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.