Estate planning is a critical tool to assuring that your assets and medical decisions achieve desired outcomes when you are no longer in a position to manage your own affairs. A difficult subject for many people, for people in the Lesbian Gay Bisexual Transgender Queer (LGBTQ) community, these issues can be particularly complex. After years of moving towards greater civil and legal rights for LGBTQ individuals and their families, many fear the new administration could turn back the clock on recent developments, creating a great deal of uncertainty for those trying to plan for their families’ needs. For many, the hope and optimism that has flourished over the past few years has been replaced with fear and anxiety as to what the future may hold.
From a wealth planning and advising perspective, well-executed estate planning can significantly protect those in a same-sex relationship. It is still not uncommon for one or both members of same-sex couples to be alienated by family members or subject to threat of litigation against an incapacitated or surviving partner. Many LGBTQ families are also still considered outside the social “norm,” requiring deliberate steps on the part of individuals to provide for their loved ones. For these reasons, estate planning can be critical, providing certainty in how one provides for his/her family and own care in the event of incapacity. As planners and advisors who understand these unique challenges, we offer the following points for consideration:
Relationship Status
The first point of planning analysis for a same-sex couple should center on their relationship’s legal status, namely, whether the couple is married, registered as domestic partners or recognized under a civil union statute. State laws have varied so widely over the last several years that a couple could travel across the U.S. and literally have their legal relationship dissolved and reinstated many times over as they crossed state lines. As laws have evolved, it is not uncommon for a couple to harbor misconceptions about their legal rights and status. The status of a couple’s legal relationship to one another matters in a myriad of ways; however, for estate planning purposes, it affects several important areas: (i) who makes medical and financial decisions for you if you are unable to act on your own behalf; (ii) what happens to your property if you have no estate planning documents in place to clarify your intent; and (iii) income and transfer tax consequences during your life and at death. Without an estate plan, the laws of intestate succession will govern any assets not subject to survivorship rights or contractual arrangements. In all states, married spouses have property rights under intestacy statutes that non-married couples do not. Thus, marital standing is of paramount importance if no other estate planning has been done.
Common Planning Tools
For same-sex couples who engage in estate planning, a wide range of estate planning devices may be used, from simple powers of attorney for health care and financial decisions to complex trust and business succession arrangements to accomplish a couple’s stated goals. For purposes of planning for the disposition of one’s assets and minimizing taxes, either a will or a revocable “living” trust (in combination with a will) is generally created. For incapacity purposes, a trust may be used, along with a financial power of attorney, and a health care power of attorney and/or living will. More sophisticated plans may utilize lifetime gifting strategies through the use of irrevocable trusts and/or business entities.
Certain issues, while not unique to same-sex couples, are more frequently encountered than when planning with straight couples. One such reoccurring issue is concern over future incapacity, as many same-sex couples do not have children and may have fewer people to turn to in the event of illness or incapacity. Understanding one’s options well in advance of a crisis, whether it means naming a friend, professional fiduciary or corporate trustee to serve in this role, can be a source of great comfort. This advocate might be named as an agent under a financial power of attorney, a health care directive or as a successor trustee. For many, the concept of a corporate trustee may sound less appealing than a friend or family member, yet in the right circumstances, corporate trustees can prove to be a valuable partner not just in terms of providing administrative services, such as managing assets, but also through its objective execution of the estate plan’s objectives.
Giving With Purpose
As political and social causes take center stage for those in the LGBTQ community, many individuals and couples have become highly focused on charitable giving to organizations that are fighting for community causes. Proper estate planning can provide tools to structure these gifts in a variety of tax-efficient ways, whether in the form of outright contributions to charities or donor advised funds, through the use of charitable trusts or by the creation of private foundations. Importantly, for same-sex couples who are struggling with the direction of the new administration, this process can also be extremely empowering.
By focusing on areas that our clients can control and where they can be impactful with their dollars and their time, we can offer a sense of peace in these deeply uncertain times. As trusted advisors to our clients, there can be no higher objective.
Rachel Brasso, a senior wealth manager and fiduciary specialist at BNY Mellon Wealth Management, assisted with background materials and the development of this article. BNY Mellon Wealth Management has been recognized by the Human Rights Campaign Foundation’s Corporate Equality Index national benchmarking survey.
M. Brooke Wilson, who is certified by the State Bar of California Board of Legal Specialization as a Specialist in Estate Planning, Trust and Probate Law, is a partner at the law firm Wendel, Rosen, Black & Dean LLP. She may be reached at (510) 834-6600 or [email protected].