GLBT Planning

Summary: Planning if you’re Gay, Lesbian, bi-sexual and transgender have many special planning considerations, only the most obvious being the lack of a marital deduction for federal gift and estate tax purposes. Consider the following:


Act Now. Doing nothing, which is the un-plan most folks opt for really just won’t do. Without your taking specific actions your partner won’t have the right to inherit your assets, raise your children, or other things married couples can count on. If you’re GLBT and single, planning is just as important to assure your financial and legal security through illness and aging.

Standard Forms. These won’t address your unique needs. If you cannot get forms that are tailored to your situation they won’t work. Yes, tailored forms cost more, but a custom made shirt will fit better than an off the rack one from GAP.

Plan. You need planning first, forms second. What personal goals do you have? What tax and financial issues do you face. You have to first delineate your unique circumstances and goals before attempting to create documents.

Rules. Understand the rules, if any, your states has that may govern your relationship. Does your state have a domestic partnership, civil union, or same-sex marriage statute? What does it provide? Do the benefits of moving to a state that has more favorable law outweigh the negative impacts (job loss, costs of move, etc.)?  Regardless of state law the federal Defense of Marriage Act will prevent you from obtaining federal tax treatment comparable to a married couple.

Get Real. You need to honestly assess your situation, not a hypothetical or idealized situation and communicate it clearly to the professionals you are working with. How does your family and others deal with your lifestyle choice? What type of safety net and support do you have in the event of illness? Is your family really going to be cooperative with your partner if you are ill or die? Remember difficult times bring out tough emotions so what might be OK now may not be if a traumatic event occurs.

Contract. Use a living together or other contractual agreements to bolster and corroborate the decisions set forth in your will in case family or others seek to challenge your plans. A well crafted living together agreement can also minimize the difficulties if your relationship with a significant other terminates. You will not have the benefits of state law that govern the dissolution of marriage, so a contractual arrangement is important to fill in those and other gaps.

Hostile Family. Take extra steps to fend off a potential future challenge by hostile family members. Revise documents periodically to create a history confirming your wishes. Consider inter-vivos gifts to those you name as heirs to establish a pattern.

Trustee. Consider the benefits of using an institutional trustee in your documents. They are not subject to the emotional whims or issue that a family member or friend may be. They can provide the objective and professionalism you may need.

Agent. Carefully evaluate who you would give the power to handle your financial matters if you are too ill.  Read carefully the document that will be used, you may not really want or need a broad general power that gives your agent every conceivable power over your assets. A more restrictive durable power of attorney may be preferable.  The best approach for many is a living trust with an independent or institutional trustee as the primary tool for disposing of your assets in the event of a problem.

 Health. Be sure to clearly indicate your wishes in your living will and health proxy. Address religious considerations specifically (what you do and what you don’t want). If you have a partner specifically mention that your partner is your agent and that you want your partner to have all the same rights and privileges afforded to a spouse. For example, if you want your partner to be afforded the same visitation rights as a spouse if you are hospitalized, state that clearly in the documents.  If you have any particular health issue address it clearly what it means in your documents, again standard form language can miss what is really important to you.

Tax. With the federal estate tax potentially returning with a $1 million exemption next year, plan to minimize estate taxes on transfers to your partner. This is challenging without the benefit of an unlimited marital deduction. Inter-vivos gift planning, life insurance planning and other techniques need to be employed.

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