Life Partners After Death?: Important Estate Planning Issues for Same Sex Couples

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For gay and lesbian couples, life is often full of issues which are somewhat unique when compared to what the mainstream experiences.  Aside from the obvious issues of dealing with a lack of understanding from the general populace, there are some more prosaic but equally important ways in which they are different.  For instance, every year at tax time, registered domestic partners must file an extra set of tax returns because the Federal Government does not recognize their right to marry.  The denial of the right to marry by both the Federal Government and the majority of states carries with it significant consequences for same sex couples when it comes to estate planning.

For married couples, there is a presumption that property owned between spouses automatically transfers to the survivor upon the passing of one spouse.  For same sex couples who have not gotten married or established a registered domestic partnership, there is no presumption that the survivor receives any benefits from the decedent partner.  Under the laws of most states, the assets of the decedent partner will pass to his or her family members, leaving the surviving partner out in the cold.  To remedy this issue, couples should consider drafting a will or a trust to clearly indicate their wishes with regard to their partner.

Another important document to consider is an advanced health care directive.  This document allows partners to appoint each other to make medical decisions for one another in an incapacity situation.  Without such a document, there is no presumption that the healthy partner has the authority to make such decisions without a court order, especially if there are blood relatives advocating for a conflicting course of action.

Children of same sex couples often require some different planning as well.  In the case of unmarried couples, sometimes the children are not legally adopted by both partners.  This can present all sorts of issues in the event the legal parent predeceases the other partner.  It is a good idea to plan for a successor guardian to minimize the possibility of a court proceeding in the wake of the legal parent’s passing.

Gifts between partners can also create some problems in an estate planning context.  Married people enjoy a tax benefit called an “unlimited spousal deduction.”  What this basically means is that spouses can transfer an unlimited amount of assets between each other without there being any tax consequences.  However, for unmarried same-sex couples, the transfer of over $13,000 per year in gifts, services or support between partners can result in gift tax consequences which were otherwise unintended.

As you can see, there are a number of estate planning issues which are unique to gay and lesbian couples.  We hope that in time these issues will diminish due to an increased acceptance and understanding in our society.  In the meantime, it is important to address these issues to prevent any unintended consequences and to make sure that each partner’s wishes are properly carried out.

Brian Y. Chou is an estate planning attorney based in Southern California at the Law Firm of Barth Calderon, LLP.

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The Digital Headstone: Planning for Social Media After Death

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What happens to your Facebook account when you die?  Is your twitter account going to tweet on when you are no longer around?  Believe it or not, death is changing.

Death is one of those constants in life that we can count on.  We can say with relative certainty that, barring any miraculous advances in technology, we will all pass away at some point.  We have all experienced death, whether at the funeral of a loved one, at a War Memorial, or when watching the Godfather.  During these scenes, we are often confronted with a physical representation of the deceased: a gravestone; an urn; or flowers placed at the foot of a telephone pole.  With the advent of social media, these memorials are turning up more and more in electronic form.

For instance, let’s take Facebook for example.  When a Facebook account holder passes away, the company allows the decedent’s page to be memorialized.  Memorializing an account still allows friends and family to post in remembrance, but it secures the account so that no one can sign-in to it.  It also prevents the profiles from being suggested as friends to other members and only confirmed friends can post on or find in search a profile that has been memorialized.  This allows the account to remain as a digital memorial where loved ones can go to remember the deceased through photos and comments which were posted both during life and after death.  Often times this serves as a much richer preservation of the deceased’s life than an inscription on a headstone.  It also is much more accessible to loved ones and allows for interactivity amongst friends and family as they post messages in memory of the deceased.

One of the issues which is increasingly garnering attention is the ownership of social media after someone has passed away.  Oklahoma recently passed a law which allows friends or relatives to take control of social media accounts if the deceased person lived in the state.  The measure essentially treats Facebook, Twitter and email accounts as digital assets that could be closed or continued by an appointed representative.  Nebraska and Oregon are both working on similar legislation.

Given the increasing relevance of social media, it is prudent to consider how you want these accounts to be treated in the event of your passing.  Creating a “virtual asset instruction letter” which lists online information and passwords will allow your appointed loved ones the requisite access to your accounts.  You should also give your loved ones instructions as to how you would like your accounts managed or if you would like the accounts to be terminated.  People have even gone so far as to name “online executors” and itemizing account passwords in their wills.

As social media use is most prevalent amongst young people, I’m sure many readers may not have estate planning high on their list of priorities.  However, it is fairly simple and inexpensive to put your wishes in writing.  Even an informal document may help to give your loved ones direction and access to what is increasingly becoming the most important documentation of your life: your social media accounts.

Brian Y. Chou is an estate planning attorney based in Southern California at the Law Firm of Barth Calderon, LLP.

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Estate Taxes: The Sleeping Giant of 2012

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The great recession has caused a lot of people in this country a lot of pain and stress.  People worry about their jobs, their retirement plan and their overall quality of life.  One thing that the majority of the general population has not had to worry about is estate taxes.  However, estate taxes may well be added to the list of stressors which our friends, family and clients may have to deal with.  Circle December 31, 2012 on your calendar, because that will be the drop dead date when we will know just what kind of estate taxes the country will be dealing with in the future.

For the uninitiated, estate taxes are a tax that the government places on your assets when you pass away.  Historically, the estate tax rate hovers around 50% which is especially hard to swallow when you consider that the assets you’ve accumulated have already been taxed once.  The saving grace of the estate tax regime is that the government allows each person an estate tax exemption.  This exemption allows each person to pass a certain amount down to their loved ones without being subject to this tax.  At the end of 2012, the current exemption is set to be reduced by 80%, barring any legislative action from Congress.

A quick history lesson for context.  In the 1990’s, the estate tax exemption was roughly $600,000 per person.  This number slowly rose to $1,000,000 per person in 2001, at which time George Bush initiated sweeping tax cuts across the board.  Over the past decade, the estate tax exemption rose steadily from $1,000,000 in 2001 to $3,500,000 in 2009.  Due to Congressional inaction, the estate tax actually lapsed in 2010, allowing mega-wealthy decedents like George Steinbrenner to pass billions down to their beneficiaries without paying the going estate tax rate of 45%.  Eventually, Congress passed a two year extension of the Bush Era Tax Cuts.  This extension reinstituted an estate tax exemption of $5,000,000 per person.  Because of the Bush Era Tax Cuts, the estate tax now affects less than half a percent of the U.S. population.  But all of this is about to change.

The Bush Era Tax Cuts are set to expire at the end of 2012.  If Congress does not extend them or pass another law governing estate taxes, the $5,000,000 exemption we all currently enjoy will drop back down to $1,000,000.  This means that many more people will be subject to estate tax liability when they pass away.  The estate tax becomes a tax not only on the very rich, but on the upper middle class as well.  The moral of the story here is “Pay more attention, pay less taxes.”  We don’t know what Congress is going to do in this coming year but there is a significant chance that they will do what they do best: nothing.  It pays to meet with your estate planning attorney, accountant or financial advisor to review your situation and to come up with a game plan.  There are many things they can do to reduce your estate tax liability but it requires time and planning.  Having a game plan in place will help you to be prepared no matter what curveballs Congress throws at you.

Brian Y. Chou is an associate at the Law Firm of Barth Calderon, LLP in Southern California.  He specializes in estate planning, asset protection, and estate administration.

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