By by Martin M. Shenkman, CPA, MBA, JD
Introduction to Planning for Unmarried and Same Sex Couples
October 10, 2011
Money Matters Radio – Estate Planning Q&A with Gary Goldberg
By: Martin M. Shenkman, Esq.Introduction/Overview:
There are a tremendous number of unmarried couples and same sex couples. What general planning steps should they consider? Let’s leave aside issues that are state specific and focus on general planning.
Aren’t many of the basic steps everyone should take similar for unmarried and gay couples?
Yes, the basics are the same as for married couples. Unmarried or same sex couples need all the same core documents: powers of attorney to manage assets if disabled, living wills and health proxies to assure medical decisions are made the way they want, and wills to assure that their assets are distributed in the manner they desire.
But even these core documents must be tailored to address the realities the same sex or unmarried couple faces. How does planning for them really differ from married couples?
It’s huge. Marriage creates clear and known legal and tax benefits to both husband and wife. Most state laws do not provide the same rights and privileges for same-sex couples as for married couples. Gay and lesbian couples do not get the same concrete tax, inheritance, and employment benefits that a marriage provides. So these couples must create the arrangements they want through the use of tailored legal contracts and estate planning documents. We’ll talk about a key document, the living together agreement, in 3 weeks as part of the third installment in this series.
Carefully plan the possible consequences of changes in state law if you move to a new state where the rules might differ. For LGBT couples, Federal Defense Of Marriage Act (“DOMA”) can wreak havoc.Your marriage may be legal in one state, but the DOMA could cause it not to be recognized in the new state you move to if that state itself doesn’t recognize the relationship. As a result, if a LGBT couple moves to a new state, it may be essential that they revise their planning and documents to endeavor to fulfill their goals in that new state.
What about state laws that permit gay marriage or civil unions?
We’re going to avoid the specifics of any state’s laws and speak more generically. Some of the differences and challenges may be mitigated if the couple is married under a state law that permits marriage between same sex couples, if they registered as domestic partners, or members of a civil union under a state that permits that. But, regardless of what state law provides, the documents and planning should address the realities the couple faces. Most states still do not afford unmarried couple, whether or not same sex, the protections that are afforded a married couple. As a result of this the documents should make it clear that the partner should be treated no different than a spouse for purposes of medical decision making or hospital visitation. Many of the provisions in typical legal documents, like wills and powers of attorney, have to be thought through more carefully. In a nuclear family, providing that assets should be distributed to “heirs at law” might work. It might result in assets passing to children and further descendants, which might be what the couple wants. But if the same sex couple does not have children, they cannot rely on what in other circumstances might be standard language. The bottom line is that in spite of significant positive legislative developments in some states, there remains many challenges and the legal environment these couples face is constantly changing and evolving.
What about tax implications?
The tax laws have always been biased against unmarried or same sex couples. They cannot file a joint federal income tax return. There is no marital deduction for gift or estate tax purposes. We’ll discuss this next week.
What other documents might a gay or lesbian couple wish to handle differently?
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