Given the explicit prejudice and discrimination against the LGBTQ community, estate planning concerns may not seem that urgent or significant. However, the ability to build and protect generational wealth is at the core of the American dream and a key path to true equality.
Unfortunately, because these options are so new, same-sex couples have had a limited window in which to become acquainted with the baroque rules and regulations of the estate planning process and to grasp the full array of estate planning strategies now available to them.
The degree to which the legalization of gay marriage has transformed the playing field cannot be overstated. Below are a few of the most important elements that have changed in the world of estate planning for LGBTQ couples since the Obergefell decision in 2015 and some steps you can take to protect your wealth and assets.
Marriage Benefits
The legalization of gay marriage meant that same-sex couples would be treated like all other married couples for estate planning purposes, and married couples enjoy a myriad of federal and state benefits that aren’t available to non-married couples, such as:
- A surviving spouse can roll over the retirement account of a deceased spouse into their own. Unmarried beneficiaries, on the other hand, generally must withdraw funds from inherited retirement accounts with 10 years.
- Florida allows spouses to own assets as Tenants by the Entirety, which can help shield your or your spouse’s assets from creditors and lawsuits.
- A surviving spouse may be eligible for survivors benefits through Social Security, if the deceased spouse met the federal work credit requirements.
- Married couples have an unlimited marital deduction, meaning that they can give each other an unlimited amount of assets free of gift or estate taxes. Unmarried couples, however, are limited by the amount of the estate and gift tax exemption.
Legal Documentation of Your Plans
Whatever your wishes are regarding the disposition of your estate and assets, it’s absolutely critical that you have the correct legal documentation to support and achieve these wishes.
I’ve seen people spend tens of thousands of dollars on estate planning documents, only to find out after the fact that those documents couldn’t accomplish what they thought they would accomplish.
In some of these cases, the issue is that the documents don’t accurately reflect what the client wanted to have happen. At other times the problems are structural, meaning that, for example, the wording is inconsistent across the documents.
Problems like this can lead to familial conflict, undesired asset disposition, and expensive estate litigation, especially for LGBTQ couples whose estate plans may be more prone to interference or contestation by unsupportive or unaccepting family members, such as:
- Contesting a will,
- Challenging financial transactions,
- Initiating a custody battle over non-biological children, if the biological parent dies or is incapacitated, or
- Refusing to let the same-sex spouse make medical decisions for their partner or have access to them.
Therefore, LGBTQ couples need to be extra careful to cross every T and dot every I so there is no chink in their estate’s armor. The fortification process starts with these five estate planning documents:
- Last Will and Testament: A written and legally binding will, drafted according to Florida laws, is the most basic element of your estate plan. In it you can designate a personal representative to administer your estate and specify how, when, to whom you want your estate to be distributed. Importantly, if you have any minor children, you should also explicitly appoint a guardian for them in your will.
- Revocable Trust: A revocable trust allows you (the Grantor) to benefit from the assets in the trust while you are alive and pass the assets on to heirs without going through probate. Fully and properly funding a trust (i.e. transferring ownership of an asset to the trust) is critical, but many individuals forget this step. Any property or assets not titled in the trust’s name, will still be subject to probate.
- Living Will: A living will allows you to specify the types of medical care you do and do not want to receive. Plus, it provides your healthcare surrogate with written instructions on which decisions to make and not make.
- Financial Power of Attorney: A financial power of attorney (POA) authorizes an “agent” to manage your finances and conduct transactions on your behalf if you are unable to do so. You can expand or restrict the breadth of the agent’s powers to fit your needs.
- Medical Power of Attorney: This document will designate a trusted person to make medical decisions on your behalf. This is a critical estate planning document for LGBTQ couples because medical providers are more likely to question the spousal rights of a same-sex couple than an opposite-sex couple.
Yearly Review & Revision
As is the case in other areas of life, estate planning for the LGBTQ community is often more complicated and more difficult than it is for other members of society: It’s technically the same, but it’s also not.
Though same-sex couples don’t have to draft different estate planning documents than opposite-sex couples, extra care must be taken to create truly bulletproof estate plans for a couple of reasons.
First, the new and evolving nature of the legal landscape means periodic review and revision is even more critical to keep documents compliant. You need to ensure your documents include the most up-to-date planning options and that the language conforms with the current federal and state laws.
Second, the future is uncertain. While the Obergefell decision is the law of the land at the moment, I am writing this piece on the day that the Supreme Court handed down its Dobbs opinion, overturning Roe v. Wade, a legal precedent dating back to 1973 (much further back than 2015).
The Court insists that, “Nothing in this opinion should be understood to cast doubt on precedents that do not concern abortion.” But in his concurrence Justice Clarence Thomas wrote that all precedents based on substantive due process are “demonstrably erroneous” and that the court has a “duty to correct the error.” In other words, he explicitly urges the Court to reconsider (and overrule) cases like Lawrence (2003), which decriminalized same-sex relationships, and Obergefell (2015).
If Justice Thomas has his druthers, as goes Roe, so goes them all.
Modern Estate Plans for Modern Families
No one truly knows how the next 5 to 10 years will play out, but when it comes to your estate plans taking a “set-it-and-forget-it” approach or, worse still, avoiding the topic altogether is not a good idea. The best path is to plan for the worst and hope for the best.
Especially for LGBTQ couples, the advice of an experienced estate planning attorney will be invaluable. If you haven’t reviewed your estate plans since 2015, it is almost certain that you are not taking full advantage of the asset protection and tax mitigation strategies that are available to you.
Reach out to me to set up a complimentary Financial Legacy Review. We will review your estate, assets, and future goals and develop a unique Financial Legacy Blueprint™ just for you.