Estate planning is essential for same-sex couples
BY JOHN GIN
"Newhouse News Service
What if you were injured unexpectedly and your loved one wasn't allowed to make essential decisions on your behalf? What if that person wasn't even allowed to see you? Can you dying and having your lifelong partner left with nothing
These scenarios happen all too often to gay and lesbian couples. Because the laws of most states do not recognize same-sex partners as families, it is particularly important for gay and lesbian couples to carefully consider their estate-planning strategy.
A properly drafted estate plan is essential for managing your assets and ensuring your needs will be met now and in the future.
When you work with a professional financial planner or attorney, consider the following planning areas:
Last will and testament. When an individual dies, his or her survivors typically submit that person's will to probate court.
Probate involves a judge's review of the will and the efforts of the executor (appointed by the decedent) to distribute property in accordance with the terms of the will. If the decedent does not have a will, the court will appoint a person to receive all claims against the estate, pay creditors, and then distribute the rest of the property in accordance with the intestate laws of the state. And there's a good chance that the court-appointed person may not recognize the partner's status. Intestate laws are not likely to do so, either.
Living (or revocable living) trust. A revocable living trust allows you to transfer ownership of your assets to a trust, yet retain complete control over the funds. When you die, the appointed trustee distributes the assets in accordance with the terms of the trust. In most states, you can name your partner as both trustee and beneficiary.
Living trusts are appealing to same-sex couples because the assets are held outside a will, thus typically avoiding probate.
Additionally, living trusts are generally not public -- making them more difficult to contest.
Durable power of attorney (DPA). A DPA can be used to grant your partner the authority to handle your affairs and make financial decisions, and you decide if it becomes effective immediately or only upon disability. If you do not have a DPA, your partner will have to petition the court to be appointed as your agent.
Advance directive. A health-care proxy used in conjunction with a living will is referred to as an advance directive. The health-care proxy grants your partner the authority to make medical decisions if you become incapacitated. A living will outlines life-prolonging measures you want taken if you become terminally ill.
Retirement benefits. The Defense of Marriage Act denies same-sex couples access to federal benefits and protections, including Social Security spousal and survivor benefits. At the state level, same-sex partners may be taxed at a higher rate than legally married partners, meaning that the sale or transfer of a home can hit gay and lesbian families harder.
However, the Pension Protection Act has helped with retirement benefits. Non-spouse beneficiaries are able to roll over assets inherited from a qualified retirement plan into an IRA, avoiding taxes until the assets are withdrawn.
Funeral arrangements. Make sure you communicate your funeral wishes and designate someone to carry out your requests. This can protect those who are grieving from being shut out of the process. "
California is among one of several states which allows Domestic Partnership and which has changed its probate and tax rules to accomodate domestic partners. However, the Internal Revenue Service does not allow filing of married tax returns based on this status, and the federal government does not recognize domestic partnerships as a marriage. The federal tax rules such as the marital deductions do not apply to same sex couples. Much care needs to be taken in planning estates of domestic partners, and even greater care when the domestic partnerships disolve. If you need additional information on this subject, please feel free to contact me.
Mina N. Sirkin is a Board Certified Specialist attorney in Estate Planning, Probate and Trust Law by the Board of Legal Specialization of the State Bar of California. Ms. Sirkin practices in Los Angeles County, California. http://www.SirkinLaw.com. [email protected].
