Estate Planning for Same-Sex Couples
Since the Obergefelle v. Hodges Supreme Court decision in 2015 [1], the LGBTQ community now has access to estate planning and tax-saving tools that were previously reserved for heterosexual couples. Marriage, including same-sex marriage, that is valid in one state must be recognized in all states. Marriage grants a couple federal recognition and the benefits that come with marital standing. This means that same-sex couples now have the benefits of Social Security, health insurance, use of the marital deduction to defer taxes when one spouse dies, ability to take advantage of a spousal rollover of retirement accounts, and the ability to avoid gift taxes when transferring assets between spouses.
States also offer alternatives to marriage, including civil unions and domestic partnerships. It is important to recognize that these non-marriage alternatives are not recognized by the federal government, and, in some cases, they limit the scope of benefits available to couples on a state level. There are no civil unions in California [2], but couples have the option of a registered domestic partnership as an alternative to marriage. At the state level in California, registered domestic partners receive all the same benefits as married couples.
Despite Justice Thomas’s opinion in Dobbs v. Jackson [3], the Supreme Court has not signaled an intention to overrule Obergefell.
While progress has been made in recent years, same-sex couples must continue to be conscientious with their estate planning efforts. With only 34% of Americans establishing an estate plan [4], most Americans are dying without their wishes and directions in place.
#1: Designating an Agent
Whether you are married or not, it is essential to prepare documents to give your spouse or partner the authority to make decisions on your behalf in the event of incapacity. Consider who you trust to make your day-to-day financial decisions if you are unable to handle these affairs yourself. Consider who you would like to make medication decisions, including end-of-life decisions, if you are incapacitated.
Executing a Durable Power of Attorney for Financial Management, an Advance Health Care Directive, or a HIPPA (Health Insurance Portability and Accountability Act of 1996) form, will give your agent (the person you choose) the authority to advocate for you during your incapacity, be it a temporary or permanent incapacity. The individual you nominate will be able to pay your bills, manage your finances, prepare and file your tax returns, have access to your medical records, elect or refuse medical treatment on your behalf, make end of life decisions, and to dispose of your remains (e.g., selecting burial or cremation, donation of your body parts, donation of your body to medical research, etc.).
Indeed, regardless of marital status, designating an agent ensures that your loved one has the authority to make decisions in your place and pursuant to your guidelines.
#2: Designating your Executor/Trustee
Regardless of marital status, you have the authority to designate a personal representative to carry out your wishes pursuant to your testamentary document(s). You can designate an executor in your will and a successor trustee in your revocable trust. The personal representative is entrusted with and has the authority to administer and settle the decedent’s estate. This includes the authority to take possession of assets, sell assets, and distribute assets to the named beneficiaries.
If an individual dies without a will or revocable trust, they are deemed to die intestate. In this case, their estate will generally be subject to probate (i.e., court proceeding to settle the decedent’s estate) and the relevant state law will determine who can serve as the personal representative. In California, if an individual dies intestate, the California Probate Code provides the order of priority for who can serve as the personal representative of the decedent’s estate [5]. A spouse or registered domestic partner has priority, followed by other family members. For couples that are unmarried or not registered domestic partners, your partner will not have priority to settle your estate.
While there is a greater incentive for unmarried couples to establish a will or a revocable trust in order to designate a personal representative, all individuals are encouraged to put their wishes in writing.
#3: Naming Beneficiaries
As noted above, if someone dies intestate, the state law will control. In California, there is no default right of inheritance for an unmarried partner. This means close relatives, parents, and children receive the estate. An unmarried partner would have no entitlement to any estate property.
If you want to leave assets to your loved ones, especially if you are unmarried (or not in a domestic partnership), it is vital that you do so in writing.
Unmarried same-sex couples have even more need of comprehensive estate plans. Many unmarried couples have been together for a long time but have never done any estate planning. Because each partner often owns assets (e.g., real estate, investment accounts, etc.) individually, a surviving partner may end up with no entitlement to the estate and no financial resources when one partner dies. If an unmarried couple lives in a home titled in only one partner’s name, if that partner dies, the surviving partner may be evicted by the deceased partner’s next of kin.
By establishing a will or a revocable trust, you are able to ensure that your partner, family, friends, or your selected charities receive a bequest after your death. Creating a revocable trust has the added benefit of providing privacy for your estate and your beneficiaries due to the fact that revocable trusts are not administered under the supervision of a court, in contrast to a will.
Alternatively, in some cases, you can avoid probate by having certain assets pass directly to your partner or intended beneficiary. A beneficiary designation, join tenancy, POD (payable-on-death designation), or TOD (transfer on death designation) will allow for a transfer directly to your beneficiary upon your death. This can be used for retirement accounts, 401(k) accounts, life insurance policies, as well as bank and investment accounts.
#4: Nominating a Guardian for a Minor Child
For couples with minor children, it is essential to establish an estate plan to nominate guardians for said minor children. What happens if only one parent is the biological or adoptive parent of a minor child? Upon their death, the other parent does not automatically have the right to custody, even if the other parent has jointly raised the child and established a parent-child bond. Consider a scenario wherein one spouse in a same-sex marriage has a child from a previous marriage. Unless there has been legal adoption, the surviving biological parent has default priority over the non-biological parent, even if the surviving biological parent had no relationship with the child.
Alternatively, what if one spouse adopted a child prior to the relationship? Again, unless there has been legal adoption by the other parent, there is no automatic right to custody.
Furthermore, what happens to minor children if both parents are deceased? Do the grandparents receive custody? If so, which set of grandparents? If not the grandparents, do the uncles and aunts?
Establishing an estate plan will allow parents to nominate guardians for their minor children. An estate plan will let the court know that you wish for legal guardianship to pass to your significant other, or other designated loved one. Doing so will help lessen the emotional and financial toll for all parties involved, especially the minor child(ren).
No matter how harmonious a family may be, it is beneficial for each individual to put their wishes in writing so as to limit the possibility of disagreement and court involvement. In the absence of these documents, the grievances of families often emerge in the arena of the probate court.
This article was written by Lilit A. Minasyan, a shareholder at Drobny Law Offices, Inc. If you have any questions, please contact Lilit at lam@drobnylaw.com.
[1] Obergefell v. Hodges, 576 U.S. ___ (2015).
[2] California does recognize civil unions entered into in other states.
[3] Dobbs v. Jackson Women’s Health Organization, 597 U.S. ___ (2022).
[4] Caring.com’s 2023 Wills and Estate Planning Study
[5] California Probate Code Section 8461.
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