By Matthew B. Drexler, Esq.*
Teresa A. Drexler, Esq.*
Domestic relations attorneys are most familiar with the husband and wife model of litigation. Family law attorneys are also familiar with assisting a large number of couples who find themselves crashing and burning before the wedding bells ring. The cases are familiar: a male, a female, and the division or allocation of property, assets, debts, parenting time, parental decision making, child support, and sometimes the family dog is in dispute.
In June 2013, the Supreme Court of the United States deemed unconstitutional Section 3 of the federal Defense of Marriage Act (DOMA). On March 12, 2013, Colorado approved civil unions, which recognizes that same sex individuals may have their property, assets, debts and other benefits (e.g. retirement plans) subject to division under Colorado’s domestic relations laws.
So, domestic relations attorneys must now impress upon their clients the importance of recognizing civil unions, discuss the relative rights and obligations of individuals in a civil union and must navigate their clients through the new landscape of dissolving civil unions.
Call The Gasper Law Group for a free initial consultation to discuss the ramifications and benefits of Colorado’s Civil Union legislation and the impact of the Supreme Court’s decision to strike down Section 3 of the Defense of Marriage Act (DOMA).
At the very least, you need an attorney who will properly and confidently analyze individual benefit plan documents to determine whether benefits may be allocated in same-sex civil union relationships and, if so, how they can be divided.
The civil union law authorizes any two unmarried adults, regardless of sex, to enter into a civil union. Also, same-sex couples legally married in another state now have a recognized civil union in Colorado. Formally recognizing a civil union in Colorado or the marriage between same-sex couples from another state provides certain protections not previously provided. Once in a recognized civil union, the parties are provided most of the rights, benefits, and responsibilities under Colorado law that are granted or imposed on all other spouses in Colorado. Because Colorado income tax filings are tied to the federal income tax scheme – which does not currently recognize civil unions – Colorado’s law does not permit parties to a civil union to file joint income tax returns.
However, civil unions in Colorado are not required to be recognized as “marriages” under federal law, which is a true and legally significant distinction. While the federal government may recognize state rights for same-sex relationships, it may still deny those in same-sex civil unions the status of “marriage.” So, perhaps it’s true that Colorado effectively denies those in same-sex relationships the benefits of marriage under federal statutes. This could have a direct impact on whether one party to a civil union is eligible as a covered individual or eligible individual under federally-sponsored or federal-provided benefits. To the point, the majority of employee benefit plans are subject to federal law whether falling under ERISA (Employee Retirement Income Security Act) and/or the Internal Revenue Code (IRC). A civil union not recognized under federal law may limit eligibility for benefits provided under federal legislation. However, where benefit plans are not governed by ERISA for example, the plan may be subject to other federal law. Where benefit plans are not at all governed by federal law, state law must be analyzed together with the plan documents to determine eligibility and method of division or allocation of plan benefits.
If you think ERISA-governed retirement plans are complicated (and they are when considering qualified domestic relations orders (QDRO’s), loans against your 401(k), and health and welfare benefits), try figuring out the implications of the federal and state tax codes! Most of us are familiar with the IRS’s position that transfers of property upon dissolution of a marriage are not treated as taxable events subjecting the receiving spouse to unfair tax consequences. In the case of a same-sex couple achieving the status of married spouses in a state that recognizes same-sex marriages, the tax benefits will operate similarly without penalizing the spouse when receiving property distributions. However, for those entering civil unions in states such as Colorado, the transfer of property after a dissolution will result in a taxable event and subject the parties to tax consequences perhaps as if the individuals were strangers receiving property from another stranger. Accordingly, not having an attorney who appreciates the distinctions can lead to terrible tax consequences. While domestic relations lawyers should not dispense tax advice (we don’t ask our accountants to perform open heart surgery), a domestic relations attorney should be well aware of potential pitfalls and methods to avoid these pitfalls by carefully researching, advising and coordinating advice with a true tax professional.
Call The Gasper Law Group for a free initial consultation whether you are thinking of entering a civil union, are curious about the ramifications of a dissolution of a civil union or are already involved in a dissolution or breakup of a civil union or same-sex marriage recognized under the law.
* Matthew B. Drexler and Teresa A. Drexler are both Managing Partners at The Gasper Law Group, PLLC and practice in our Domestic Relations and Civil Litigation Divisions. Teresa A. Drexler is a member of the Family Law Section of the Colorado Bar Association and Matthew B. Drexler is a member of the Colorado Trial Lawyer’s Association. Both Attorneys Drexler are committed to excellent representation and are not timid about tackling the tough cases with aggressive, dedicated and zealous representation.