Proper estate planning is vital for anybody that has assets they wish to protect, and if you have loved ones, proper estate planning can protect them as well. Same-sex couples can now get married, thanks to the 2015 United States Supreme Court ruling that legalized same-sex marriage.
This ruling created a lot of new opportunities for LGBTQ+ couples to benefit from estate planning strategies that were once unavailable to them. However, there are many types of estate planning challenges that LGBTQ+ couples need to be aware of.
Some of these situations are:
- Custody battles over non-biological children if the biological parent has died.
- Family interference with the spouse’s ability to make decisions for their partner.
- Wills being contested by family members who do not recognize the validity of the relationship.
- If a same-sex couple were married in a state that allowed same-sex marriage, and moved to a state that did not recognize that marriage (but not officially annulled), they still need to obtain a divorce to avoid issues with their estate.
1. Ensuring Assets Transition
Though same-sex marriage is now legal, according to the 2021 United States Census, there were about 710,000 same-sex households that were married. We can infer that same-sex couples who are not married are likely in a serious partnership.
However, if you’re in a domestic partnership or another romantic relationship, and you die without a will, then the state you live in will decide who inherits what.
Domestic partners are rarely included when the state goes through the interstate process.
What Is Intestate?
Intestate is the process of inheritance, if you were to die without a will. If you have a surviving spouse (, remember, domestic partnerships don’t count) and no children, then your spouse would inherit your estate.
If you have a spouse and children, your estate would be split evenly between your children and your spouse. And of course, if you have no spouse or children, your parents inherit the estate.
There are some things that don’t go through intestate when you die without a will, due to having beneficiaries named. Typical things that have beneficiaries named are: joint bank accounts, retirement accounts, and insurance policies.
How to Ensure Your Domestic Partner Is Included
The only way to ensure that your estate passes to who you want and in the fashion that you want, is to create a will with very specific instances laid out. Wills can be customized to include domestic partners, adopted children, special needs family members, and much more.
However, you will need to ensure that you regularly update your beneficiaries' designations, so that everything stays up-to-date and nobody gets overlooked because of an outdated statement.
Make sure that you add a “no contest” clause to your will. You can go into as much detail about why you’re making the decisions that you’re making, ensuring that the chance it’s contested is lowered greatly.
Another option for ensuring your domestic partner is included in your final arrangements, is to create a trust that ensures that your spouse or partner isn’t stressed by a probate case, because it offers superior asset protection and you have a lot more control over it.
And remember, if you’re worried about your will being contested, keeping old copies of previous wills can help your spouse or partner prove that this was your intent all along.
2. Don’t Just Use A Will For End-of-Life Care
When someone is thinking about what they want for their end-of-life care, they think about a will first. While this is true, same-sex couples risk being challenged by their partner's family when they need to make medical or financial decisions for partners who cannot communicate or are otherwise incapacitated. By listing their spouse or partner for same-sex couples, this lowers the chance that another family member could contest your partner’s right to make these decisions.
Familiar documents that same-sex couples need to ensure are in order are:
- Durable financial power of attorney, a designation that allows your loved one to decide regarding finances if you cannot.
- Health care power of attorney, or health care proxy, is a designation that allows your loved one to make decisions for your medical care.
- HIPAA privacy authorization form. This allows your partner to have information shared with them about your medical records and medical care.
- Health care directive, this indicates the type of care you want to receive if you’re at the end of your life and cannot advocate for yourself.
3. Unlimited Marital Exemption
Prior to same-sex marriage being legalized, partners in these relationships had to plan to cover estate taxes, and they often did this by purchasing an insurance policy with their partner as the beneficiary. However, same-sex couples now have access to the same marital estate exemptions for estate and gift taxes.
What this means is that gay and lesbian spouses can leave as many assets as they’d like to their spouse, without triggering a federal estate tax, as long as both spouses were United States citizens.
Same-sex spouses can also roll over new assets from a deceased spouse’s retirement account to their account, without a mandatory minimum or lump-sum distribution.
4. What About the Children?
Same-sex parents have a unique situation when it comes to their children and estate planning, especially when only one parent is the biological parent. It’s strongly recommended that the non-biological parent adopt the child legally, to ensure that there is less chance of custody battles. When a non-biological parent adopts a child, it’s often referred to as “co-parent adoption” or “sex parent adoption”.
An example of how this could play out is below:
You have died, and you were the biological parent of your child and your spouse or partner has not adopted them. If you have no plan in place that establishes a guardian for your minor child after your death, the courts will step in.
The courts will work to determine who is the best person to care for this child and sometimes it may not be who you have in mind. When creating your estate plan be sure to note exactly who your minor children will be going to upon your death.
5. Real Estate Ownership
Be sure to review and update your real estate documents, especially if you purchased property before marriage equality to make sure they are in accordance with your wishes. It’s important that your documents are re-done to indicate your spouse.
Ideally, you want the language to read:
- John Doe and spouse, Jack Doe… / Jane Doe and spouse, Jill Doe are tenants by the entirety.
However, tenants by the entirety are only available to married couples, and the protections it provides are only given to married couples. So if you and your spouse are not married, you’d want the documentation to reflect joint tenants with rights of survivorship.
6. Loose Ends From Before Marriage Equality
Prior to marriage equality, LGBTQ+ individuals may have entered legal unions before marriage was an option. Many couples may have lived in a state that recognized same-sex marriage and married while they were there. But, if these couples left that state pre-equality, their marriage was no longer recognized except in the state they were married in.
So, to protect your estate, you need to go back through any civil unions, domestic partnerships or legal arrangements before marriage was made legal for same-sex partners, and ensure that anything legally recognized that may not apply to you now, is annulled.
Upon your death, your family and loved ones could face stressful legal issues that could cause financial strain on them.
7. Work With A Trusted Estate Planning Lawyer in North Carolina
If you’re a same-sex couple, married or not, and you need help to create your estate plan, as long as you reside in North Carolina, we can help! Our estate planning attorneys can help you, no matter where in NC you may be.
Our team is fully equipped to meet with you via Zoom during a time that works best for you. . If you have questions or are ready to get help from a professional on your own planning, please give our welcome specialists in NC a call at (919) 335-7426 or contact us online.
We’ll be happy to help you determine your next steps or point you in the direction of resources that can help you.