Estate Planning for Lesbian, Gay,
Bisexual and Transgender People
Recent court decisions and an IRS decision have given LGBT people the same rights as straight couples when it comes to planning their estates.
IRS announced on Aug. 29, 2013 that same-sex couples who were legally married in jurisdictions that recognized their marriages would be treated as married for all IRS purposes. This decision eliminated the unequal treatment previously used for same-sex couples, who had to file their income tax returns as individuals, often at a higher tax rate.
The IRS decision also made it clear that same-sex couples would have the same benefits concerning estate planning as straight couples. This includes the use of an A-B trust to take advantage of a deceased partner's marital deduction, and unlimited gifts to a spouse. Portability now also applies to estates of LGBT people.
The changes in the law also allow same-sex couples to characterize their assets as community property and take advantage of the step-up in basis allowed when one of the partners dies.
For those who do not plan their estates, intestate succession will determine the disposition of their estates, but the difference is that the surviving partner will have the same rights as a straight spouse.
1. Situations can arise in which a partner believes that he or she is the parent of a couple's child, but the couple has never gone through adoption proceedings for the partner.
2. Gifts to a class of people, such as "to my grandchildren", can likewise be invalid if adoption proceedings were required but have not taken place.
3. Outdated beneficiary designations for health care documents, IRAs, and 401Ks, can also create major problems.