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Estate Planning

Honor Your Partner Beyond Your Lifetime

You've taken all the steps you can to share your life with the person you love. You've made a commitment to build a life together, but have you considered what might happen to your assets after your lifetime?

Members of the lesbian, gay, bisexual and transgender (LGBT) community face significant legal challenges to passing property to their partners after their death because most states do not recognize same-sex marriages or civil unions, a legal status that ensures same-sex couples certain rights and responsibilities as married couples. Thus, the surviving partner of a LGBT relationship who lives in such a state has no general right under state law to inherit the deceased partner's property. The property in these cases will be distributed to legal heirs through the laws of "intestacy." This means the deceased partner's assets will automatically pass to surviving biological or adopted relatives—or even the state itself—and not to their surviving partner.

The Need for an Estate Plan

To help ensure that your property and assets are distributed according to your wishes after your lifetime, it is essential for members of the LGBT community to implement an estate plan. Basic estate planning includes:

  • a will;
  • a durable power of attorney;
  • health care directives;
  • beneficiary designation coordination; and
  • possibly a revocable living trust.

What Could Go Wrong

Example:

Ann and Barbara have been partners for 10 years, living in a house owned by Ann. They reside in a state that does not recognize same-sex marriage. Ann is suddenly killed in a car accident. Ann had not implemented an estate plan to provide for Barbara. Because state law does not recognize same-sex marriage, all assets titled in Ann's individual name will likely be distributed to her biological or adopted relatives. Barbara would receive nothing and may be forced to move from the home.

Issues Specific for the LGBT Community

As a result of a 2013 Supreme Court ruling, couples that are legally married in states that allow same-sex marriages are now entitled to the same benefits under federal law as married opposite-sex couples. However, couples who are not legally married or who live in a state that does not recognize same-sex marriage should keep the following in mind:

  • Federal tax law shifts a heavier tax burden to same-sex couples that are not legally married. Same-sex couples cannot file "joint" or "married, filing separately" federal income tax returns and, as a result, may pay more in annual income taxes—although in California, Nevada and Washington different rules apply. Same-sex couples are also not eligible for the unlimited marital deduction or gift tax exclusion for gifts between spouses. And for those whose estates are worth more than the current exempt amount of $5.25 million, tax planning becomes even more critical.
  • A partner will not ordinarily receive any continuation of the deceased partner's defined benefit pension plans. Most pension plans are governed by federal rules and do not permit a continuation of pension benefits after the death of the pensioner.
  • Federal law doesn't allow a spousal "roll-over" of retirement accounts for same-sex couples that are not legally married. Federal laws allow a surviving spouse to roll over a deceased spouse's IRA or other qualified retirement plan accounts into a spousal IRA. A same-sex couple that is not legally married is not allowed to benefit from this rule. Instead, the partner can elect either a payout over five years or a conversion to a "stretch IRA." The partner, however, will be required to start receiving taxable distributions no more than one year after the account holder's death, regardless of the partner's age.

Who Will Make Decisions in the Event of Incapacity?

A new federal regulation in 2011 makes it easier for partners to have visitation rights in the event their partners are hospitalized. However, same-sex couples often aren't permitted to manage financial or health care decisions for their partners in the event of incapacity due to injury, serious illness or advanced age, without signed authorization.

To ensure that critical financial and health care decisions are made by your partner, and not somebody else, contact your estate planning attorney to create the legal documents naming your partner as your attorney-in-fact for finances and health care directives.

Real Case Scenario:

Patrick and Brett were life partners for more than 25 years. They shared their home and finances as a married couple. They were not accepted as a couple by Patrick's family. While on a business trip, Patrick had a sudden aneurism and subsequent stroke. Brett was allowed some hospital visitation rights. When Patrick was finally able to be discharged from the hospital, Patrick's parents took him home and barred Brett from seeing Patrick. When Brett petitioned the court for guardianship, the court sided with Patrick's parents.


In Re Guardianship Atkins,
868 NE 2d 878, Ind. App. June 27, 2007 (No. 29A02-0606-CV-471).

Your Next Step

Consult an estate planning attorney to protect and provide for your partner today and after your lifetime.

 

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A charitable bequest is one or two sentences in your will or living trust that leave to People for the Ethical Treatment of Animals a specific item, an amount of money, a gift contingent upon certain events or a percentage of your estate.

an individual or organization designated to receive benefits or funds under a will or other contract, such as an insurance policy, trust or retirement plan

"I, [name], of [city, state ZIP], give, devise and bequeath to PETA [written amount or percentage of the estate or description of property] for its unrestricted use and purpose."

able to be changed or cancelled

A revocable living trust is set up during your lifetime and can be revoked at any time before death. They allow assets held in the trust to pass directly to beneficiaries without probate court proceedings and can also reduce federal estate taxes.

cannot be changed or cancelled

tax on gifts generally paid by the person making the gift rather than the recipient

the original value of an asset, such as stock, before its appreciation or depreciation

the growth in value of an asset like stock or real estate since the original purchase

the price a willing buyer and willing seller can agree on

The person receiving the gift annuity payments.

the part of an estate left after debts, taxes and specific bequests have been paid

a written and properly witnessed legal change to a will

the person named in a will to manage the estate, collect the property, pay any debt, and distribute property according to the will

A donor advised fund is an account that you set up but which is managed by a nonprofit organization. You contribute to the account, which grows tax-free. You can recommend how much (and how often) you want to distribute money from that fund to PETA or other charities. You cannot direct the gifts.

An endowed gift can create a new endowment or add to an existing endowment. The principal of the endowment is invested and a portion of the principal’s earnings are used each year to support our mission.

Tax on the growth in value of an asset—such as real estate or stock—since its original purchase.

Securities, real estate, or any other property having a fair market value greater than its original purchase price.

Real estate can be a personal residence, vacation home, timeshare property, farm, commercial property or undeveloped land.

A charitable remainder trust provides you or other named individuals income each year for life or a period not exceeding 20 years from assets you give to the trust you create.

You give assets to a trust that pays our organization set payments for a number of years, which you choose. The longer the length of time, the better the gift tax savings to you. When the term is up, the remaining trust assets go to you, your family or other beneficiaries you select. This is an excellent way to transfer property to family members at a minimal cost.

You fund this type of trust with cash or appreciated assets—and receive an immediate federal income tax charitable deduction. You can also make additional gifts; each one also qualifies for a tax deduction. The trust pays you, each year, a variable amount based on a fixed percentage of the fair market value of the trust assets. When the trust terminates, the remaining principal goes to PETA as a lump sum.

You fund this trust with cash or appreciated assets—and receive an immediate federal income tax charitable deduction. Each year the trust pays you or another named individual the same dollar amount you choose at the start. When the trust terminates, the remaining principal goes to PETA as a lump sum.

A beneficiary designation clearly identifies how specific assets will be distributed after your death.

A charitable gift annuity involves a simple contract between you and PETA where you agree to make a gift to PETA and we, in return, agree to pay you (and someone else, if you choose) a fixed amount each year for the rest of your life.