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Vermont lawmakers attracted national attention in 2000 when they tried to extend most of the economic benefits of a traditional marriage to same-sex couples.

But legal and financial advisors in the Green Mountain state say federal law has sharply limited the effects of Act 91, the “civil union act.”

Donna Lescoe, a financial advisor with Choice Financial Services, Starksboro, Vt., now has an easier time getting gay and lesbian clients on their partners life insurance policies.

Before, “people had to show an insurable interest,” Lescoe says. “Now, you dont have to go, Im gay! All I have to say now is, Thats a civil union.”

Eileen Blackwood, a lawyer in Williston, Vt., says she worries a little less that blood relatives of a gay or lesbian client who dies will attack efforts to leave assets to the clients partner.

But “federal tax law hasnt changed,” Blackwood says. “Under federal tax law, transfers between spouses are non-taxable events. For partners in a civil union, there is no exemption. You still have the issue of taxable transfers.”

Many Vermont residents, including many Vermont Republican lawmakers, have argued that extending the economic benefits of marriage to same-sex couples will undermine the sanctity of a traditional marriage.

Supporters of the Vermont civil union act have taken the opposite position. They voted to require state-regulated tax collectors, insurers and employee benefit plans to offer civil union partners the same privileges and benefits they offer to married couples.

Sellers of state-regulated individual and family health insurance policies and state-regulated municipal employee health plans must treat civil union partners the same way they treat spouses.

Life insurers must offer civil union couples the same policies and contracts they offer to married couples, “except where prohibited by federal law, or where a benefit is limited under federal law to a married person,” according to Regulation 2000-01-1H Civil Unions, a civil union regulation adopted by the Vermont Department of Banking, Insurance, Securities and Health Care in December 2000.

“The mere existence of a civil union shall automatically create for each party to a civil union an insurable interest in the other party,” the regulation states.

Vermont normally bases its state income tax calculations on a percentage of the federal income tax paid. The state is asking civil union couples to calculate their state taxes by filling out federal tax forms as if they were married, then multiplying the results by 0.24.

Republican lawmakers have been working hard to repeal the civil unions act, and the original language of the law and related regulations incorporate many restrictions.

Life insurers, for example, are allowed to charge higher rates for civil union partners than for married spouses when they have enough “relevant actuarial data” or “actual cost experience” to justify the higher costs.

The state exempts a fraternal benefit society with religious ties when compliance “would violate the societys free exercise of religion,” according to Regulation 2000-01-1H.

But the most important exceptions are disclaimers permitting insurers to ignore the equal-protection provisions when requiring compliance would violate federal laws or regulations.

The Vermont civil unions act exempts employee benefit plans governed by the Employee Retirement Income Security Act, and the act has no effect on estate taxes or gift taxes.

Congress emphasized its opposition to equal-protection provisions for same-sex couples when it enacted the Defense of Marriage Act of 1999.

The act provides “that no state, territory, or possession of the United States or Indian tribe shall be required to give effect to any marriage between persons of the same sex under the laws of any other such jurisdiction,” according to a summary prepared by congressional legislative analysts.

“In determining the meaning of any act of Congress, or of any ruling, regulation, or interpretation of the various administrative bureaus and agencies of the United States, the word marriage means only a legal union between one man and one woman as husband and wife,” the analysts state.

Because of all the restrictions, in the area of money management, “theres nothing we can see thats different,” says Rian Fried, president of Clean Yield Asset Management, Greensboro, Vt.


Reproduced from National Underwriter Life & Health/Financial Services Edition, July 6, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.


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