E. CHRISTOPHER KEHOE
Protection from creditors

In the swirling controversy over whether homosexuals should be allowed to marry, much of the discussion has centered on the rights and benefits that same-sex marriage would provide to gay and lesbian couples.

President Bush’s call last week for a federal constitutional amendment to ban gay marriage added yet another twist to the debate, especially in Massachusetts where a ruling from the state’s highest court has essentially cleared the way for same-sex marriage. The court’s ruling and subsequent debate in the state Legislature has garnered national headlines.

If cities and towns in the Bay State ultimately start issuing marriage licenses to same-sex couples, gay and lesbians would see some new benefits and changes, particularly as they pertain to homeownership.

“Some things won’t change at all,” said Gary Zanercik, a partner at the law firm of Nutter McClennen & Fish in Boston. Other aspects of homeownership would change drastically for partners in a same-sex marriage.

While things like real estate taxation and assessment won’t be affected, same-sex marriage could change the application of other homeownership and tax laws in Massachusetts, said Zanercik and another lawyer interviewed by Banker & Tradesman. One of the most obvious and frequently cited benefits pertains to survivorship.

Today, when a spouse dies without a will, his or her property automatically goes to the surviving spouse. With unmarried couples, if a partner dies without a will specifying to whom the property will go, all the property – including real estate holdings – transfers to heirs who are usually blood relatives like parents, siblings or cousins.

That survivorship benefit is one of the principal reasons that proponents of same-sex marriage have persisted in their push for the right to marry instead of having civil unions, explained E. Christopher Kehoe, a partner with Boston-based law firm Robinson & Cole.

“You have people who don’t always have the means or don’t have the opportunity to do the estate planning,” said Kehoe, who is president of the Real Estate Bar Association for Massachusetts.

And even in cases where same-sex couples laid out specifically in their wills how property will be distributed in the event of a death, Kehoe pointed out that wills are frequently contested. Having that survivorship benefit provides added protection for partners in same-sex relationships.

Another major area that would be affected if gays are permitted to marry is tenancy or the manner of holding title to a property. In most states, people who are not married can co-own property as either joint tenants or tenants in common. Only married couples can be tenants by the entirety.

While joint tenancy is in many ways similar to tenancy by the entirety, there are some key differences, according to legal experts. “A tenancy by the entirety is only available to married couples. It provides some protection against creditors that no other forms of tenancy provides,” said Kehoe.

That’s particularly true in cases involving property that is the primary residence of a couple. If one spouse, for example, accrues debt, creditors cannot seize the house and sell it if that house is a primary residence.

“The interest of a debtor spouse is not subject to seizure or execution by the creditor of that debtor spouse as long as the debtor spouse uses the property as the primary residence,” said Zanercik.

But that same protection doesn’t apply to joint tenants, said Zanercik.

Another important difference is that under joint tenancy, just like tenancy by the entirety, if one co-owner dies, his or her interest in the home goes to the other co-owner. But in joint tenancy – unlike tenancy by entirety – one of the co-owners of a home can unilaterally terminate the survivorship feature, said Zanercik.

“The joint tenant desiring to defeat the survivorship feature need only record a deed conveying his/her interest to a straw, then have the straw deed it back. That converts the joint tenancy to a tenancy in common,” Zanercik said.

“In the case of either a joint tenancy or tenancy in common – but not a tenancy by the entirety – either tenant can unilaterally force a sale by court action, called a partition action. This is much more involved and costly, as are all court proceedings,” he said.

But even if same-sex couples were allowed to marry in the Bay State and permitted to become tenants by the entirety, that type of ownership would only apply to property they own within the state. If the couple owned a home in another state that doesn’t recognize their marriage, it is unlikely they would be able to hold the deed as tenants by the entirety. That’s because Congress passed the federal Defense of Marriage Act in 1996 – and dozens of other states have passed similar laws – defining marriage as a union between a man and woman.

Taxing Questions

Those marriage defense laws appear to be one of the biggest obstacles for advocates of same-sex marriage seeking the same benefits as married heterosexuals. Even if Massachusetts starts issuing marriage licenses to homosexuals and they win certain rights and benefits within the state, that doesn’t mean they’ll apply elsewhere.

The federal Defense of Marriage Act comes into play with certain tax laws pertaining to homeownership. Under federal tax laws, a married couple that sells a home or property can each shelter $250,000 of capital gain or profit. That’s true even for unmarried co-owners of a home.

However, in the case of a married couple, even if only one spouse is named on the property title, the couple can still shelter up to $500,000 in gain together. In the case of an unmarried couple, if only one name appears on the title, the property owner can only shelter $250,000 in gain.

If gays were allowed to marry, it’s still unclear whether they would be able to take advantage of this federal tax benefit as married couples currently do, according to lawyers.

“The question is going to be, does the federal Defense of Marriage Act trump the clause in the U.S. Constitution that each state has to give each other state full ‘faith and credit,'” said Zanercik. In other words, said Zanercik, would other states have to “recognize the rights that individuals have derived by virtue of their home state?”

Only on matters within the state, said Kehoe, would state laws control which benefits are provided. A benefit in this state that would most likely be affected is homestead protection.

Under current state law, if a married couple owns a home, the head of household can declare a homestead on the primary residence that protects the family from losing the home to creditors by safeguarding up to $300,000 in equity in the home. That protection applies to each spouse, even if only one name appears on the property title.

In cases where unmarried partners own a home, they can each declare a homestead to protect their interests, but one homeowner can’t file a homestead to protect both himself or herself and a cohabitating partner. And if only one name appears on the title, the homestead protection would extend only to that homeowner.

Some politicians argue that an amendment to U.S. Constitution prohibiting gay marriage isn’t necessary because of the Defense of Marriage Act, but Bush and other same-sex marriage opponents fear that the federal law could be struck down by courts, particularly in light of what’s happening now in Massachusetts.

In the meantime, opponents and supporters of gay marriage are anxiously waiting to see what happens in Massachusetts. Senate President Robert E. Travaglini and Senate Minority Leader Brian Lees have proposed an amendment to the state constitution that would restrict marriage to heterosexuals but also create a civil union system that would provide the same benefits and protections of marriage. Vermont has enacted a similar provision. Last week, presidential candidate John F. Kerry said he supports such an amendment.