Estate Planning for Same Sex Couples
Careful estate planning for all couples is essential to the security of the family. While every family is different, every estate plan must reflect those differences. There are seven documents that are critical to creating a foundation upon which you may rely to protect those you love.
These important documents are:
Last Will and Testament – A Last Will and Testament allows the Principal, or drafter of the document, to control the distribution of their assets upon death. The law provides that if a person dies without a will, their legal next of kin will be the “distributes,” or recipients, of those assets. In most cases, that would be a spouse, children, parents, siblings, siblings children, aunts and uncles or first cousins, in that order. With a will, Property may be divided and distributed at the discretion of the Principal. Also, a Will is the only document which allows parents to name legal guardians for their children if tragedy strikes.
Durable Power of Attorney – This document allows the Principal to authorize another person to make financial decisions for them. It authorizes, among other things, payment of debts, collection of payments, redistribution of assets, withdrawal of assets from a bank account and the sale of property. Because of the important nature of these powers, there is an attached affidavit that the authorized party must complete before the powers become effective. This affidavit is a built-in protection mechanism to avoid misuse of these powers.
Designation of Guardian for Property Management and/or Personal Needs – If a person were to be judicially declared incompetent or incapable of managing their property or themselves, the court would appoint a guardian for that purpose. The guardian is usually a family member. This document allows the Principal to designate who that guardian would be.
Living Will – A Living Will states exactly what measures a person wants or does not want if certain specifically outlined medical conditions arise. It does not, however, authorize another person to make those decisions for the Principal of the Living Will.
Medical Power of Attorney / Health Care Proxy – This document allows a designated person to have access to medical records and make specified medical decisions for the Principal.
Priority Visitation Directive – A Priority Visitation Directive specifies who the Principal prefers to have priority visitation privileges, usually over family members. It tells a hospital administrator, floor supervisor and any other hospital personnel that the possessor of the document shall not be denied access to the hospitalized Principal.
Affidavit of Burial or Cremation – This document ensures that a funeral director or funeral home administrator follows the instructions given them by the person designated in the affidavit.
Important Estate Planning Issues for Same Sex Couples
Property Ownership – Another important aspect of estate planning for same sex couples is the question of property. If you own property as a couple, the first thing to know is how that property is titled. If you are married and your marriage is recognized, then you own in as “Tenants by the Entirety,” or as spouses.”
This is the most secure way to own property as a couple because it allows spouses to own property together as a single legal entity with automatic rights of survivorship. Under a tenancy by the entirety, creditors of an individual spouse may not attach and sell the interest of a debtor spouse: only creditors of the couple may attach and sell the interest in the property owned by tenancy by the entirety. “Joint Tenants with Rights of Survivorship” (JTWROS) is the most secure way for unmarried couples to own property because the property automatically passes to the surviving partner one one dies.
You must, however, keep accurate records as to individual contributions to the property because the IRS considers the first to die as the owner of the property in full. The last way a couple can own property is “Tenants in Common” which allows a couple, or additional owners, to own indivisible parts of the property. Their share passes through their Will when they die, unlike JTWROS, which bypasses probate and goes directly to the surviving owner.
Marital Agreements – While no one wants to think about dying, NO ONE wants to think about their relationship failing. Without a recognized marriage, the protections of divorce will not be available to assist a couple in dividing their assets in a fair and equitable way. The only way to assure that a court would be able to monitor this difficult process is by the drafting of a Domestic Partnership Agreement if you are not married and a pre or postmarital agreement if you are. This is not to be confused with a domestic partnership registry of your city or township. Domestic Partnership Agreements and Pre or Postmarital Agreements are legal contracts drafted and reviewed by attorneys.
The following are the most recognized reasons why couples should consider drafting these agreements:
- They can be used to memorialize the partner’s respective contributions toward the acquisition of major assets, such as real property, investments and so forth, and provide a mechanism for division of assets and liabilities in the event of dissolution of the relationship. This can also be addressed in a separate document called a “Joint Tenancy Agreement.”
- They define financial obligations to one another (and/or to the partner’s, children), both during the partnership and after dissolution.
- They may also be useful to prove the contributions of each partner for purposes of estate tax and acquiring stepped-up basis for a deceased partner’s interest.
- They can define separate and joint property for the purposes of equitable distribution upon the dissolution of the relationship.
Other Benefits of Marital Agreements
If you are unmarried and have a Domestic Partnership Agreement, these agreements are important because they may provide the basis upon which a court may grant the parties a particular right or benefit ascribed to legally married couples exclusively if the relationship dissolves. As dissolutions are often messy and contested, these agreements provide the court with a clear declaration of the intentions of the parties.
If you are married and have a pre or post marital agreement, you get to define the terms of the dissolution. As long as there is full financial disclosure and independent legal representation for both parties, the parties can define separate and marital property and provide for spousal support if appropriate. Marital agreements create a clear path to a considered and fair dissolution.
Many couples ask about how Trust Planning can benefit them and their families. There are two types of trusts: revocable and irrevocable. Revocable Trusts help to bypass probate and irrevocable Trusts assist in estate tax planning. If you have children that are minors, you should consider creating a Will with a testamentary trust (a trust that does not come into existence unless you, or you and your spouse or partner, both die). This trust allows you to control the way money is distributed to a minor and by whom. Trusts are also advisable for people who own property in states other than those in which they reside. This will help to avoid costly and redundant probate proceedings. For more information about Marital Trusts, click here.
If you have any questions regarding Estate Planning for Same Sex Couples, please email me at: Anthony@TimeForFamilies.com.
For more information about pre-Obergefell estate planning, check out my Florida Coastal Law Review article on Estate Planning for Same-Sex Couples.