Our firm is very friendly to members of the of the LBGT community. There was once a time when estate planning for same-sex couples was particularly important, because there were impediments to marriage. Even in states that legalized same-sex marriages, there were federal laws on the books that could have a major impact.
Things changed because of the efforts of a woman from the state of New York named Edith Windsor. She and her partner, Thea Spyer, got legally married in Canada in 2007. The following year, the marriage was recognized in their home state due to a legal ruling.
In 2009, Spyer passed away, and she left a large estate to Windsor.
There is a federal estate tax that is applicable on asset transfers that exceed the amount of the credit or exclusion. In 2009, the amount of this exclusion was $3.5 million, and the maximum rate of the tax was 45%. The amount that was inherited exceeded the amount of this exclusion.
However, there was then and there is now an unlimited marital estate tax deduction. This allows you to leave any amount of money and/or property to your spouse free of taxation.
Though Windsor and Spyer were legally married as far as New York was concerned, the federal government did not recognize same-sex marriages. As a result, the Internal Revenue Service forced Windsor to pay an estate tax bill that was just over $363,000.
Windsor filed a lawsuit, and it eventually made its way to the highest court in the land. In June of 2013, the Supreme Court ruled that the Defense of Marriage Act, which was the law that prohibited same-sex marriages, was unconstitutional. Since then, the federal government has recognized marriages between people of the same gender.
Additional LGBTQ Planning Concerns
In addition to the estate tax angle, there are other reasons why long-term, committed same-sex couples had a specific set of estate planning concerns. There are certain inherent legal rights that are afforded to people that are married in the eyes of the law. Before the federal recognition, couples that could not get married had to take specific legal steps to protect themselves.
Now that the federal government recognizes same-sex marriages, all married people enjoy the same rights. This being stated, estate planning has always been important for all married couples. You should certainly discuss your financial situation and your estate planning goals with a licensed attorney, regardless of your orientation.
A joint revocable living trust can be a great estate planning choice for a wide range of different couples. When you have this type of trust in place, all of the assets are consolidated, and the administration of the trust is not subject to the probate process and the various drawbacks that go along with it.
This is one asset transfer method that is quite commonly used, but there are others. Plus, a well-constructed estate plan will address possible latter life incapacity. You can name a disability trustee to manage your trust if you ever become unable to do so yourself.
An incapacity plan can also include a durable power of attorney to designate a medical decision maker and a durable power of attorney for property that is not held by the trust. A living will should be added as well to state life support preferences.
Without question, there are many tools in the estate planning toolkit, and you should address the possibility of future long-term care costs. Personalized attention is key, because each situation is different, and careful planning is required to take care of the people that you love in the optimal manner.
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