Introduction
While every American over age 18 needs an estate plan, gay couples face special circumstances that make it even more essential to put a plan in place. Without a proper plan, gay partners and spouses are almost sure to see complications arise. Fortunately, estate planning isn’t as hard as most people think. Here are 10 simple steps that you can take to put a plan in place, along with a discussion of some of the common issues that gay couples will need to address in the process.
1. Understand Rights of Spouses vs. Partners
In 2015, the Supreme Court legalized same-sex marriage in the United States with their decision in Obergefell v. Hodges. Gay couples who are married can now enjoy all of the privileges and protections that come with spousal recognition, and that has a massive impact with estate planning. Married couples possess the inherent authority to access their spouse’s assets, consult with their spouse’s doctors, and make important decisions on their behalf if the spouse is incapacitated. Spouses are also given preference in probate proceedings, even if the decedent did not leave a will (known as intestacy). In contrast, unmarried partners have no authorization to handle financial or medical needs, and they have no inheritance rights to the decedent’s property if there isn’t a will.
2. Appoint a Legal Agent
One of the most common challenges that gay couples face is not having the authority to speak and act for their partner if they become incapacitated. Strict privacy laws in the banking and healthcare industries restrict access to the legal spouse, and in some situations the spouse may still be denied access. Whether or not you are married, it’s a good idea to appoint your partner as your legal agent with a durable power of attorney. If you become incapacitated—perhaps due to an accident or a serious illness—your partner will have the necessary authority to handle all of your financial affairs.
3. Appoint a Healthcare Proxy
On a similar note, your partner will need the authority to access your medical records, speak with your doctors, and make important medical decisions when you’re unable to communicate. To prepare for this, appoint your partner as your healthcare proxy with a healthcare power of attorney. Some states allow you to appoint an agent and a healthcare proxy with the same power of attorney document.
4. Draft an Advance Directive
An advance directive (sometimes referred to as a living will) is a legally binding document that establishes your healthcare preferences. If you are incapacitated and cannot communicate with your doctors, the doctors and your family members can consult your advance directive to understand which treatments you would approve, and which treatments you would not approve. If there is any disagreement between your family members over which treatment option is best, it’s helpful to have this document to clear the air. Without one, your healthcare proxy will have to guess as to what your treatment preferences would be. Some topics commonly addressed in an advance directive include palliative care, resuscitation, artificial life support, and cancer treatment.
5. Plan for Your Funeral and Burial
Another common challenge for gay couples with estranged families is fighting over funeral and burial arrangements. If you are in a financial position to purchase pre-needs services from a cemetery or mortuary, that’s always the best route to ensure everything is planned and paid for in advance. If that’s not an option, you should leave a letter of instruction with your family that indicates your preferences and what assets should be used to cover the costs. A letter of intent is not a legally binding document, but courts will usually recognize their instructions as long as the handwriting and signature match the decedent’s.
6. Appoint an Executor
Your executor (aka personal representative) is the individual nominated in your will to handle your estate when you pass away. They will be tasked with probating your will, gathering your assets, settling your liabilities, distributing your remaining assets, and closing your estate. With estranged family situations, it’s not uncommon to see a parent or sibling petition the court to be the personal representative instead of the decedent’s partner. However, as long as your will is valid and you clearly name an executor in your will, any contests to your will can be thrown out by the judge. As a precaution, it’s a good idea to name a backup executor too, in case your first pick is unable to do the job.
7. Name a Guardian for Your Children (if applicable)
If you have children, it’s imperative that you choose a guardian to care for them in your will. While same-sex marriage is legal in all 50 states, there can be custody complications when one of the parents is not the biological parent of the child. Unfortunately, it’s also not uncommon to see estranged family members sue for custody or try to remove the child from the home. By clearly naming a guardian in a valid will, you can avoid much of this hassle. You can’t stop family members from attempting to intervene, but at least the law will be on your side. In addition to naming your partner as the guardian, it’s a good idea to name a backup guardian who can take custody of your child if you and your partner die together.
8. Assign Beneficiaries to Probate Assets in Your Will
Any assets that are subject to probate will need to be addressed in your will, even if it’s a simple catch-all phrase that says a particular beneficiary is to receive all of your assets. If your partner is the primary beneficiary, you’ll want to name a contingent beneficiary to receive the assets if your partner passes away at the same time. The following assets are subject to probate:
- Individual bank and brokerage accounts
- Real property held individually or as tenants in common
- Personal property including vehicles, art, jewelry, collectibles, etc.
Note that failure to appropriately disposition assets subject to probate will result in intestacy, where your assets will be distributed according to the state’s intestate succession laws. In the state of Arizona, an unmarried partner has no right to receive assets.
9. Assign Beneficiaries to Non-Probate Assets
Because probate can be a long and costly process, it’s often easier to position your assets to bypass probate. There are a number of assets that include a contractual beneficiary on the account and can transfer to the beneficiary when the financial institution receives a copy of your death certificate. Such assets include:
- Bank and brokerage accounts that have a payable-on-death or transfer-on-death beneficiary
- Life insurance policies
- Retirement accounts
- Real property owned as joint tenants or as tenants in the entirety
- Trusts
For these assets, all you need to do is ensure that the right beneficiary is listed on the account. If your partner is the beneficiary, be sure to list a contingent beneficiary in case they pass away with you.
10. Establish a Trust for Your Children (if applicable)
Keep in mind that minors cannot own or receive property, so you should not gift assets to children in your will, or list children as beneficiaries to non-probate assets. Doing so would require a court-appointed conservatorship to administer the assets to your child. If you have children, it’s often better to create a trust for them instead.
There are 3 parts to a trust: a trustee who manages the assets, a beneficiary who is to receive the income and/or principal, and a trust agreement that establishes the terms of the trust. If you would like to maintain control over the assets that are intended for your child, you can set up a living trust where you are the trustee and the beneficiary. The trust agreement will name your child as the successor beneficiary, and a successor trustee who will administer the assets for your child until the child turns 18. If you’d prefer to form the trust after you die, you can include directions in your will to create a testamentary trust for your child. Similarly, there will be a trustee to administer the assets for your child’s benefit until they turn 18. Once they’re an adult, they can legally receive all of the assets in the trust.
For long-term peace of mind, contact us to set up a consultation today. We look forward to helping with your will and other estate planning needs.
Call our Estate team at (480)467-4325 to discuss your case today.