Warning: Illegal string offset 'src' in /home/shenklaw/public_html/laweasy.com/wp-content/themes/laweasy/single-tips.php on line 45
< Back to

Gift Tax Planning for Same Sex, Unmarried LGBT Couples

Gift Tax Planning for Same Sex, Unmarried LGBT Couples

By by Martin M. Shenkman, CPA, MBA, JD

Gift Planning for Unmarried and Same Sex Couples

October 17, 2011

Money Matters Radio – Estate Planning Q&A with Gary Goldberg

By: Martin M. Shenkman, Esq.

Introduction/Overview

Many unmarried couples and same sex couples hold considerable wealth. What gift planning steps should they consider now and why?

question

How has the 2010 Tax Act changed planning for unmarried couples and should they be doing anything now?

answer

For most unmarried couples the 2010 Tax Act has provided a completely new planning paradigm. And most unmarried couples should move quickly to take advantage of these opportunities before they disappear. The increase in the lifetime gift exemption from $1 million to $5 million makes it feasible for the vast majority of unmarried couples to change ownership of assets now without a tax cost. If the negotiations on Capital Hill could eliminate this opportunity if the gift exemption drops back to the $1 million level it had been at for years. Remember, while there has been a contingent of people protesting the evil “death tax,” no one has protested the gift tax.

question

Is this really such a big deal for unmarried couples? Does planning for them really differ from married couples?

answer

It’s huge. Our tax laws have always been biased against unmarried or same sex couples. Even the 2010 Tax Act continued that bias. The key difference from an estate planning perspective is that married couples can transfer property freely between themselves with no gift tax concerns. Unmarried or same sex couples do not qualify for the unlimited marital deduction. Even if the unmarried or same sex couple registered under a state domestic partnership act, or married under a state’s laws that permitted same sex marriage, they are not recognized as a couple for federal estate tax purposes.

question

So what does this opportunity mean and what should unmarried couples do?

answer

They should first determine their goals and create a plan. For many unmarried couples equalizing assets between the partners (e.g, assuring both names are on their home) is a primary planning objective. In the past the gift tax was a major impediment to doing this. Now, an unmarried partner can shift $5 million to his or her partner without any gift tax worries. For most unmarried couples this large dollar figure provides enough room to solve any planning issues. But if the political and tax wrangling in Washington results in this figure dropping dramatically, the planning opportunity will disappear.

question

Are their clever ways to do this planning – something better than just making the gift?The kind of complicated and costly planning folks can brag about on the golf course?

answer

Absolutely. Giving a simple gift, like re-titling the deed to the couples home is easy, simple and cheap. But it is also limited. What if the value of that home grows tremendously in future years when the real estate markets recover? What happens if either member of the couple is sued? A simple gift offers no protection of the assets involved and no estate tax planning benefit. The best option, so long as the amounts involved justify it, is to make the gifts to a trust that will benefit the partner, yet protect the assets.

Our Consumer Webcasts and Blogs

Subscribe to our email list to receive information on consumer webcasts and blogs, for practical legal information in simple English, delivered to your inbox. For more professional driven information, please visit Shenkman Law to subscribe.

Ad Space