Insights

June 14, 2023

Diversified Estate Planning for LGBTQ+ Families

In Estate Planning, LGBTQIA+, Wealth Strategy

Katie Quick
Contributions from: Katie Quick, CFP®

When it comes to estate planning, LGBTQ+ individuals may need additional considerations to ensure that their wishes are fully honored and protected. Given the variation in state laws and recognition, same-sex couples must continue to be conscientious and thoughtful when it comes to their estate planning efforts, and are highly encouraged to seek a competent legal professional to help organize and establish this plan.

LGBTQ+ Estate Planning Basics

LGBTQ+ couples should consider including and updating the following types of documents in their estate plan:

Wills

This document expresses your wishes for your estate, primarily who your desired beneficiaries are, how you are divvying up your assets and property, and guardianship instructions for minor children. This will go through probate, which is public and can be a lengthy process. You may consider providing rationales in your will which explain your explicit choices for non-blood related beneficiaries, thus making it more difficult to contest in court.

Revocable Living Trusts

A revocable living trust can accomplish many of the same objectives as a will, but it tends to provide a deeper level of protection, control, and privacy. This type of trust allows the grantor to retain control of the assets during their lifetime, including the ability to update beneficiaries, update which assets are held within the trust, and distribute principal and income. One benefit is that these trusts avoid probate, meaning the process for distributing the wealth to beneficiaries remains private and can move quicker. For some LGBTQ+ individuals, this privacy may be vital.

Those contemplating creating trusts should also consider that this can be more expensive to set up and maintain and is not the vehicle to establish guardianship for children—you should still have a will to accompany the trust.

Living Will

Sometimes referred to as an Advanced Health Directive, a Living Will explicitly states your end-of-life care wishes, such as life support, should you become incapacitated.

Medical Power of Attorney

Also called a Health Care Proxy, this is a legal document designating a particular person to make medical decisions on your behalf if you become incapacitated.

HIPAA Privacy Authorization Form

This allows doctors and others health care professionals to release pertinent health information and records to your designated health care power of attorney or trustee. Your appointee may need your medical records to establish your medical condition or mental capacity for the purposes of managing your estate.

Financial Power of Attorney

This document designates a person to conduct your financial affairs if you become ill or incapacitated. Note that a Financial Power of Attorney is only in force while someone is alive.

Final Arrangements

As part of your estate plan, you and your partner might also consider documenting final arrangements. You can specify your wishes in as much detail as you choose. Some of these arrangements can include burial or cremation; caskets, urns, and headstones; ceremonies; and paying for final arrangements. While this document is not legally binding, it can bring clarity and relief to those who must take care of these details after you die, which may be of help to your partner if you anticipate friction or strong opinions from relatives when your partner tries to assert your wishes.

Beneficiary Designations, Titling, and Names

Beneficiary designations are one of the most vital steps and should be reviewed annually to ensure they still align with the estate plan and your wishes. You may also find that account titling or ownership can become more efficient. In general, having joint ownership of accounts can ensure that a spouse has easy and immediate access if something happens to the other spouse. For those who live in community property states, care should be taken to know what is designated as community property and what is not. Additionally, if anyone involved in your estate plan has had a name change or pronoun changes, you should make sure that your legal documents match the legal changes of those individuals.

When Family Conflict is a Factor

It is not uncommon in the U.S. for LGBTQ+ individuals to have conflict with birth family. In fact, four in ten LGBTQ+ Americans experience rejection from their families[1]. If you are estranged from your blood relatives, or if you expect conflict amongst your family over your estate, you may consider adding a no-contest clause to your estate documents. This clause states that if someone (for example, a homophobic or transphobic relative) wants to contest your will in court, and they lose, they will not inherit anything from your estate. You might consider stating in your will if someone is not to receive anything from your estate, to make it perfectly clear.

Incorporating Children into Your Plan

LGBTQ+ parents have a unique set of estate planning concerns. Establishing parentage can still be tricky, especially when only one or neither partner is the biological parent. In such cases, non-biological parents should strongly consider adopting their child to establish a legal relationship, and to avoid having to battle for custody with long-lost relatives if the biological parent should die.

If the child was born prior to marriage, not every state has a marital presumption law or would recognize non-biological same-sex parents. It is not uncommon for courts to step in and make decisions about guardianship for children.

You might assume that because the child’s birth certificate has a non-biological parent’s name on it that they are protected, but the courts in a few states have ruled that birth certificates cannot create parentage. It is encouraged to pursue adoption agreements or obtain a parentage judgment (depending on the state).

A child that is either born or adopted into a same-sex union should be specifically identified and accounted for throughout your estate planning documents. For example, you can designate guardianship for minor children in your will. But without a will there is no guardianship established, and therefore the courts will choose guardians based on their best guess as to who the biological parent would have preferred and what they view as the best interest of the child. The court may or may not choose your partner or spouse if not specifically designated.

Marital Status

Same-sex couples have only been allowed to legally marry at the Federal level for the past 8 years. Prior to the 2015 Supreme Court ruling in Obergefell v. Hodges, LGBTQ+ couples could access domestic partnerships, civil unions, and other legal arrangements depending on the laws in individual states. It is important to know the laws as they apply in your state and note that these legal arrangements do have different meaning and benefits. A striking example is that some individual states automatically converted civil unions to marriages after the Obergefell v. Hodges decision, which therefore married many couples[2]. If you engaged in one of these legal arrangements prior to 2015, and you later split with your partner but never dissolved the legal setup, you may want to investigate to ensure your status aligns with your estate plan. Knowing whether you are legally married or not is critical when establishing an estate plan.

If you are an unmarried couple but have the designations of domestic partner or civil union, there is an even higher sense of urgency to create a solid estate plan, and to ensure the recognition and protection of your partnership if one of you dies or is incapacitated. Unmarried couples will not benefit from the unlimited marital exemption, spousal survivorship benefits, or other marital benefits, and it is even more crucial to set up these estate arrangements for the surviving partner.

Conclusion

We recommend that all clients, regardless of sexual orientation or gender identity, engage with an estate attorney to create a comprehensive estate plan. Considering the variations in laws from state to state and the uncertainty of future legislation, these extra factors for the LGBTQ+ community make the need for a solid estate plan even more critical. We recommend finding an estate attorney who specializes in LGBTQ+ awareness and can best serve this community’s needs. At Coldstream we like to work hand-in-hand with our clients’ teams of professional advisors, and estate planning can be a large piece of one’s financial plan. If you don’t know an estate attorney, your wealth management team at Coldstream can provide you with a recommendation.

[1] https://www.pewresearch.org/social-trends/2013/06/13/a-survey-of-lgbt-americans/

[2] https://www.ncsl.org/human-services/civil-unions-and-domestic-partnership-statutes#:~:text=Following%20the%20passage%20of%20same,all%20civil%20unions%20into%20marriages

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