Same-Sex Marriage and Your Estate Plan

by Anthony M. Brown, Esq. – June 28, 2011

Estate Planning for same-sex couples in New York just got a lot more interesting.  While marriage equality is certainly welcome in the Empire State, there are now conflicting Federal and State guidelines that must be understood and incorporated into your overall estate plan.  Conflicts between these two governing interests must be resolved as best as possible and your estate plan must be a portable as possible.

A comprehensive estate plan must now properly define a marital relationship in a manner that will be respected by, yet not conflict with, the laws of the federal government and with the laws of states which do not recognize the NY marriage. 

It is also critical to understand exactly what rights and benefits your NY marriage will provide.  From intestate succession to priority status in a probate proceeding, marriage carries powerful protections for a surviving spouse and peace of mind for couples seeking to protect their families.

Other benefits of marriage include:

• The protection that divorce provides upon the dissolution of a marriage
• The ability to file joint state tax returns
• Exemption from State estate taxes for a surviving spouse
• Medical decision making and hospital visitation
• Public employee pension and health insurance benefits
• The ability to sue for wrongful death of a spouse and receive worker’s compensation for a spouse who is injured on the job

Getting married is an important and extremely personal choice.  You may feel compelled to marry because, “grow up, get married, have kids,” was the mantra you learned.  It is your choice.  Before marrying, you should also consider that gay-unfriendly states or countries might not recognize your marriage.  You may also become ineligible for means-based government assistance should the assets of your spouse be added to the eligibility calculation.   The immigration status of a spouse may be red-flagged due to a same-sex marriage.  Finally, many states and countries that allow single individuals to adopt, do not allow adoption for same-sex couples.  

Whether you decide to take advantage of New York’s new found marriage equality or not, if you are partnered, you must be proactive in your estate plan.  If you have any questions at all, please feel free to contact me at Brown@AWCLawyer.com.

Elements of a Nontraditional Estate Plan – Pt. 3

Providing for unforeseen circumstances is the goal of the nontraditional estate planner.  One of those circumstances is a court ordered guardianship appointment.  This situation is best illustrated by the case of Sharon Kowalski.  Kowalski had been living with her partner Karen Thompson when she suffered severe injuries in an automobile accident. Thompson cross-petitioned against Kowalski’s father for guardianship.  Thompson assumed that she would be able to visit her partner so she consented to the father’s guardianship.  The Kowalskis then, with the court’s approval, terminated all visitation rights to Thompson.  Eight years and many court rulings later, Thompson was reinstated as her partner’s guardian.

 A Nomination of Guardianship for Personal Needs and/or Property Management or Conservatorship grants standing to a same-sex partner to seek guardianship status in court. Most states authorize the nomination of a guardian by statute.  While guardianship is not automatic, a person whose same-sex partner, once their standing is established through nomination by documentation, may then demonstrate to the court why he or she is the appropriate guardian by presenting evidence such as common residence, financial and emotional interdependence and a mutually reciprocal estate plan.

 Perhaps the most emotionally memorable cases I personally have been involved with was that of Rosa and Vanessa.  Both partners in this 20-year relationship had previously been married to men and had families of their own.  They discovered their sexuality when they met and courageously bonded their relationship in the face of ridicule and misunderstanding from their own children.  Vanessa suffered a severe stroke ten years prior to Rosa seeking my assistance and had been in a convalescent home for that entire time.  As Vanessa steadily recovered and was preparing to finally go home with Rosa, Vanessa’s children arrived from Florida threatening to take Vanessa back with them.  I drafted a Nomination of Guardian Document and Medical Power of Attorney for Vanessa, naming Rosa as her agent.  Just these actions made Vanessa’s children back off from their threat and return to Florida leaving Vanessa in Rosa’s care, as she had been for the previous 10 years.

 Durable Powers of Attorney (DPA) for business management provide partners with the security of knowing that one partner can pay bills, make transfers, correspond with state and federal agencies and buy and sell property, among other enumerated powers, if the other is unable to for any reason.  “Durable” refers to the fact that the designation remains in effect even if the signatory is completely incapacitated.  Private entities, such as banks and brokerage houses, may require their own versions of the DPA, however, many private entities will accept a notarized DPA if it meets their execution requirements.

 The final document of a basic estate plan is an Affidavit of Burial or Cremation, which authorizes a surviving partner to have access to the final remains and to make the final arrangements for their deceased partner. Allowing same-sex couples to make funeral decisions for one another has been an acceptable legislative olive branch to the LGBT community.  However, as with homophobic hospital staff, homophobic funeral directors may look for a reason to deny a surviving partner access.  Affidavits of Burial or Cremation provide the surviving partner the legal authority to circumvent personal prejudices.

Elements of a Nontraditional Estate Plan – Pt. 2

Medical visitation and decision-making authorizations are an essential part of any nontraditional estate plan.  Priority Visitation Directives (PVD), or Visitation Authorizations, instruct a health care provider or facility who you authorize to visit you if you are hospitalized.  An effective PVD prioritizes the designee above any family members that may seek access to a hospitalized partner.  In reality, hospital personnel in States or cities that are hostile to gay and lesbian families may simply refuse access to a hospitalized partner; however, without some form of documentation, an unrelated person has little or no chance of seeing their loved one in a hospital situation.

  A dangerous precedent was set in 2009 with the case of Langbehn v. Jackson Memorial Hospital.  While on vacation in Florida with her partner and their three children, Lisa Pond collapsed and was taken to a Miami hospital.  Her partner, Janice Langbehn, was informed that she was in an, “antigay city and state,” by hospital personnel and that she would receive no information regarding her partner’s condition, even though she presented the hospital with a medical power of attorney form authorizing Langbehn to make medical decisions for Pond.  The implications of this decision reach beyond that LGBT community.  The court ruled that Jackson Memorial Hospital had no obligation to allow their patients visitors, regardless of their relationship to the patient, essentially putting the rights of any visitor in the hands of whomever is on call at the hospital that night.  The court also ruled that the hospital was under no obligation to allow anyone into their trauma unit, a place where visitation is critical.

 Most hospitals, however, will honor Medical Powers of Attorney designating same-sex individuals the right to make medical decisions for their hospitalized partner if they are in compliance with state drafting and execution standards.  One critical consideration is providing one’s partner with access to their protected health information (PHI) in order to make an informed decision regarding their health care.  The Health Insurance Privacy and Accountability Act (HIPAA) of 1996 prevents the dissemination of protected health information to unauthorized individuals.  It is crucial that any Medical Power of Attorney contain a HIPAA waiver in order for the designee to have full access to their partner’s medical file.

 In order to protect a partner from family protests about end of life care, every estate plan must contain a Living Will, which defines which treatments the signatory wants for themselves in an end of life situation.  Thanks to the Supreme Court, a competent person may refuse life saving treatment if they so designate.  Without such a designation, or Living Will, the decision to provide or withhold life saving treatment falls on next of kin, if there is no individual authorized to make medical decision via a Medical Power of Attorney.  Same-sex couples must provide additional powers to their partners regarding end of life decision-making.  One answer to this problem lies in a specific authorization, contained in partner A’s Medical Power of Attorney, allowing partner B to interpret and override partner A’s end of life directive.  This effectively provides for the situation where partner A has an end of life condition which would otherwise warrant the withholding of life saving treatment under their Living Will, yet a situation exists where partner B knows of a stem cell study or drug trial, for example, directly associated with Partner A’s end of life condition.  Partner B may then authorize, under the terms of the Medical Power of Attorney, the continuation of life saving treatment until the results of that study or trial are available.

Part 3 of this series will be posted in two weeks.  To get email notification, please subscribe to this blog.

Elements of a Nontraditional Estate Plan – Pt. 1

 Ignorance is not an option for same-sex couples looking to protect their relationships and their families.  The State laws of intestacy and the federal tax protections afforded to surviving spouses do not apply to unmarried same-sex couples.  Depending on a marriage performed in a State which recognizes same-sex marriage equality to provide even the most basic protections of an estate plan can prove disastrous at worst, and unreliable at best.

 A comprehensive estate plan is comprised of multiple documents covering various legal issues, from health care to power of attorney authorizations.  However, the most effective estate plan must also take into consideration, property ownership, and its attendant tax complications, non-probate asset designations and wealth transfer strategies, both during and after a client’s life.  To begin to understand asset transfer after death, you must start with the Last Will and Testament.

While most people have an understanding of the importance of preparing for the worst by drafting and executing a Last Will and Testament, the majority of Americans do not have a Will.  A recent study by Thompson Reuters showed that 57.6% of participating individuals did not have a Will.   While the foundation of any estate plan, the Last Will and Testament makes up only a minor part of the type of comprehensive plan needed to protect the rights of a same-sex couple. 

 An understanding of exactly what assets are protected by a Will is necessary before beginning the drafting process.  Wills cover “probate” assets, or assets that are governed by the relevant probate process in order to pass to the designated beneficiary.  These assets include real and tangible property, bank accounts and securities held solely in the decedent’s name.  For same-sex surviving partners, probate assets are often the cause of dismay, as they may be vulnerable to challenge in probate court by necessary parties to the probate action.  In New York, necessary parties include intestate family members, or those who would have received from the estate had the decedent failed to draft a Will, or those individuals whose interests are adversely affected by the Will, for instance, someone whose interest was terminated by the drafting of a codicil to an existing Will.

  The predetermined distribution of non-probate assets provides a same-sex couple with a modicum of security knowing that these asset transfers are not subject to challenge by homophobic or otherwise unsupportive intestate distributees.  Examples of non-probate assets include assets or real property owned as Joint Tenants With Right of Survivorship (JTWROS), real property owned as Tenants by the Entirety (TBE), assets held in a Revocable Trust and assets held in the following designated beneficiary accounts: In Trust For (ITF) accounts, Transfer on Death (TOD) accounts, Life Insurance policies, Totten Trust accounts, IRAs, 401(k)s, annuities and Health Savings accounts.

Part 2 of this series will be posted in two weeks.  To get email notification, please subscribe to this blog.

Joint Ownership of Real Property For Unmarried Couples

Purchasing property is one of the most financially bonding experiences for a couple.  Some of the most common struggles same-sex couples experience involve the potential tax consequences of joint ownership of real property.  Committed gay and lesbian couples’ choices are limited in the ways that they can purchase real property together.  Most gay couples may choose between two of the three available ownership mechanisms, the third, Tenancy by the Entirety (TBE) is reserved for legally married couples.  The greatest advantage of this form of ownership is its ability to shield the property from the creditors or either spouse.

 The desire to secure a surviving partner’s ownership rights after death often conflict with a significant ownership assumption made by the IRS.  This assumption pertains to property owned by unmarried couples as Joint Tenants with Right of Survivorship (JTWROS).  This method of real property ownership effectively transforms jointly held real property into a nonprobate asset, ensuring the surviving partner’s ownership and saving him or her the necessity of depending on a probate court’s ruling in order to transfer the property upon the death of a joint tenant.  For couples of modest means, this is the logical way to ensure that their partner will not have their ownership rights questioned by homophobic family members. 

 The disadvantages to owning property JTWROS may be mitigated to an extent by careful record keeping, but it is critical that any couple looking to purchase property must understand the specifics of this type of ownership.  The most common issue confronting joint owners is how best to document uneven contributions by individual partners.  Because many joint tenancies are defined by the common law notion of the four unities of property ownership (time, title, possession and interest), equal ownership, therefore equal contribution to expenses associated with jointly held property is assumed for the purposes of equitable distribution of property upon the dissolution of the relationship.

Domestic Partnership Agreements are strongly advised for couples owning property with unequal contribution to expenses. 

Real estate attorneys unfamiliar with same-sex couples and the tax issues associated with the purchase of joint property, in most cases, fail to advise their gay and lesbian clients about a significant section of the United States Tax code that allows the IRS to attribute 100% of the value of the property to the first deceased partner.  This provision necessitates specific and ongoing record keeping of individual partner contribution to jointly held property.  Not only must these records indicate individual contribution, they must also prove the source of the individual income.

One major tax issue that may occur on the formation of the joint tenancy if initial ownership interest does not accurately reflect individual contribution is that of the taxable gift.  Because each party has a unilateral right to sever the joint tenancy, equal ownership from the onset is presumed.  If one party contributes more to the property’s purchase than the annual gift exclusion, a taxable gift may occur.

Non-Traditional Families Seminar

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