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First Comes Gay Marriage…then Gay Divorce?

June 27, 2012
Personal Finance
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It’s inevitable that, as same-sex couples get married, some of those marriages will end in divorce. New York State saw its first same-sex divorce wind up in court this past week, just a year after same-sex unions were legalized there. Katie Marks and Dese’rae Stage, who were married in the Pop-up Chapel in Central Park on July 30, sadly saw their marriage fall apart quickly after the wedding. Stage told the NY Daily News that the couple has no shared assets or children, just $10,000 worth of debt for a big ceremony they were planning to celebrate their wedding. But what if they had had substantial assets? How will assets be divided for divorcing LGBT couples, when so many protections given to heterosexual couples (especially under Federal law) are denied to them?

Since the number of legal LGBT divorces has been so far only a tiny fraction of the divorces granted in the U.S., there’s not much of a case history, and legal experts are calling it a gray area. But one big snag caused by the Defense of Marriage Act is that the tax-free division of assets is ruled out for gay couples. In a heterosexual couples’ divorce, assets are transferred between the divorcing spouses without the burden of Federal taxes. One spouse can give the other the house without being subject to capital gains tax, for instance. But capital gains tax, like all Federal taxes, is a part of a Federal legal system that doesn’t recognize same-sex unions. So the Federal tax burden on asset transfer for a divorcing same-sex couple is likely to be enormous no matter what.

But it’s hard to tell exactly how assets will be divided in same-sex divorce, especially when multiple states’ conflicting laws come into play. In one landmark case in Maryland, a lesbian couple who had married in California but now live in Maryland went through a battle to even be able to get a legal divorce in the state. Courts did finally allow the divorce, citing a history in Maryland of granting divorces to other types of married couples the state doesn’t recognize—giving the example of uncle-niece weddings. But in that case too the couple wasn’t seeking any legal decisions about splitting up their assets. LGBT divorce precedents to help courts split the assets of same-sex couples are probably still years in the future.