Estate Planning Basics for Same-Sex Couples

Jaime Zimmerman explains the basics and benefits of a well-designed estate plan.

Estate planning is often associated with tax strategies for the wealthy, but having a comprehensive estate plan serves a number of other purposes, including passing ownership of assets, providing guardians for children and specifying healthcare directives. The benefits of a good plan are magnified when these issues are applied to same-sex couples. While Wisconsin’s domestic partnership law provides for better protection for same-sex couples who register as domestic partners, it does not necessarily assure your assets will be distributed in the way you desire upon your death. Therefore, having a well-designed estate plan is an important consideration for all individuals, regardless of age or level of wealth, but particularly for same-sex couples.

Following are some planning basics to consider. As always, it’s important to consult with an attorney or financial advisor to determine which planning instruments are appropriate for your personal situation.

Last Will and Testament
A will is intended primarily to direct how your individual assets are distributed at death, but a will also allows you to nominate someone as the legal Guardian of your minor children. Without a will, your assets are distributed according to state law, and the courts will decide who will be Guardian of minor children. For couples not registered under Wisconsin’s domestic partnership law, only blood relatives will be recognized as your heirs under state intestacy laws. A will must be administered under the supervision of your county probate court, although smaller estates can typically be administered in an expedited process.

Revocable Trust
Assets held in a revocable trust pass directly to your named beneficiaries without requiring court supervision. Avoiding probate administration reduces the time and expense of a probate proceeding and keeps the details of your estate out of the public eye. By naming yourself as trustee of your revocable trust, you maintain control of the assets during your lifetime. Revocable trusts can be an effective alternative to a basic will for any level of wealth or type of family structure.

Advanced Health Care Directives
Advanced health care directives include a Living Will and a Power of Attorney for Health Care (POAHC). A Living Will allows you to make written instructions to physicians and family members about what life-sustaining treatments you would, or would not, want to receive if you become unable to make such decisions for yourself. A POAHC ensures that medical providers will seek guidance from your domestic partner in the event you are hospitalized and unable to make your own medical decisions. Without a properly executed POAHC, your partner will generally not be consulted, and may even be denied visitation rights. While Wisconsin’s domestic partnership law gives a partner some visitation rights and access to medical records, having a POAHC removes any questions or conflicts during events that are already quite stressful.

Durable Power of Attorney for Financial Matters
A Durable Power of Attorney for Financial Matters (DPAFM) allows you to designate another person to act as your agent in your financial and legal matters if you become incapacitated. Because a DPAFM authorizes a broad range of powers, you should only name someone who is responsible and trusted as your agent. A DPAFM can be in effect immediately or only upon incapacity.

Gifting and Joint Accounts
As of January 1, 2009, individuals can gift up to $13,000 to any number of beneficiaries each calendar year without creating a gift-tax issue. Gifts above the annual exclusion amount may still be made without incurring gift tax because individuals have a cumulative $1 million lifetime exemption from federal gift tax. However, the use of some or all of the lifetime exemption results in a dollar-for-dollar reduction to the $3.5 million estate tax exemption that is available for transfers occurring at death. At this point, gifts between same-sex partners are still subject to the $13,000 gift limit, and rules allowing for unlimited gifting between married couples have not been extended to same-sex couples.
Owning assets jointly generally will not result in an immediate gift to your co-owner; however, you should be aware that adding another person to your account as a joint-owner gives that person withdrawal rights over the entire account.

Living Together Agreement
You might also consider a cohabitation or domestic partnership agreement, which is similar to a prenuptial agreement. An agreement may be used to determine your respective rights in the event of a separation, and it can also establish property rights at death.

– – – – – – – – – – – – – –

Estate planning is about more than just taxes. The goal is to protect your assets during your lifetime and distribute them according to your wishes when you die.

Editor’s Note: This article was written in 2009 before it was legal for Same Sex Couples to marry in Wisconsin. There are still some really great ideas in this article for estate planning, so we chose to publish this online in its entirety. Though we won one battle, our rights can still be infringed upon in other ways. Better safe than sorry.