Estate planning is an important consideration for all couples. However, for LGBTQ+ couples (or former couples), it may be more important than they realize to review their circumstances and see whether they have an estate plan in New York that accurately reflects their wishes.
In 2015, the U.S. Supreme Court ruled that same-sex couples may exercise the fundamental right to marry in all states and have their marriage recognized by other states. This case also invalidated state laws that excluded same-sex couples from civil marriage on the same terms and conditions as opposite-sex couples.
Before this ruling, LGBTQ+ couples could provide for their partner through wills or insurance policies, but often not to the extent they would have been able to if their partner was a legal spouse. This is because many state and federal laws give preference to biological relatives and descendants over an unmarried partner or significant other.
After this ruling, many estate planning options that were not previously available to LGBTQ+ couples have become a possibility well worth exploring.
Tax Benefits: Marital Exemption and Portability
One of the benefits of being legally married is that under U.S. Federal Estate and Gift Tax laws, a person may transfer an unrestricted amount of assets to their spouse at any time, including at their death, tax-free (assuming they are a U.S. citizen).
This estate preservation tool was unavailable to LGBTQ+ couples until same-sex marriage became legal. As a result, each partner had to use up their own lifetime federal gift and estate tax exemptions before they could transfer assets to their significant other.
These exemptions still apply if a couple is not married and may be a good reason to formalize a partnership through marriage. In 2024, if an unmarried couple wishes to gift one another assets, they would be limited to:
- An annual gifting limit of $18,000 per recipient; and
- The lifetime federal gift tax exclusion for U.S. citizens of $13.61 million per recipient.
However, upon the marriage of two individuals, any assets left to a U.S. citizen spouse is entitled to the unlimited marital deduction.
Another tax benefit of being legally married is that the surviving U.S. citizen LGBTQ+ spouse may also elect portability of their deceased spouse’s unused federal estate and gift exclusion amount for their benefit. This can be a critical tax-saving device where the surviving spouse has an estate value that exceeds the federal exclusion amount.
Social Security Benefits
LGBTQ+ couples may also wish to consider getting married to reap potential Social Security benefits. The Social Security Administration (SSA) now recognizes all marriages in all states, as well as some civil unions and domestic partnerships. As a result, the SSA will use this to determine whether a person is entitled to Social Security benefits, Medicare, survivor benefits, and more.
A person or their spouse may be entitled to benefits or a higher benefit amount based on their marital relationship. In addition, their children or stepchildren could also be entitled to benefits based on their relationship with you or your spouse.
Married LGBTQ+ partners may also now qualify for Social Security survivor benefits. For example, if you were married to a person who passed away, your marriage may qualify you for Social Security survivor benefits based on your partner’s work record. This is also true even if you could have been married at the time of your partner’s death if state laws hadn’t prevented you from doing so, or you would have been married longer if not for unconstitutional state laws that prevented you from marrying earlier.
Rolling Over Retirement Assets
Before the 2015 Supreme Court ruling, LGBTQ+ couples could not roll over assets from their retirement accounts to a surviving partner’s account. However, now all married couples have this ability.
A spouse beneficiary may roll over or transfer an inherited IRA from their deceased spouse into their own IRA for their benefit and use. Once the new IRA is established, the surviving spouse may also name the beneficiaries of the new account. However, non-spouse beneficiaries do not have this option. This may be another estate planning benefit that makes marriage a good choice.
Gift Splitting
Married LGBTQ+ spouses, can also take advantage of “gift splitting” to reduce the size of their taxable estate. What this means is that one spouse, with the consent of their spouse, can gift the annual gifting tax exemption amount ($18,000 x 2 in 2024) from their assets to a recipient and treat it as if each spouse contributed half the amount.
Allowing the combination of individual allowances permits many couples to use the gift tax exclusion in a way that works best for them. However, before you do so, it is best to consult with a tax professional to ensure gift splitting makes sense for you.
Children of LGBTQ+ Relationships
Many LGBTQ+ couples will be concerned about providing for their children upon their passing or cementing their parental rights over those of biological relatives especially where only one parent is a biological parent. In these instances, a single parent adoption is necessary so that the nonbiological parent will be recognized in all 50 states as their child’s parent. Once a single parent adoption is complete, all of the traditional estate planning options are open and are available to the couple when planning to provide for their children after death. In addition, concerns about who would be a child’s legal guardian upon the death of one parent should also be resolved.
If a couple is not married and considering marriage, there may be tax advantages to planning the adoption before the marriage. This tax benefit is referred to as the adoption tax credit. An LGBTQ+ couple considering this should consult with a tax professional before making any decisions.
Untangling Prior Relationships
A less frequently discussed issue that many LGBTQ+ individuals may face is the impact of their prior civil unions, domestic partnerships, or other relationships on their future estate plan. This is especially true for couples who are no longer together.
For example, a couple who moved to a state that first recognized same-sex domestic partnerships or unions but is no longer together may not realize that their prior partner could have a claim against their future estate. Some states that allowed the earliest unions ultimately upgraded these nonmarital unions to marriages after laws changed.
As a result, people who are no longer together may be legally married and not realize this. These unions would need to be undone in order to engage in proper estate planning that carries out your wishes.
You may have realized from reading this article that estate planning can be more complex for LGBTQ+ persons. Obtaining the counsel and advice of a qualified attorney can make a world of difference. Speak with an attorney at Pierro, Connor & Strauss who can help you with your estate plan.
Transgender Rights
In the past 12 months, more than 40 states have introduced more than 495 laws restricting health care access and other rights of transgender individuals. New York is a Trans Sanctuary State which means that the New York State Legislature has decreed that New York will remain a safe haven for all trans and non-binary individuals.
At PCS, we believe that every individual has a right to freedom of gender identity and expression. Included in your rights is the right to use your preferred name and gender in your estate documents and to determine your funeral wishes.
At PCS, we will respect your wishes in the drafting of your documents by using your preferred name and pronouns. If you require assistance in legally changing your name, we can also assist you in doing so by representing you in the required court proceeding or referring you to an organization that participates in a “Name Change Project” for non-binary or transgender individuals who cannot afford an attorney.
With respect to your funeral arrangements, in the absence of designating an individual to disposal of your remains in a legal document (authorized by NY law), your next of kin will have the ultimate authority over your remains. Regardless of whether or not you reside in New York, we will assist you in the preparation of a document entitled “Appointment of Agent to Control Disposition of Remains” so that your final wishes will be honored.
The attorneys of PCS will assist you in preparing your estate plan, respect your gender identity and expression and do our utmost to ensure that your wishes are upheld.
Further reading: see this article in which Caryn B. Keppler, Partner at Pierro, Connor & Strauss, contributed. 6 Tips to Help LGBTQ Partners to Plan Their Estate
