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2011 may be a very taxing year for same-sex couples, regardless of marital status

Onerous federal estate tax set to return

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Congratulations, you assembled your friends and family and got married in Washington DC. Now it is recognized in both DC and Maryland. It’s the moment of a lifetime and a moment you’ve been waiting for.

Well, guess what? The IRS doesn’t care! That’s right, to the IRS, you are still strangers according the law. If your estate and retirement plans include leaving your partner your estate, next year may well prove to be a expensive year to die regardless of marital status!

Thanks to the Defense of Marriage Act, even though same-sex couples can now get married in Washington DC and have it recognized in the state of Maryland, the IRS still does not recognize the validity of that marriage. As a result, unlike heterosexual married couples who can pass an unlimited amount of assets between spouses at death, same-sex couples can be hit with the Federal estate tax, regardless of marriage status. Understanding how the Federal estate tax rules work and following a couple of action items could significantly reduce or entirely eliminate this tax.

The Federal estate tax is due when a person leaves assets above a certain dollar amount to someone other than a heterosexual married spouse. Straight married couples get a free pass called the unlimited martial deduction. In 2010 only, there is an unlimited exemption. But, you may owe capital gains tax on any appreciation. Each estate can exempt $1.3 million of gains from the carryover basis rule. Another $3 million exemption applies to assets inherited from a spouse.

In 2011, however, unless Congress acts, Federal estate tax rules change. As a result, same-sex couples could witness a significant tax bite if a partner dies next year. Straight married couples won’t have this problem since the IRS continues to give them a free pass with the unlimited martial deduction.

Next year, at the death of a partner, the value of any estate above $1 million will be taxed at 55%.

Think you don’t have a $1 million, well think again!

How the IRS calculates your gross estate for Federal estate tax purposes probably includes some items you likely wouldn’t count. It also means that many more gay and lesbian couples will feel this tax bite, if you don’t plan properly. The largest impact will likely be felt by older gay and lesbian couples, who are nearing retirement and have built up retirement assets over the course of their life. This becomes an issue as they rely on their partner’s asset to maintain financial independence.

How the IRS calculates the Federal Estate Tax:

To determine whether an estate is hit by the Federal estate tax, it is important to understand how the IRS calculates the Federal Estate Tax. For the purposes of the estate tax calculation, the IRS includes almost everything. Yep, add up all the assets, including personal assets, cars, collections, art, etc. The biggest ticket items usually include the following:

• savings and checking accounts, CDs;
• brokerage or investment accounts;
• retirements accounts like IRAs, Roth IRAs, 401(k)s, 403(b)s or TSP plan assets;
• personal property such as boats, paintings, collections, etc.;
• real estate titled in the decedent’s own name or the percentage portion that is titled • as tenants in common;
• the gross value of life insurance proceeds in the decedent’s own name;
• property that is titled as joint tenants with rights of survivorship (which allows the property to pass automatically to a partner at death, the way many gay and lesbian couples have their homes titled).

The last two bullets are important and frequently overlooked. Most people know that life insurance passes INCOME tax free, but if it is owned by the person who dies, the IRS includes the entire amount of the life insurance proceeds in the total amount of the ESTATE tax calculation. As a result, if you own a $500,000 life insurance policy in your name and have your partner as the beneficiary, your estate increases by $500,000

The IRS also includes the gross value, less any mortgages on property titled as Joint Tenants with Rights of Survivorship (JWROS) in the estate of the first person to die UNLESS payments or contributions can be proven.

Let’s take a look at a hypothetical example: Mark age 55 and Max age 60 are looking to retire in 5 years. They own a $550,000 home with a $50,000 mortgage titled as joint tenants with rights of survivorship. Max has been paying the mortgage, while Mark has been paying all the living expenses. Max also owns two life insurance policies: one from work which is worth $250,000 and a personal policy worth also $250,000. His 401(k) has taken a hit with the market but is still valued at $425,000 and he has a rollover IRA with $25,000. He also has a brokerage account worth $25,000 and a $25,000 CD.

While drinking a martini in Rehoboth, Max accidently chokes on an olive and dies. Unless Congress acts, here’s how the IRS will calculate the estate in 2010 versus 2011.

Note that because Max made all the contributions, the IRS adds the home to his estate, even though it is titled jointly. Mark could not show that he contributed to the mortgage payments. He was paying for the utilities, car payments, etc.

In 2011, Mark has to pay $275,000 in Federal estate taxes. Again, straight married couples pay zilch, zero, nada! Mark still walks away with a cool $1,225,000, right?

Well, not exactly. Because Mark will continue to live in the home that part of the estate is not liquid or immediately accessible. If the value of the house is removed, the actual cash amount that he receives from the estate is reduced to $725,000 or ($1,500,000 less $500,000 (the value of the home) less $275,000 (the estate taxes)).

Mark, like any heterosexual married beneficiary, is going to have to pay legal/probate fees. In addition, Mark will also have to pay Federal income taxes on the 401(k) and IRA money when he starts taking distribution. In the worse case scenario, if he pulled out all those funds in a lump sum, the tax could be taxed up to 35%.

The question then becomes will Mark, who has a life expectancy of an additional 24.37 years according to Social Security table, have enough assets to live at least that long without running out of money.

The estate tax is often considered a voluntary tax because with proper advanced planning, Max and Mark could have significantly reduced their overall estate tax burden. By re-structuring some of their assets today, they could reduce their estate size to potentially pay zero Federal estate taxes. That’s right, zero, zilch, nada!

The question then becomes, where is a good place to spend the $275,000 that would otherwise have gone to estate taxes, a problem we would all like to have!

What to do:

• Calculate the gross estate including all your assets. Be sure to calculate it the way the IRS does.
• Review your estate planning documents and beneficiary designations.
• Review the titling of all your assets to determine in to whose estate the asset falls.
• Review the ownership of your life insurance including both your personal and work. The current ownership structure of the life insurance could simply be increasing the amount you will be paying to the IRS. By retitling the ownership of the life insurance to either a trust or putting it in your partner’s name you may be able to remove it from your estate. Use caution, however, because retitling assets incorrectly could trigger a costly current gift tax if not done correctly.
• Review how your home is titled and who is making payments on the mortgage. It is common for one partner to pay the mortgage while the other pays for other expenses. This could cause an estate trap because it may be difficult to substantiate payments into a jointly owned home. Retitling your home incorrectly could trigger a costly current gift tax of 55% if not done correctly. In some jurisdictions, even if it is done correctly, it may trigger a local transfer tax.
• Consult a professional to determine what is the best way to structure your estate and minimize your estate taxes.

The information provided is for general information. It is not intended to be all-inclusive on estate taxes.

Nicholas Burkholder and Joseph Kapp ([email protected]) are registered representatives and investment advisor representatives with Lincoln Financial Advisors Corp., a broker/dealer (member SIPC) and registered investment advisor, offering insurance through Lincoln affiliates and other fine companies. This information should not be construed as legal or tax advice. You may want to consult a legal or tax advisor regarding this material as it relates to your personal circumstances. The content of this material was provided to you by Lincoln Financial Advisors for its representatives and their clients. CRN201004-2040969

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Commentary

O’Shae Sibley’s murder is an attack on LGBTQ people and their expression, as both rise

More than 350 anti-LGBTQ attacks reported between June 2022 and July 2023

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O’Shae Sibley (Headshot from O'Shae Sibley's Facebook page)

BY HENRY HICKS IV | What do the banning of a children’s picture book about two male penguins, white supremacist stand-offs outside of weekend brunches and a killing during impromptu dancing at a gas station have in common? Plenty. Each impinges on the escalating trend of attacks on LGBTQ+ people and their right to free expression. 

On the evening of July 29, O’Shae Sibley pulled into a Brooklyn gas station parking lot with his friends to fill up their gas tank. As they waited for the tank to fill, the group spilled from the car and used the moment to move joyfully in the hot summer night, cranking the car radio’s volume and dancing together. Sibley, a gay man, was also a skilled professional dancer and choreographer. He displayed his talents this night, voguing to the sounds of Beyoncé, an artist that Sibley and his friends were fans of. By coincidence, the artist was performing just a few miles away that night, with professional voguers joining her on stage.

Vogueing, a dance style born out of the traditionally queer ballroom scene, is known for its electrifying dips, drops and duckwalks. The style has been prominently featured in the Golden Globe-winning television show “Pose” — and, more recently, on stage in Beyoncé’s all-consuming Renaissance World Tour. The energy of the ballroom scene has spirited communities across the country, as Beyoncé’s tour has touched down city-by-city, and Sibley and his friends were not exempt to this reach. He was, in fact, eager to participate in his artistry as someone known for his role as a dancer, choreographer, and active member of New York’s ballroom community. 

As he and his friends vogued to Beyoncé in the parking lot, moves that Sibley was adept in as an artist himself, they grabbed the attention of hostile onlookers. As captured on surveillance footage, Sibley was first berated with homophobic slurs — Sibley’s vogue performance seeming to signal his sexuality to his attacker. Shortly following the verbal assault, things turned violent. Sibley was stabbed and murdered in a tragic hate crime, fueled by homophobia and triggered by Sibley’s open expression as a dancer and artist. 

In mourning, and in defiant protest in the days following, the New York City queer community  hosted a memorial at the site of his murder where they honored his memory through performance, with a vibrant and resistant ball

“You won’t break my soul. / You won’t break my soul, no, no. / I’m telling everybody,” Beyoncé sings defiantly in her single, “Break My Soul.”

The murder of O’Shae Sibley was devastating — and a signal of a disturbing trend. Increasing violence toward LGBTQ+ people, and attempts to quash their personal and artistic expression, are on the rise in the United States. Advocacy organizations such as GLAAD and the Anti-Defamation League have reported surges in harassment, vandalism and physical violence against LGBTQ+ people — with 356 instances being reported between June 2022 and April 2023. Transgender people, as well as drag performers, have been targeted at notably high rates. The Human Rights Campaign reported 34 murders of trans people — mostly trans women of color — in 2022  (HRC emphasizes that the actual number is likely higher, as most attacks go unreported, or are reported inaccurately.) 

Drag shows across the country have faced threats and intimidation from armed protesters, including the far-right extremist group, the Proud Boys. Gay bars have been targeted by armed assailants, such as the tragic massacre thatoccurred at Club Q in Colorado Springs, Colo., last November. Hospitals providing gender-affirming care to transgender youth have been targeted with bomb threats. On Aug. 18, a California store owner was shot and killed for displaying a Pride flag. Harassment, threats of violence, and hate crimes against the LGBTQ+ community have steadily risen in recent years. It is clear that this bigotry has been emboldened and its first goal is to silence the free expression of LGBTQ+ people, through violence if necessary. 

The exponential increase in physical violence against LGBTQ+ people over the last few years cannot be divorced from the recent legislative environment that has grown ever-more hostile to LGBTQ+ expression. Bills categorizing drag shows as obscenity, book bans targeting LGBTQ+ authors and stories about queer identities in schools and public libraries, as well as other legislative attacks are part of this trend against the LGBTQ+ community. The attacks, both physical and through laws and bans, risk enabling a culture that normalizes repression of queer voices and increases the risk of violence aimed, in part, at suppressing expression of LGBTQ+ people, even when individuals are simply voguing to Beyoncé in public. 

Starting in 2021, we’ve seen a historic surge in book bans around the country, targeting LGBTQ+ voices and stories at a disproportionately high rate. PEN America has reported that among the top eleven books targeted by bans in the first half of the 2022-2023 school year, four focused on LGBTQ+ narratives. These challenges, paired with the historic number of bills targeting LGBTQ+ people in state legislatures across the United States — with at least 566 bills ensnaring the broader LGBTQ+ community, according to the Trans Legislation Tracker — contribute to the normalization of repressing personal and artistic expression of queer people. As these policy attacks continue to advance, violence against the LGBTQ+ community has surged. 

And while O’Shae Sibley’s murder occurred in New York, a state that has passed no anti-LGBTQ+ bills in the most recent legislative session, his brutal killing shows just how pervasive the impact of anti-LGBTQ+ legislative attacks on free expression in other states are, shaping a culture that spills across borders and impacting LGBTQ+ people throughout the country. Even states perceived to be supportive to the LGBTQ+ community, such as New York, are not immune to the cultural reach of anti-LGBTQ+ repression and intimidation: the home and office of Erik Bottcher, a gay city councilmember in New York City, was vandalized last December after he voiced support for Drag Story Hour, and more recently, a rainbow Pride flag at a Manhattan restaurant was intentionally lit on fire.

Political threats to LGBTQ+ expression, whether it be through restricting and chilling on-stage performance or making it virtually impossible to even acknowledge the existence of LGBTQ+ people in Florida and other states’ schoolshave and will continue to put LGBTQ+ people at risk everywhere, chilling their ability to express themselves and potentially even sending them back into the closet, which, at its core, is a form of self-censorship. 

A culture of free expression, where people can speak, write — or dance — free from fear of violence, is essential to a thriving democracy. LGBTQ+ people deserve to equally enjoy this right — through creative performance, gender expression, or displays of joy. The ongoing trend of legislative attacks on drag, attempts to label LGBTQ+ stories as “obscene,” and the accompanying trend of violent assaults on LGBTQ+ people are attacks on free expression and must be condemned as such.

Henry Hicks IV is the coordinator for PEN America’s U.S. Free Expression program. PEN America is committed to defending against attacks on LGBTQ+ free expression. 

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Fly the Rainbow Flag in honor of Laura Ann Carleton, an LGBTQ ally

Murder in Cedar Glen, Calif., has sparked outrage around the country

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Laura Ann Carleton (Family photo shared on social media)

The Gilbert Baker Foundation mourns the Aug. 18 murder of Laura Ann Carleton, a gift shop owner in Cedar Glen, Calif. A longtime LGBTQ+ ally, Lauri was shot dead by a man who complained about the Pride flag displayed at her store. Carleton leaves behind a husband and nine children.

The world has reacted with anger to this shocking hate crime. But people should not be surprised. This is the inevitable conclusion of mounting Republican Party and conservative attacks on the LGBTQ+ community. They label us as groomers, they lie that we are recruiting children. They ban our books, halt trans care, censor our school curricula. And all this hatred creates more hatred. Now it has led to the brutal and senseless murder of a straight woman whose only crime was to support her LGBTQ+ friends by flying a Pride flag.

The blood of Lauri Carleton is on the hands of every conservative politician who makes verbal and legislative attacks on the LGBTQ+ community. Make no mistake; this horrendous crime is no isolated incident. Across the country the Rainbow Flag has been banned in 40 cities. Right-wing legislators have also tried to ban the flag nationally — over 30 members of the U.S. House of Representatives voted for such a proposal earlier this year. This wave of censorship and anti-LGBTQ+ sentiment has created a climate ripe for hate crimes, and now a brutal murder in Cedar Glen.

The Gilbert Baker Foundation unequivocally condemns the rhetoric of hatred promoted by conservative and homophobic politicians. Words have consequences. Words of hate have even greater consequences. In memory of Lauri Carleton, the foundation asks every American to display a Rainbow Flag — at their homes, at their businesses — to let the haters across America.

Charles Beal is the president of the Gilbert Baker Foundation.

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Commentary

Legal registration of NGOs is vital for advancing human rights of LGBTQ, intersex rights in Africa

Kenya and Eswatini groups have won legal victories this year

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(Photo by NASA)

By MULESA LUMINA, KAAJAL RAMJATHAN-KEOGH AND TANYA LALLMON | Upholding the human rights of lesbian, gay, bisexual, transgender, nonbinary, other gender diverse and intersex (LGBTQI+) people remains a pivotal human rights concern across Africa. In recent years, despite significant but sporadic victories in several African courts affirming the human rights of individual members of non-governmental organizations (NGOs) working to uphold LGBTQI+ rights, including their members’ right to freedom of association, many obstacles hinder such organizations’ ability to register with appropriate authorities in order to operate legally. 

As unpacked in a webinar organized by the International Commission of Jurists, such obstacles include bureaucratic red tape, a dearth of domestic laws explicitly prohibiting discrimination based on sexual orientation, gender identity, gender expression or sex characteristics (SOGIESC) and the existence of criminal laws targeting and perpetuating discrimination against LGBTQI+ individuals. The severe anti-LGBTQI+ backlash from community and religious groups exacerbates the situation and compounds these obstacles, further undermining advocacy efforts. 

The Kenyan Supreme Court in February 2023 ordered that the National Gay and Lesbian Human Rights Commission be allowed to register because the authorities’ initial decision to refuse registration was discriminatory and unconstitutional, violating the right to freedom of association solely because of the sexual orientation of the organization’s members. In June this year, the Supreme Court of Eswatini became the latest African apex court to rule in favor of registering a LGBTQI+ human rights NGO, directing the minister responsible for registering companies to reconsider his initial refusal because, procedurally, it violated the Constitution. While the Swazi Supreme Court’s ruling in the case did not necessarily rely on a clear statement upholding the human rights of LGBTQI+ people in Eswatini, this remains a welcome decision. Seven years prior, the Botswana Court of Appeal ordered the Registrar of Societies to register Lesbians, Gays and Bisexuals of Botswana (LEGABIBO) on the grounds that the refusal to register LEGABIBO as an organization was unlawful and a violation of the right to freely associate. 

Still, across Africa, civil society organizations continue to oppose the denial of registration and seek redress for violations of the right to freedom of association of their members. Nyasa Rainbow Alliance (NRA), for instance, is one such organization with a pending decision in their legal quest for registration. NRA’s case is still awaiting hearing and determination by three judges of the Malawian Constitutional Court.   

The right to freedom of association is a fundamental foundation of any democratic society. Exercising this right by forming and legally registering NGOs is essential for enhanced advocacy since it allows organizations to apply for funding, operate bank accounts that hold these funds, employ staff, work with international partners, and access global and regional human rights mechanisms and fora. 

As noted by the African Commission on Human and People’s Rights (African Commission) in its Guidelines on Freedom of Association and Assembly in Africa, the rights to freedom of association and assembly under the African Charter “are inextricably intertwined with other rights”. Further, in the matter mentioned above the Supreme Court of Kenya also emphatically stated, “[g]iven that the right to freedom of association is a human right, vital to the functioning of any democratic society as well as an essential prerequisite [for the] enjoyment of other fundamental rights and freedoms, we hold that this is inherent in everyone irrespective of whether the views they are seeking to promote are popular or not.” 

It goes without saying that human rights NGOs play a critical role in upholding democratic principles and safeguarding human rights by mobilizing collective action, holding governments accountable, offering direct assistance to victims of human rights violations, challenging discriminatory laws and policies and more. The Triangle Project, for example, is a South African NGO that has been instrumental in amplifying awareness of anti-LGTBQI+ hate crimes, influencing policy change and supporting victims. 

NGOs advocating for the human rights of LGBTQI+ persons, in particular, empower and protect these oft-marginalized individuals by offering awareness-raising platforms, connecting them with key stakeholders, and providing access to resources and services that might otherwise be denied to them. During the COVID-19 lockdowns, many LGBTQI+ Africans were abruptly cut off from the NGOs that were their safe havens and sources of social and economic support. Additionally, amid increasing hostility towards LGBTQI+ persons in many African countries, including Ghana, Nigeria and Uganda, NGOs like the Initiative for Equal Rights (TIERs) and LGBT+ Rights Ghana provide crucial protective spaces. 

Having legal status is also a prerequisite for holding observer status and participation in the sessions of bodies like the African Commission on Human and Peoples’ Rights. However, the withdrawal of the Coalition of African Lesbians’ observer status by the African Commission and recent denials of such status to Alternative Côte d’Ivoire, Human Rights First Rwanda, and Synergía – Initiatives for Human Rights undermine the right to freedom of association and represent missed opportunities to ensure that the human rights of marginalized groups, including LGBTQI+ persons, are placed on the African human rights agenda.

Registration of LGBTQI+ human rights organizations in Africa is more than a matter of legal formality. It can be a significant step towards bolstering advocacy and promoting human rights for all. It is truly unconscionable that, in 2023, LGBTQI+ people continue to endure violence, persecution, discrimination and bigotry amid the reignited backlash against their human rights in multiple African countries. It is essential for governments to protect the right to freedom of association by dismantling barriers to registration and working closely with these groups to realize the human rights of all people. Only through collective efforts can we build an inclusive society that is able to guarantee the right to dignity of all persons and offer protection and non-discrimination to all.

Mulesa Lumina is the Legal and Communications Associate Officer for the International Commission of Jurists’ (ICJ’s) Africa Regional Program, Kaajal Ramjathan-Keogh is ICJ Africa’s Director and Tanya Lallmon is a former ICJ Africa intern. 

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