Wealth Advisory & Planning
September 09, 2021
Wealth and Estate Planning Considerations for the LGBTQ Community
Whatever your age or relationship status, identifying your goals and creating a financial plan around them is central to your long-term wellbeing. The LGBTQ community faces some unique considerations, even with the passage of marriage equality laws. In this article, we discuss some important components essential in estate planning strategies for the LGBTQ community.
Financial benefits to marriage
The decision to marry is deeply personal, but there are several financial benefits to marrying, including:
- Married couples can claim the unlimited marital exemption for federal estate and gift taxes. Spouses can generally leave an unlimited amount of assets to their surviving spouse without triggering a federal or state estate tax.
- Health insurance may be less expensive for a family rather than for two unmarried individuals and children.
- A spouse can receive Social Security spousal and survivor benefits, but there are no benefits for life partners.
Also, be aware that some states, such as Washington, may have legislation that creates financial rights between committed couples, even if they are not married.
Planning a family
For the LGBTQ community, there may be financial planning concerns not experienced by most others, including:
- The cost of adoption, fertility treatments, surrogacy and other options for LGBTQ individuals and couples may run in excess of $100,000. Planning for any of these options typically begins months, if not years, in advance.
- Adoption and guardianship issues make it important to formally choose a legal guardian for your children to take effect should you die or become incapacitated. This is necessary to avoid any later misinterpretations of your wishes by family, friends and the courts.
Establishing an estate plan
Having a formal estate plan assures that, upon your death, your assets will be transferred to one or more surviving loved ones per your wishes. An estate plan also will protect your beneficiaries, including minor children, help reduce federal and state estate taxes and state inheritances taxes, and minimize potential family conflicts.
As part of that estate plan, you should have several documents in place to help ensure your intentions are carried out and your partner or spouse has the authority to make decisions for you. These documents will likely include:
Financial power of attorney (POA)
A financial POA gives a third party, your agent, the ability to manage your financial affairs if you are unable to do so. A durable POA would be effective immediately and would survive your incapacitation. A POA can help circumvent a major disaster for a family. In some states, if there is no POA, the court will appoint a guardianship to control the assets.
A healthcare proxy, or medical POA, gives an agent the power to make medical and healthcare decisions on your behalf when you unable to do so yourself. If either party of an unmarried couple living together becomes hospitalized or ill without a healthcare proxy, there may be no rights, even for hospital visitation. A healthcare POA gives your agent the authority to request and receive medical information and make healthcare decisions for you, except for end-of-life decisions.
A healthcare proxy is essential for all unmarried individuals, but particularly unmarried LGBTQ couples. The Healthcare Insurance Portability and Accountability Act of 1996 (HIPAA) privacy authorization form gives doctors and healthcare providers consent to discuss and disclose your health condition and records with the person you designate.
A living will, or advanced healthcare directive, is a written, legal document that spells out medical treatments you would and would not want to be used to keep you alive, as well as your preferences for other medical decisions and organ donation.
A will provides your wishes as to the distribution of your property after death. Whether or not it matches your current ideas about your estate plan, a will remains in force until you revoke it. The birth of a new child, adoption, moving to a new state, divorce or changes in tax law are a few things that may unintentionally cause the redistribution of assets among your beneficiaries in ways you never contemplated. To safeguard your estate plan, you should revisit your will after every significant life event or at least once every few years.
There are steps you may want to take if you have significant assets to plan for the possibility of increased taxes, especially with respect to capital gains. Working with your wealth planner or financial advisor is crucial to accelerate income into this year while rates are still low. Further, review your estate plan with your advisor periodically when life circumstances changes, especially since some states have changed their estate tax laws recently.