Estate Planning for the LGBT Community
The legal landscape surrounding estate planning for the LGBT community has changed significantly in the past few years, legalization of same sex marriage being at the front of the list. For instance, until the decision in United States v. Windsor, the federal Defense of Marriage Act (DOMA) defined marriage as a “legal union between one man and one woman,” and spouse as “a person of the opposite sex who is a husband or a wife.” Because of that definition, though legally married, same-sex couples were not entitled to the “marital deduction”, an important tax break for married couples, which allows spouses to transfer as much as they want to each other during life or, at a set dollar amount (currently over $5,250,000+ per person at death), without having to pay any federal estate or gift tax. Until Windsor, same-sex couples didn’t get this break because of DOMA. Therefore, same-sex married couples were required to pay federal estate tax on their inheritance if it exceeded the tax-free amount. The Supreme Court’s decision in Windsor now allows same-sex married couples to receive this tax break.
The decision in United States v. Windsor affects other federal estate planning benefits as well. In addition to the marital deduction, other benefits that will be available to same-sex couples as a result of the Windsor include gift-splitting by spouses from a joint account to obtain the gift-tax exclusion, the carry-over estate tax exemption for widows and widowers, the right to be sole primary beneficiary of your spouse’s company retirement plan, and rollover rights for IRAs and qualified plans. At Thornton Koller, we are using estate planning strategies and techniques that we implement for opposite sex spouses to be implemented in an identical manner for same-sex spouses.
For those in our gay community, estate planning is especially important. State intestacy laws (covering those who die without a will or trust) do not allow for property to pass to a non-married surviving partner. Though same-sex marriage is legal in California, most California same-sex couples (and many opposite-sex couples) are not married and, despite having a long term relationship, without proper estate planning, those surviving loved ones may not receive the assets the decedent desired go to them. In addition, Windsor does not have any effect on marriage equivalents, such as registered domestic partnerships and civil unions. If a member of the LGBT community fails to properly plan, the result can be devastating to his or her partner and family. Having no estate plan, or relying upon a Will, Joint Tenancy, or Tenancy in Common as an estate plan, is tantamount to giving up control of one’s estate and management of one’s well-being in times of incapacity. This need for an estate plan is critical in case of an accident or illness that renders the partner incapable of making decisions or managing his or her affairs. Without a proper estate plan, the other partner could be legally precluded from having any role in the decision-making of his or her partner’s care, managing his or her affairs, or even having access to the incapacitated partner. At Thornton Koller we design estate plans for unmarried same-sex couples to ensure their desires and wishes will be fulfilled and honored.