Everyone should have an estate plan to ensure his or her final wishes are expressed and followed. However it is even more important for the following individuals to have an estate plan to protect and provide for their loved ones:
- Single individuals,
- Unmarried individuals in committed relationships (such as life/domestic partners or significant others for both same-sex or heterosexual couples), and
- Same-sex married couples
For these individuals, dying intestate could mean that the people who stand to inherit your estate are not the same people you want to inherit your estate. For these individuals, it is imperative that an estate plan be established.
Dying Intestate
If a married individual dies intestate, his or her spouse would inherit under a state’s intestate statute. However, when an unmarried individual dies intestate, if he or she is in a committed relationship, his or her companion has no legal right to inherit any of the estate and the estate would pass to the individual’s heirs-at-law (such as parents or siblings, assuming the individual does not leave any descendants). By having a Will, an unmarried individual can direct his or her assets to the correct person(s), whether to friends or significant others.
For same-sex married couples who are legally married in one state (Iowa, for example) but live in another state that does not recognize the marriage (Minnesota, for example), if either spouse passes away intestate, that state will not recognize the marriage to allow for the surviving spouse to inherit by the intestate statute.
Tax Implications
Gay couples who are legally married should strongly consider establishing an estate plan for tax purposes. Heterosexual, married individuals can leave an unlimited amount of assets to his or her spouse without incurring any federal or state estate taxes. However, if an individual leaves assets to a non-spouse individual and those assets are over either the federal or state estate tax exemption (in 2011, the federal estate tax exemption will most likely be up to $1 million and state estate tax exemptions vary by state), that gift will incur estate taxes.
If a same-sex couple is legally married and lives in a state that sanctions same-sex marriages, that couple can leave an unlimited amount to one another without incurring state estate taxes. Despite the fact that the couple is legally married in that state, since the federal government does not recognize gay marriage, if the gift is over the federal exemption limit, it will incur federal estate taxes. The New York Times article, The High Price of Being a Gay Couple, outlines the tax implications for estates of gay couples that are over the exemption limits. With a strategic estate plan, that same couple could avoid or at least minimize any potential taxes.
By the same token, if the same-sex couple was legally married in one state (for example, again Iowa or Massachusetts) but lived in another state that did not recognize the marriage (for example, Minnesota or Rhode Island), when one of the spouses passes away leaving an estate that is worth more than the federal and state tax exemption limit, that estate would incur both federal and state estate taxes since in this example both the federal and state governments do not recognize the same-sex marriage. Again, careful planning can reduce that couple’s estate tax liability.
Financial Security
Unmarried couples, and in some cases married gay couples, should also consider the importance of estate planning to ensure they can provide financial security and protection to their surviving loved ones since often times these couples are not afforded the same benefits that heterosexual married couples receive, such as spousal social security benefits or pension benefits.
Appointing Agents
The same considerations should be taken into account for appointing people to speak on your behalf in times of incapacity or incompetence for financial, legal and medical matters. The people you want to speak on your behalf may not have a legal right to do so if you do not have the proper documentation in place. The people who know you the best and know your wishes may not have a legal right to vocalize those wishes unless you grant them the authority to do so.
Domestic Partner Registries
Some cities have domestic partner registries, which allow unmarried couples to register to be afforded certain benefits typically offered solely to married couples. In Minnesota, there are several suburban cities that are considering the registry (Star Tribune Domestic Partner Registries Begin to Attract Attention). Individuals should consult with their local city clerk to determine if his or her city offers such registration. However, in some cities that have these registries, being registered as a domestic partner does not entitle you to certain legal rights (for example, see Denver, Colorado’s City Clerk’s website). Having a health care directive and power of attorney in place can ensure the correct people are able to act and speak on your behalf at times when you cannot.
The above information should not be construed as an endorsement or recommendation of marriage as it is a completely an individual and personal choice whether or not to do so. However, if you are in a committed relationship and marriage is not to happen, either because of personal choice or the law, there is greater care, consideration and need for an estate plan.
