Key Life Planning Topics

Since same-sex relationships are not respected by the federal government or in many states and local jurisdictions, being strategic about the life planning decisions you make is particularly important to protect yourself and your loved ones. Your life planning goals may vary depending on whether you’re single or you have a partner or spouse, children or others who depend on you for support. Below are a few goals to consider — and some strategies you should discuss with your advisors to ensure that the plan you have in place is most likely to meet your goals.

*Please remember that this information is not legal advice. If you require legal advice for a particular situation, you should consult an attorney.



Strategies to consider:

Whether you’re single or one half of a couple...

  • Who will make medical decisions for you if become incapacitated?
  • Who will make financial decisions for you if you’re incapacitated?
  • What would happen if you were to die?

If you’re part of a couple...

  • How do you hold/own your assets?
  • How you are planning for retirement?
  • If your spouse/partner is dependent on you for income...

If you have children and something were to happen to you...

  • Whom would you want to care for your children?
  • How would your children be supported and who will make those decisions?



Whether you’re single or one half of a couple you should consider...

Who will make medical decisions for you if become incapacitated?

    While this is not a subject most people want to think about, it’s an important one for lesbians, gay men, bisexuals and transgender people to consider. In many cases, LGBT people may have moved far from home or have strained relationships with their parents and/or siblings. It’s important that you work with an attorney or advisors to create what often is referred to as a Health Care Power of Attorney that details who should make decisions regarding your health care in the event you can’t. Ideally the person you identify should be local to where you live and know you well. Without such a document, health care professionals (or relatives you may or may not have a close relationship with) could end up making long- or short-term decisions for you that do not reflect your priorities.

    You should also consider what might happen to you if you develop a long-term disability — and take steps to secure disability insurance to help pay expenses for you or your loved ones if an accident or illness prevents you from working.

Who will make financial decisions for you if you’re incapacitated?

    This is another important decision to make and one that should be identified in writing through a Power of Attorney for financial decisions. This may or may not be the same person you designate to make decisions about your health care. It needs to be someone you trust to manage your finances and protect your long-term interests without conflicting self-interests. Think about it: If something were to happen to you and you couldn’t pay your bills, who would you want to take care of that? Then talk to an attorney or advisor about putting that name in writing. You should also check with the financial institutions where you have accounts about whether they require execution of their own forms to allow others to access your accounts.

What would happen if you were to die?

Whom do you want to receive your assets?

    If you die without a will, the courts will determine who will receive your assets. In most instances, unless you have taken certain steps, your property will go to a legally recognized spouse (or civil union partner or registered domestic partner, if your state respects these) first, then children, then parents, then siblings, and (unless covered above) not to a same-sex partner or a partner’s children or to any other important people in your life or to any organizations you may want to support. Having a Will or Living Trust is very important in order to provide that your property is distributed in the way you choose — and not in the way the state would choose for you — upon your death.

How large will your estate be?

    You should know that retirement assets, life insurance proceeds and everything you own in your name (or with someone else) will be considered part of your total estate and can therefore incur estate taxes. Depending on the state you live in, your estate may have to pay a state estate tax — and, in 2007, if your estate is over $2,000,000 your estate will owe federal taxes on any amount over $2,000,000 (this value is currently expected to increase to $10,000,000 in 2010 but then revert back to $1,000,000 in 2011 unless Congress changes the law in the interim). Federal estates taxes can be high, reaching up to 48 percent of the amount over the nontaxable cap and may affect how much your estate beneficiaries will receive. Given the size of the taxes your estate might owe, it is worthwhile discussing strategies with your financial advisor or attorney, such as providing provisions for nonprofit organizations like Lambda Legal, which could help offset the effect of taxes on your beneficiaries.

Whom do you want making decisions about your funeral?

    It is a good idea for you to identify either through your will or a funeral arrangement document the person who will make decisions about where you want to be buried and what type of funeral you’d like to have. If you already have these plans in place, it will make decisions upon your death much easier for those closest to you. Many people also indicate in their will that their estate should pay for the costs of the funeral, thereby ensuring that your loved ones are not burdened by paying for your funeral or burial costs directly.

If you’re part of a couple...

    Your local jurisdiction or state may or may not recognize your relationship through domestic partnership, civil union or marriage — but, even if you have local or state recognition, the federal government presently does not respect same-sex relationships, especially when it comes to tax matters and therefore requires couples in such relationships to file as “single” individuals. Because a taxpayer may face legal liability from filing a tax return that the taxpayer knows is false or misleading, married same-sex couples face a potential dilemma in filing their federal tax returns. Some tax professionals advise that each member of a married same-sex couple file their tax return singly but seriously consider disclosing in some way that they are married, such as by including a cover letter that the taxpayer is married to a same-sex partner and is filing as single in light of the federal Defense of Marriage Act.

If you are married to or in a civil union or state-registered domestic partnership, please discuss these issues with a tax specialist.

How do you hold/own your assets?

    Many couples who have been together for a period of time choose to merge some of their assets or begin to purchase property together. Since the federal government does not respect same-sex relationships for tax purposes, it is important for you and your partner or spouse to think about how you combine your assets — and to do it strategically.

    Adding a partner or a spouse of the same sex to your checking, savings or other account could be considered by the federal government to be a gift to that person for tax purposes — not only at the time you add your partner’s or spouse’s name to the account, but also each time you deposit your income or assets into the shared account. As of 2007, every individual can give $12,000 each year tax free to another person. Any amount over $12,000 must be reported to the IRS on your annual tax return and may incur gift taxes for you if you have made gifts above the lifetime gift exclusion of $1,000,000. Even if you have not reached that exclusion amount, gifts will reduce the amount of the lifetime gift exclusion available to you. In addition, if you add your partner or a spouse of the same-sex to the deed of any property — the federal government may consider half the value of the property a gift to them for gift tax purposes.

    You should also consider how you and your partner/spouse purchase property. Your options may differ from state to state. In addition to considering whether you should purchase the property as what in most states is referred to as Tenants in Common (where each of your wills would direct who receives their portion of the home upon their death) or Joint Tenants with rights of survivorship (where the surviving partner or spouse of the owner automatically receives the other half of the property — although it should be noted that there could still be estate tax due on the portion of the property that was in the deceased partner’s or spouse’s name), couples should keep track of how much they each contribute to the purchase and payments toward your home. Ideally each of you would contribute half the cost of the property from the time of purchase through to the full payment of the mortgage (or any improvements). This will help ensure that if one of you dies only half the value of the property would be considered part of the deceased partner’s or spouse’s estate — if you cannot prove that you contributed half (or more) of the value of the property then the IRS may consider the full value of the property as part of your deceased partner’s or spouse’s estate — possibly incurring additional estate taxes. These issues, as well as whether transfers in ownership may trigger reassessment of real estate for property tax purposes, also should be discussed with an attorney and/or tax advisor.

    Many financial advisors suggest that you each maintain separate checking and savings accounts and create a shared account that you each contribute to equally. Additional challenges can occur if one of you has more assets than the other. In this situation, it is advisable for you to discuss with your financial advisors or attorney how you and your partner or spouse acquire property or share assets, in order to minimize issues around income, estate, gift and property taxes.

How you are planning for retirement?

    With life expectancies increasing, everyone should be planning for that time when they can retire and ensure that they have enough assets to provide for their golden years. Social Security is one plan, but in many cases it may not provide enough income to maintain the standard of living you and your partner or spouse have become accustomed to. In addition, for same-sex couples, if one of you died earlier than expected, the surviving partner or spouse may not be eligible to receive any of the deceased partner’s or spouse’s Social Security income. Given this situation, it is important that you and your partner or spouse work with your financial advisors to prepare for all contingencies so that your retirement plans will be fully funded for both of you.

    One retirement strategy you might consider with your advisors is creating a charitable gift annuity with a nonprofit organization that can provide income for both you and your partner or spouse during your lifetime and then allow the residual asset after both of your deaths to be used by the nonprofit to fund their programs. Read more about Lambda Legal’s Charitable Gift Annuity program.

If your spouse/partner is dependent on you for income...

    What will happen if you become incapacitated?

    In the situation where you or your partner or spouse are dependent on each other for income to maintain your standard of living, it is very important that you discuss strategies with your financial advisors to help protect both of you should one of you become incapacitated. Disability insurance is one strategy to consider, but there may be other options available to you.

What would happen if you were to die?

    You should consider options that will help provide income for your partner or spouse should you die unexpectedly. In addition to providing for your partner in your will or estate, you may also want to consider purchasing life insurance (including whether a life insurance trust is an appropriate option for you), establishing a trust to benefit your partner or spouse, or establishing a charitable gift annuity during your lifetime or through your estate that can benefit your partner or spouse for the rest of their life.

If you have children and something were to happen to you...

Who would you want to care for your children?

    When you have children, it is especially important that you have a plan in place to care for them if something happens to you. In states where this is possible, many same-sex couples either will adopt children together or secure a second-parent adoption to make sure that their partner or spouse will be the person who will care for the children should one person die or become incapacitated. Again, if your state allows them, you may want to consider guardianship agreements that indicate whom you want to care for your children if something happens to you (although even with indications in your will or a guardianship agreement, courts in some jurisdictions may disregard your wishes and decide for themselves what they believe to be in the best interest of the child). Please discuss these issues with your attorney to determine the best course of action for your family.

How will your children be supported and who will make those decisions?

    You should also consider whether the person you want caring for your children also will manage (or act as trustee for) any assets you want to leave to your children. In many cases this might be the same person, but you can consider whether you would prefer someone else managing the financial assets. You should discuss different options with your attorney or other advisors.