Estate planning is important for everyone — especially for same-sex couples. Historically, same-sex couples have not had the tax and inheritance advantages that federal and some state laws provide to married couples of opposite sex. It has also been important to consider your state’s intestacy laws – if you die without a Will, the law of intestacy directs how your assets are distributed.
The Supreme Court’s June 2013 ruling that a portion of the 1996 Defense of Marriage Act law was unconstitutional gave a number of new federal rights, responsibilities and benefits to same-sex couples who are married in states where same-sex marriage is legal. However, only a limited number of states currently allow same-sex marriage. Whether you are married or not (or whether your marriage is not recognized in your state), there are some common planning considerations you will want to address.
It’s important to appoint your partner as your agent under Powers of Attorney for financial and health care matters. Without this, state law often looks to a blood relative to make these decisions. This can be especially important since you may be denied visitation of your partner in the hospital. If your partner has a power of attorney or is acting as your agent under a Living Will, it assures admittance.
Funeral arrangements are another important topic — many states limit the right to make these arrangements to your immediate family. Other states allow you to name a person of your choosing, like your partner, to fulfill these responsibilities.
A trust may be the best way to provide for your family after your death. A trust can be used to hold assets for your partner’s benefit either under the provisions of your Will or Revocable Trust. The benefits of using a lifetime trust are:
If you decide to establish a lifetime trust for the benefit of your family, you may wish to consider naming an independent third party as trustee. An independent third party trustee can serve as an unbiased decision maker, balancing the needs of your partner and your other beneficiaries.
If only one partner is recognized as the legal parent (since several states don’t allow same-sex partners to have joint custody) and that partner becomes incapacitated or dies, the surviving partner could lose all rights to contact with the child. Your Will and Durable Power of Attorney for financial matters can include language to address this; but there’s no guarantee that a judge will honor it.
You should include a sentence in the guardianship clause that states that you recognize your surviving partner as the child’s parent and that they are given priority over others as the child’s guardian. You may also want to name your partner as the trustee of any trust you establish for your child — and spell out how often you want the trustee to see your child. This will help address concerns that your partner will still be entitled to have contact with your child.
Consider the ultimate distribution, ownership and occupancy of your home. You may want your partner to stay in your home for life or until your partner becomes incapacitated. In that event, you may decide to have your home revert to your relatives or other beneficiaries. Also consider who should be responsible for maintenance, repairs, utilities, insurance and real estate taxes. A lifetime trust or other planning techniques can provide the funds and structure for this purpose.
If you are not married, or your state does not recognize your marriage, purchasing life insurance may also be a difficult task because of the lack of an “insurable interest” by the policyholder partner in the insured partner’s life. An insurance trust can help overcome this. By having the trust own the policy and your partner be the trust beneficiary, the “insurable interest” problem may be avoided. A properly drafted trust can also prevent your estranged partner from receiving the policy proceeds should your relationship end.
Consider naming your partner as the beneficiary of your retirement plan and any personal IRAs. Unless you reside in a state that recognizes same-sex marriages and your plan default is your spouse, most retirement plans will not go to your partner if you fail to name them as a beneficiary on your retirement account.
The tax information herein is not intended to be used and cannot be used by any taxpayer for the purpose of avoiding tax penalties. It was written to support the promotion of Advisory Services.
Taxpayers should seek advice based on their own particular circumstances from an independent tax advisor.
Examples included herein, if any, are hypothetical and for illustrative purposes only. Individuals should seek advice regarding their specific situation.
Investment, insurance and annuity products are not FDIC insured, are not bank guaranteed, are not deposits, are not insured by any federal government agency, are not a condition to any banking service or activity, and may lose value.
Advisory Services are provided through Advice & Planning Services, a division of TIAA-CREF Individual & Institutional Services®, LLC, a Registered Investment Adviser. TIAA-CREF Individual & Institutional Services®, LLC also distributes securities and provides additional brokerage services in its capacity as a registered broker/dealer, member FINRA. TIAA-CREF Trust Company, FSB provides investment management and trust services.
Managed Accounts: You have unique needs; we have the expertise to manage them.