamentary gifts to a “spouse.” Members of civil unions will not be treated as “spouses” for purposes of federal gift and estate tax law because the federal Defense of Marriage Act (DOMA) excludes same-sex couples from the definition of “spouse” for all federal law purposes.

Planning techniques for same sex couples have adapted to the unavailability of a federal marital deduction, and many of those techniques will continue to be employed. However, many states that have state-level estate taxes also offer a marital deduction for those state-level estate taxes. While New Hampshire currently does not have a state-level estate tax, neighboring states such as Massachusetts and Maine do have such taxes, and both of those states offer a marital deduction for purposes of their estate taxes. Most states that have enacted civil union statutes (including New Hampshire) recognize civil unions formed in other states. This means that New Hampshire civil union couples that own property in other states may be eligible for a state-level estate tax marital deduction. Estate planning for civil union couple will need to take this into account. For example, inclusion of QTIP provisions in revocable trusts for civil union couples may be desirable despite the fact that they will be ineffective for federal estate tax purposes.

Rollovers; Other Misc. Taxes

Because of the federal DOMA, civil union couples will not be able to take advantage of the various federal income tax rollover options available to surviving spouses for the deferral of withdrawals from retirement assets such as Individual Retirement Accounts and 401(k) accounts. However, less clear is what effect the provisions of RSA 77:4-b will have on such accounts owned by civil union couples for interest and dividends tax purposes.

Civil union couples should be entitled to the joint filing exemption for interest and dividends tax purposes under RSA 77:5-a. Similarly, conveyances of real estate pursuant to the dissolution of a civil union should be exempt from the real estate transfer tax under RSA 78-B:2(XIII).

Statutory Inheritance Rights

Because statutory inheritance rights are based on state law, surviving members of civil union couples should be afforded the same status as a surviving spouse for purposes of intestate succession, elective share rights, and wrongful death recovery. Despite these statutory protections, civil union couples will be well- advised to prepare estate planning documents articulating the benefits they want their partner to receive. This is in part due to the marital deduction issue discussed above, but also in consideration of the possibility that more than one state’s laws may apply if the couple owns property in more than one state or if the couple relocates. It is expected that the automatic revocation of will and trust provisions favoring a spouse that results from a divorce will also apply upon the dissolution of a civil union.

Medicaid Benefits

One area that is currently unclear both in New Hampshire and in other civil union jurisdictions is the extent to which civil union couples will enjoy the same protections as other spouses in the Medicaid context. For example, transfers of assets between spouses are non-disqualifying for Medicaid purposes. Although Medicaid is federally funded, and may therefore be subject to the preemptive effect of the DOMA, Medicaid benefits are largely governed by state law. Whether or not these and other types of public benefits are characterized as state law rights extended to civil union couples is likely to be the subject of litigation.

Contact Jan P. Myskowski (603-629-4560) or any member of the Wiggin & Nourie Trusts and Estates Group if you have questions about these and other trust and estates questions.

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