Honor Your Partner Beyond Your Lifetime

You’ve taken all the steps you can to share your life with the person you love. You’ve made a commitment to build a life together, but have you considered what might happen to your assets after your lifetime?

Members of the lesbian, gay, bisexual and transgender (LGBT) community face significant legal challenges to passing property to their partners after their death because most states do not recognize same-sex marriages or civil unions, a legal status that ensures same-sex couples certain rights and responsibilities as married couples. Thus, the surviving partner of a LGBT relationship who lives in such a state has no general right under state law to inherit the deceased partner’s property. The property in these cases will be distributed to legal heirs through the laws of “intestacy.” This means the deceased partner’s assets will automatically pass to surviving biological or adopted relatives—or even the state itself—and not to their surviving partner.

The Need for an Estate Plan

To help ensure that your property and assets are distributed according to your wishes after your lifetime, it is essential for members of the LGBT community to implement an estate plan. Basic estate planning includes:

a will;
a durable power of attorney;
health care directives;
beneficiary designation coordination;
possibly a revocable living trust

What Could Go Wrong

Helen and Joanna have been partners for 10 years, living in a house owned by Helen. They reside in a state that does not recognize same-sex marriage. Helen is suddenly killed in a car accident. Helen had not implemented an estate plan to provide for Joanna. Because state law does not recognize same-sex marriage, all assets titled in Helen’s individual name will likely be distributed to her biological or adopted relatives. Joanna would receive nothing and may be forced to move from the home.

Issues Specific for the LGBT Community

As a result of a 2013 Supreme Court ruling, couples that are legally married in states that allow same-sex marriages are now entitled to the same benefits under federal law as married opposite-sex couples. However, couples who are not legally married or who live in a state that does not recognize same-sex marriage should keep the following in mind:

  1.  Federal tax law shifts a heavier tax burden to same-sex couples that are not legally married. Same-sex couples cannot file “joint” or “married, filing separately” federal income tax returns and, as a result, may pay more in annual income taxes—although in California, Nevada and Washington different rules apply. Same-sex couples are also not eligible for the unlimited marital deduction or gift tax exclusion for gifts between spouses. And for those whose estates are worth more than the current exempt amount of $5.25 million, tax planning becomes even more critical.
  2. A partner will not ordinarily receive any continuation of the deceased partner’s defined benefit pension plans. Most pension plans are governed by federal rules and do not permit a continuation of pension benefits after the death of the pensioner.
  3. Federal law doesn’t allow a spousal “roll-over” of retirement accounts for same-sex couples that are not legally married. Federal laws allow a surviving spouse to roll over a deceased spouse’s IRA or other qualified retirement plan accounts into a spousal IRA. A same-sex couple that is not legally married is not allowed to benefit from this rule. Instead, the partner can elect either a payout over five years or a conversion to a “stretch IRA.” The partner, however, will be required to start receiving taxable distributions no more than one year after the account holder’s death, regardless of the partner’s age.
Who Will Make Decisions in the Event of Incapacity?

A new federal regulation in 2011 makes it easier for partners to have visitation rights in the event their partners are hospitalized. However, same-sex couples often aren’t permitted to manage financial or health care decisions for their partners in the event of incapacity due to injury, serious illness or advanced age, without signed authorization.
To ensure that critical financial and health care decisions are made by your partner, and not somebody else, contact your estate planning attorney to create the legal documents naming your partner as your attorney-in-fact for finances and health care directives.

Real Case Scenario:

Patrick and Brett were life partners for more than 25 years. They shared their home and finances as a married couple. They were not accepted as a couple by Patrick’s family. While on a business trip, Patrick had a sudden aneurism and subsequent stroke. Brett was allowed some hospital visitation rights. When Patrick was finally able to be discharged from the hospital, Patrick’s parents took him home and barred Brett from seeing Patrick. When Brett petitioned the court for guardianship, the court sided with Patrick’s parents.

Your Next Step

Consult an estate planning attorney to protect and provide for your partner today and after your lifetime.

The information on this website is not intended as legal or tax advice. For such advice, please consult an attorney or tax advisor.

For Outside of the US

Canadians leaving a planned gift to ROLDA will use the same information as members in the U.S. for the Legal Language and Tax ID in a will and other gifts such as bank accounts, insurance policies, etc. You can request information be sent to you by emailing us at rolda@rolda.org

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