Estate Planning for LGBTQ Couples
October 27, 2023
Following the Supreme Court’s ruling in Obergefell, married same-sex couples have access to many of the same estate planning for lgbt couples tools that opposite-sex spouses have enjoyed. These tools, including living trusts, can help ensure that one partner has the right to make medical and financial decisions for an incapacitated partner without interference from family members.
1. Nomination of Guardians for Children
Regardless of their legal status, parents should carefully consider who will care for any minor children they may leave behind in their absence. This should be documented in the couple’s estate plan.
Prior to the 2015 Supreme Court ruling that made same-sex marriage legal in all 50 states, gay and lesbian couples could be excluded from many state and federal estate tax benefits. The removal of this barrier means that gay and lesbian couples now need to carefully consider how to make the most of their estate tax planning opportunities.
A revocable living trust is often the estate planning tool of choice for gay and lesbian couples, as it ensures privacy through avoidance of probate. It also allows for a flexible and detailed plan that is not accessible to nosy family members who may be antagonistic towards the couple’s lifestyle choices.
2. Health Care Directives
While most people reevaluate beneficiary designations on their bank accounts, retirement and IRA accounts, life insurance policies and other assets when they divorce, it’s especially important for LGBTQ couples to do so. When a partner dies, their spouse can still be named as the primary beneficiary on these accounts, and that could lead to unintended consequences.
Same sex couples should also make sure to have a living will (or advanced healthcare directive) and power of attorney in place. These documents appoint a person to act on your behalf in medical situations where you are unable to express your own wishes.
Lastly, couples should consider executing joint ownership agreements for their property. This means redrafting their real estate documents from Tenants in Common to Joint Tenants with Rights of Survivorship, which provides both individuals with equal ownership of the property. This can help ensure the property passes to the surviving partner. Also, if you and your partner use Assisted Reproduction to have biological children, it may be helpful to specify in your estate plan that any biologically-related grandchildren are considered the children of both partners.
3. Durable Power of Attorney
In the past, when a same-sex couple married or entered into a legally-recognized civil union in one state, they could claim an unlimited marital exemption from federal estate and gift taxes. However, the 2015 Supreme Court decision in Obergefell v. Hodges made marriage legal nationwide and opened up other legal protections for gay couples, including the right to inherit assets from their spouses.
While every person should keep their beneficiary designations on bank, IRA and life insurance accounts up-to-date, LGBT couples in particular need to make this a priority. Many people remove ex-partners from these lists after a break-up, and this can leave the surviving partner without access to any financial assets.
Additionally, unmarried couples should consider a Durable Power of Attorney and a Living Will (also known as a Health Care Directive) to protect their loved ones from speculation about their relationship when they’re incapacitated. These documents provide clear instructions to healthcare and financial institutions and give a trusted companion the authority to make decisions on their behalf.
4. Final Wishes
Even if you’re married or in a civil union, your family won’t have the rights and protections of the law without a few key estate planning documents. Unmarried gay, lesbian and bisexual couples can’t have their financial or medical management wishes for their lifetimes — or their wishes for how matters should be handled upon death — honored unless they have the right documents in place.
Everyone should check that beneficiary designations on bank, retirement and IRA accounts and life insurance policies are up-to-date — and LGBTQ couples especially should. In many cases, these designations override what’s written in a will, and they can leave behind assets to an ex-partner if a break-up occurs before the death of either partner. Similarly, if you have children, it’s a good idea to consider legal adoption as part of your estate plan. It can help avoid custody battles or accidental disinheritances. It can also lower your estate tax bill.