On the National Archives building in Washington, DC it is written: “What is past is prologue”. That would apply to the evolving national acceptance of gays in the military and of the right of same sex couples (two men or two women) to marry. Same sex couples can now marry in five states, but other states’ recognition of those marriages ranges from absolute to non-existent.

America’s increasing acceptance of homosexual couples is similar to the genesis of equal rights for minorities and women. We ended slavery with the Civil War. We passed the Civil Rights Act of 1964; and relatively recently the State of Maryland abolished miscegenation, thereby allowing Blacks to marry. Women have earned the right to own property and to vote.

Gay rights are evolving differently from other civil rights movements to the extent that the right of same sex partners to marry is being declared state-by-state rather than by the U.S. Congress.

A DC Bar seminar on March 23, 2010 highlighted just how big a courthouse and statehouse battle gay marriage is shaping up to be. Take the Commonwealth of Virginia, for example. Gay marriage is not recognized in Virginia, where marriage is defined as a union between one man and one woman. The U.S. Supreme Court is unlikely to force Virginia to recognize two men or two women as being married, because that sexual pairing violates Virginia’s public policy. Public policy trumps the laws of sister states.

So what will happen?  There will much work by lawyers, CPA’s, and judges. Certain principles are clear:

1.         Attorneys need to be extra careful when drafting premarital agreements, wills, health care directives and durable powers of attorney for same sex couples.  If a document refers to same sex parties being married, it may not be enforceable outside the state that married them.

2.         The survivor of a wealthy same sex couple may be attacked by IRS for gift taxes on the lifetime transfers between the parties that exceed the annual exemption of $13,000.00 a year.

3.         Many Federal entitlements do not flow to members of same sex couples.

4.         States may ignore out-of-state contracts and court orders involving same sex couples based upon the Federal Defense of Marriage Act (“DOMA”), 1 U.S.C. § 7 and 28 U.S.C. § 1738C.

5.         Clever drafting may protect rights of same sex spouses outside of the recognizing states.  Possibilities include contracts that state adequate consideration without mentioning marriage; or living trusts that include phased-in terms for support and division of property in case of separation or breakup. The possible loophole for lawyers to exploit is that all 50 states will enforce a valid contract, even if the contracting parties are a couple of women or a couple of men. The toughest part of any workaround involves retirement rights: QDRO’s are unavailable to gay and lesbian couples, and pre-tax retirement funds cannot be accurately balanced against non-retirement assets dollar-for-dollar.