Estate Planning Challenges for Same-Sex Couples

As a follow up to my recent post discussing four estate planning must-haves, I wanted to follow up with a special post discussing the unique challenges same-sex couples face in estate planning. The primary reason that same-sex couples face these challenges is because the federal government still does not recognize same-sex marriage from a legal and tax standpoint.

This has very large implications when making decisions about how and who to leave assets to in the event of your death, access to and ability to make decisions about medical issues, and what happens to children you may have. Below I have laid out some common issues faced, as well as some solutions to address these concerns wherever possible.

1. Living Will

   In a traditional marriage, assets will typically be automatically transferred to a surviving spouse in the event that there is no will, which is an excuse (I used that word on purpose) for ignoring this topic. However, in the event of same-sex marriage, this is not the case. Assets will be transferred at the discretion of the court, and being that same-sex marriage is often not recognized by the court, your partner will receive no part of the estate. Additionally, while couples of opposite sex can transfer assets to a spouse without incurring any estate or gift taxes, same-sex couples cannot. From a tax planning perspective, passing assets to a same-sex spouse is viewed by the federal government the same as leaving assets to a stranger, and if large enough, will incur estate and gift taxes.

2. Power of Attorney/Health Care Proxy

   While a power of attorney is a very important planning tool for most individuals, they are especially important for same-sex couples. Because most states still do not recognize same-sex marriages, your partner may be denied access to you in the event you are admitted to the hospital. Having a power of attorney that gives permission to your loved ones to visit and make decisions on your behalf, while still not bulletproof, can mean the difference between being allowed to see your spouse or not.

3. Beneficiary Designations

   For same-sex couples, beneficiary information is extremely important. If a traditional married couple leaves beneficiary designation blank, the assets will by default be transferred to their spouse. For a same-sex couple, a blank beneficiary designation will mean the assets are left to the deceased estate, leaving no legal right to the assets for your partner. However, keep in mind that if you do designate your partner as a beneficiary, there may be tax consequences of doing so.

4. Guardianship

   For same-sex couples, this process can be much more complicated. Some states allow same-sex couples to adopt and custody a child together, some states allow same-sex couples to adopt the children of their partner, and some states allow no co-custody of children under any circumstances. It is important to understand your legal rights in the event that your partner dies. In the event that you have little or no custody rights, there is a chance that you would lose complete control of your child and have no rights to visit with them. This is especially controversial in the event that direct members of the deceased family do not approve of your relationship. While specifying your partner as the rightful guardian does not provide a guarantee that your child will remain with your partner, it is a significant step in ensuring that your futures wishes are carried out as intended.

Again, while there are no bulletproof ways in which you can completely avoid some of the issues discussed above, taking action by speaking to a estate attorney will be a very good first step to protecting yourself and your loved ones going forward.