What Same-Sex Couples Need to Know About Estate Planning in 2024

Jamie Block, CFP®, CPA/PFS, CDFA®, AEP®, MBA

Sr. Wealth Advisor, Sr. Director

Summary

For same-sex couples, it’s vital to have an estate plan that ensures loved ones receive your wealth and children are protected.

What Same-Sex Couples Need to Know About Estate Planning in 2024 Image

Although estate planning is important for everyone, same-sex couples have an even greater need to ensure they receive the same rights as heterosexual couples. In 2015, the U.S. Supreme Court held that same-sex marriages legal in one state are to be recognized as legal in all 50 states. This means that legal protections including the automatic right to inherit property from a spouse, the right to make medical or financial decisions for each other, and related legal considerations should now apply to same-sex couples who have formally married or entered into a legally recognized civil union under any state’s law.

As a same-sex couple, married or not, putting an estate plan in place to protect your financial assets and your family is imperative to ensure your loved ones receive your wealth and your children are protected, especially when the unexpected happens.

It’s no secret that LGBTQ individuals may face discrimination based on their sexual orientation. And with 1.2 million same-sex households in the U.S. alone, estate planning is particularly crucial.1 Sadly, same-sex couples can often be vulnerable to family members contesting a will or to custody battles over non-biological children in the event of the biological parent’s incapacity or death. Whether you are reviewing your current estate planning documents, or documenting your wishes for the first time, there are several important things for same-sex couples to consider.

Don’t open the door to custody battles

Same-sex parents have a unique set of estate planning concerns when it comes to children, especially when only one partner is the biological parent. A child, either born or adopted into a same-sex marriage, needs to be intentionally named throughout estate planning documents.

This begins by designating guardianship for minor children in your will. Without a will, the courts will choose guardians on your behalf, and they may or may not choose your partner or spouse.

To prevent custody battles, the non-biological parent should consider adopting the child. Depending on the state, this is often referred to as a second-parent adoption, co-parent adoption, or stepparent adoption. This is particularly true if the child was born before the couple married since not every state has marital presumption laws. Adoption establishes a legal relationship to avoid a custody battle if anything happens to the biological parent.

Don’t forget about the house

It’s also important to review real estate documents. This is especially true for property purchased before marriage equality to ensure the ownership is listed according to the couple’s wishes. Make sure to update the deed to your home to reflect both spouses as joint owners of the property as tenants by entirety. Property owned as tenants by the entirety includes a right of survivorship, so that upon the death of the first spouse, the property automatically passes to the surviving spouse. This holds true for non-married couples as well.

Regardless of your orientation, you need an estate plan

Whether you’re a same-sex couple or a straight couple, if you have financial assets, real estate, or have family members who depend on you, you need an estate plan. Think of an estate plan as your instructions on how you want your affairs to be handled when you pass away. A sound estate plan considers everything – your wealth, your loved ones, disability or incapacity planning, and end-of-life planning.

A will is the keystone to most estate plans. If done properly, you can avoid probate, reduce estate taxes, and protect spouses and children from divorce and creditors. However, this is just the iceberg tip. For same-sex spouses, making medical and financial decisions for partners who become incapacitated requires even more planning. This means same-sex couples need to be hyper-focused on documenting their true desires. Additional documents to carry out your final wishes include:

  • Financial Power of Attorney (POA): This document appoints a trusted person or persons to make financial decisions for you in case of incapacity. You can grant that person broad or limited powers, depending on what your needs are; for example, you may want this person to be able to pay bills but not sell property. A durable financial POA, for example, would allow the appointed person to make decisions on your behalf if you become incapacitated.
  • Healthcare POA: Like a financial POA, a healthcare POA allows someone you appoint to make medical decisions for you in case of your incapacity. Again, depending on your wishes, you can grant the person wide powers or limit them to certain decisions (for example, whether and when you should be resuscitated).
  • Living Will (Advanced Medical/Care Directive): This document is similar to a healthcare POA but gives you the ability to list specific wishes concerning your medical treatment in the event you are unable to make those decisions.
  • HIPAA (Health Insurance Portability and Accountability Act) Authorization: HIPAA was enacted to help ensure privacy of your medical information when talking to physicians and other medical providers. It also allows you to give your appointed person(s) authorization to access that information so that they can make medical decisions on your behalf.

Important considerations for same-sex couples, married and unmarried

We encourage you to explore these issues with your partner, your wealth advisor, and a qualified estate attorney, especially one who understands LGBTQ legal issues.

If you are married:

  • Estate planning documents drafted before 2015 may need to be revised so your older documents are aligned properly to reflect the current law. Exact and correct wording in estate documents is extremely important and can help you avoid expensive legal challenges.
  • If you have money or assets you inherited before marriage, you may not want to commingle these assets. Perhaps you would rather set aside these assets for other family members in the event of death or remarriage.  Comingling assets may subject an inheritance to becoming marital property in the event of a divorce.
  • As discussed, if your documents are more than four years old, it makes sense to review and update them.
  • If you’re married, federal law entitles surviving spouses to about one-third of the deceased spouse’s estate, depending on where they reside. So, if you have assets that you want to preserve for other beneficiaries, you should revisit your estate plan to make sure these assets are carved out.
  • Also, it’s likely that you both have retirement accounts, like a 401(k) or an individual retirement account (IRA). Make sure you check and update your beneficiaries to ensure that your spouse is the designated beneficiary.

If you are unmarried:

  • Hopefully, each of you has a will. If you don’t have a will, the government will make decisions for you, and these decisions might not be what you want. If you want your assets to go to your intended partner, a will or estate plan is the best way to make sure your wishes are carried out.
  • Do you own a business? Have other property? Without a proper estate plan, the transfer of an ongoing business, real estate or other property may be at risk. You don’t want a business you built with your partner to wind up in someone else’s hands.
  • Who gets custody of the adopted child or children? With a surrogate child, what rights does the biological parent have versus those of the non-biological parent? Adoption, especially by a non-biological parent, is strongly advised to avoid future custody battles.
  • Some states have laws that recognize marriage if you’ve lived together for a period of time. You or your intended spouse may have been married before and not even know it. You don’t want your current partner or heirs to have to deal with a past love showing up after your death and laying claim to part or all of your estate.

Same-sex marriage: What you need to know

When deciding to leave parts of an estate to a partner, it’s generally easier for unmarried same-sex couples to set this up before they get married. LGBTQ couples considering marriage may want to consider a prenuptial agreement or place assets they want to leave for other beneficiaries into a trust to protect these assets. Also, if either partner has any past legal unions or marriages, it’s a good idea to clear these up before getting married. This may take time and some expense, but it’s better to tackle those issues upfront rather than later.

It’s also critical to have the “money talk” with your partner; this should happen whether you’re getting married or not. If one partner has past financial entanglements or unresolved lawsuits, it’s good to disclose these issues and talk through them. Having these conversations early on will help you both to develop a plan that considers your entire financial picture.

You work hard to grow your wealth, let Mercer Advisors help you preserve it wherever you may be in your financial journey. If you own real estate, have retirement accounts or insurance policies, then you most likely need an estate planner. If you’re interested in learning more, contact your advisor. If you’re not currently working with Mercer Advisors and would like information on estate planning, contact us.

 

1 Scherer, Zachary. “Key Demographic and Economic Characteristics of Same-Sex and Opposite-Sex Couples Differed.” Census.Gov, 22 November 2022.

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