by Michael Ettinger, Esq.
Same sex couples face unique estate planning issues since, in many jurisdictions, their unions are not legally protected. New York, for example, does not permit same sex marriages although the state does recognize same sex marriages performed elsewhere (i.e., Massachusetts, Connecticut, Vermont, Iowa and D.C.).
Living trusts are often the estate planning vehicle of choice for the GLBT community for a number of reasons.
1. They provide for your partner to be able to handle your assets should you become disabled. Powers of attorney and health care proxies/living wills are ancillary documents that also help insure that your partner will be in charge of all legal , financial and medical decision-making in the event of disability, free of interference from other family members.
2. Will planning has fallen into disfavor because (a) wills are significantly easier to challenge than trusts (b) a notice of the proceeding must be given to your closest legal heirs, providing them with an opportunity to object (c) the will is a public record, eliminating privacy, and (d) the legal process may be time consuming possibly delaying the surviving party’s access to needed funds.
3. Simply putting your partner’s name on your assets, or joint tenancy, seems to be a simple solution to many, until they learn of the pitfalls. First, for appreciated assets, such as stocks and real estate, there are tax disadvantages to receiving assets from a joint tenant. While inheriting from a will or trust at death eliminates taxable capital gains for the survivor, joint tenancy only eliminates one-half of those capital gains since you are only “inheriting” one-half of the property. Secondly, you may be exposed to the debts and liabilities of your partner. Thirdly, you lose control over where the assets go after your surviving partner dies. Perhaps you may want to provide for your partner for life, but state where the unused assets will go after he or she passes. Finally, once you make your assets joint with your partner, you may have more difficulty in getting those assets back in the event of a break up in the relationship.
4. Funeral and burial arrangements are often contentious matters. New York law allows you to designate the person you wish to have control of the arrangements as well as providing in writing the specific type of funeral and burial that you may wish.
5. On the other side of the coin, the inability of same sex couples to marry in New York does offer a couple of distinct Medicaid planning advantages in later years. Whereas for married couples the combined assets of the couple are available for the care of the ill spouse, such is obviously not the case for unmarried couples. So your assets are legally protected from your partner’s cost of care. Further, while married couples who wish to plan ahead five years be setting up a Medicaid Asset Protection Trust (MAPT) may not name each other as trustee, such is not the case for unmarried couples. So if you wish to protect your home and life savings from nursing home costs, and cannot obtain long-term care insurance for any reason, you may each establish MAPT’s for each other and need not go outside the relationship to put someone else in charge in order to protect your assets.
In our experience, crafting an estate plan for a same sex couple, that is thought through addressing all the potential social, legal, financial, health and tax issues, is a loving act that provides peace of mind knowing your choices will be legally protected and honored.