Same-Sex Couples May Need to Review Estate Plans

Obergefell v. Hodges, the historic Supreme Court decision requiring all states to recognize legally valid same-sex marriages, will certainly have rippled effects in the estate planning world. Why? Because couples in the LGBT community need to now review their estate plans to determine whether the language used to transfer assets to their significant other is still legally accurate and valid.

Many states, including Virginia, did not recognize same-sex marriage prior to the Obergefell decision, so many LGBT couples opted not to put together estate plans where their significant other received assets for fear that they may not be legally valid upon their death. In addition, even if LGBT couples decided to put together an estate plan, they may have done so with under a civil union or domestic partnership agreements. These agreements offered some protections and benefits, but not at the same level as a married couple.

For example, married couples are not subject to gift taxes when a transfer is made between spouses. Also, married couples are not subject to the estate tax at the death of one of the spouses. Additionally, portability laws allow a surviving spouse to make additional gifts without being subject to the gift tax for any unused portion of the deceased spouse’s applicable exclusion amount, which for 2015 is $5.43 million. The amount is adjusted annually for inflation, according to an article published by Michael Smith and Richard Barid.

Civil union and domestic partnership agreements did not offer such generous tax savings, which probably meant that many LGBT couples limited a bequest to a significant other to the applicable exclusion amount to prevent their significant other from having to pay estate taxes (currently at a whopping 40 percent) on any amount above d $5.43 million.

With the Supreme Court’s decision , LGBT estate plans can now be amended to bequeath the entire estate to a surviving spouse. Also, same-sex couples were limited to the individual annual exclusion amount of $14,000 for both gifts and generational-skipping transfers without being taxed or dipping into their applicable exclusion amount. That has now changed and LGBT couples can actually combine their gifts or transfers for a total $28,000 a year per recipient, according to the aforementioned article by Smith and Barid.

Time to Speak to an Estate Planning Attorney in Your Area

Now that same-sex marriages are nationally recognized, there is no longer a concern that a will, trust, or other estate planning instrument passing assets to a same-sex spouse could be contested by the decedent’s biological family members.

Take the time to sit down with an experienced estate planning attorney so they can walk you through the planning process. In addition to a Last Will and Testament, your estate planner may recommend a joint marital trust, a health care directive and durable power of attorney. Contact an estate planning attorney in your area sooner rather than later. Waiting to put a plan together only increases the risk that your significant other will face unnecessary stress and difficulties upon your passage when trying to settle your estate.