28 May Trust and estate planning strategies for LGBTQ couples
by Mindy Neira, CFP ®, ChSNC®, Modera Wealth Management
Marriage equality helped to level the playing field for same-sex marriages. Even with this huge leap forward, there remains many legal inconsistencies from state to state for those who identify as lesbian, gay, bisexual, transgender, or queer (LGBTQ).
This creates an important need for LGBTQ financial planning.
And while the barrier to marriage has been lifted, several years later 42% of same-sex households remain unmarried. This compares to opposite-sex couples, where fewer than 12% are unmarried partners.
Now factor in that many Americans pass away without a will, including those who are LGBTQ, the need for trust and estate planning becomes an even larger point of consideration within LGBTQ planning.
The decision to marry your partner is personal choice, regardless of how you identify or the law. This decision, though, does affect your financial life especially if you choose not to get married. The good news is that you can take control of some financial matters on your own by implementing some of the following strategies.
LGBTQ Couples Can Protect Their Financial Interests
In your relationship, you may already be commingling your financial affairs. You may even eventually entrust your partner in all things financial. But this commitment level also adds potential complexity when it comes to issues like future estate planning.
For example, if you are not married, there are risks that your savings, property, or care of children could inadvertently pass to someone other than your partner. This may be even more of a risk for those who identify as LGBTQ (for example, unfavorable outcomes with your blood relatives).
To ensure your intentions are followed, here are some estate planning tools and strategies to help protect yourself and your partner’s interests:
· Wills: You should each draft a last will and testament. In a will, you can designate your partner as the beneficiary of your financial assets or guardian and caregiver for your child, if desired. Provide rationales in the document — especially for non-blood related beneficiaries — to make your decisions harder to contest in court. This may be especially important if your partner is not your child’s legal parent, the child is from a prior opposite-sex relationship, and/or if the child is adopted. Keep in mind, however, that a will must go through probate court and therefore becomes a public document when you pass away. Anyone who views this has the ability to contest it in court.
· Revocable Living Trusts: Revocable living trusts can accomplish many of the same objectives as a will while also providing greater protection, control, and privacy. These trusts allow you to transfer ownership of your assets to the trust itself, with named beneficiaries in the event of your death. While you are alive, you remain in control of the assets held in the trust as the trustee. Another major benefit of a revocable living trust is that it avoids the probate process entirely, and your wishes and bequests remain private to outsiders. For some LGBTQ couples, retaining privacy in financial affairs may be paramount.
Another plus is that certain people around you, such as disagreeable relatives, are less likely to successfully challenge a revocable living trust compared with a will. Why? A revocable living trust is by definition a trust you put into place and maintain while you are alive. As a result, factors such as asset ownership transfer become much harder to challenge in court. Lastly, you have the option to retain the assets in the trust for your beneficiaries after you pass away; that is, the assets do not have to be immediately distributed from the trust, as is the case with a will.
The two additional considerations to using a revocable living trusts versus a will are 1) the trust is more expensive to set up, and 2) the trust cannot be used to appoint guardianship for children. Additional planning would be required to supplement your trust.
· “Pour-over” Wills: This special type of will can be a useful tool in conjunction with a revocable living trust. A pour-over will can automatically allocate, or “pour over”, any remaining assets not yet held in trust into your revocable living trust upon your death. Keep in mind that pour-over wills are usually still subject to probate. But it can help ensure that you capture any remaining assets into the trust after your death so these too will be managed according to your wishes.
· Irrevocable Living Trusts: An irrevocable living trust can also be a strategic piece of an overall estate plan. Unlike a revocable living trust, an irrevocable trust also protects assets in your estate for any named beneficiary, such as your partner. For example, you could shield such assets from your partner’s creditors or restrict access by potential future partners or spouses. An irrevocable living trust also removes those assets held in the trust from yours and your partner’s estates. This can prevent additional taxation of these assets (even after both of you have passed away).
However, these potentially significant benefits come with important considerations: The trust is irrevocable — once created, it is extremely difficult, if not impossible, to modify. It is therefore critical that you do planning and are confident in your decision. You should consult your financial advisor and attorney about the choices you make before you commit to an irrevocable trust.
· Health Care Directives: LGBTQ couples may also want to consider drafting legal health care directives when it comes to potential medical emergencies. If you are not married, the default designee may be a blood relative who you may or may not want in control of decisions on your health. If you are married, the following directives ensures that the health care provider will follow your wishes regardless of their personal beliefs about your relationship.
A living will provides specific guidance on the healthcare you may or may not want, should you become medically incapacitated. A healthcare power of attorney designates a decision maker in charge of your healthcare in the event you are unable to make decisions yourself. With both of these legal health care directives in place, you can protect your medical wishes.
· Financial Power of Attorney: To assist in managing your financial affairs if you are unable, a power of attorney is needed. Regardless of your marital status, financial institutions will not grant your partner access to accounts where they are not the owner. This includes personal bank accounts, investment accounts, and retirement accounts. You can establish these powers as “springing” to be used upon confirmation by medical professionals that you are incapacitated, or as “durable” to be valid upon execution of the document. Especially if you are not in a position to make your own financial decisions, financial power of attorney allows your partner, or whomever you wish, to legally handle your financial affairs. It’s worth noting that the financial institutions may also require their own form to accompany the legal power of attorney document that you establish.
Modera Can Help LGBTQ Couples Plan Ahead
Our team at Modera Wealth Management includes LGBTQ financial advisors and allies serving the needs of the LGBTQ community. We can help you assess your unique situation and determine a plan of action to protect your financial interests, both now and in the future. To learn more, please contact Mindy Neira.
Mindy Neira, CFP ®, ChSNC® (she/her/hers) is a CERTIFIED FINANCIAL PLANNER® and Chartered Special Needs Consultant professional with Modera Wealth Management, LLC in Westwood, NJ. She may be reached at or (201) 781-4910.
Modera Wealth Management., LLC (“Modera”) is an SEC-registered investment advisor with places of business in Massachusetts, New Jersey, Pennsylvania, North Carolina, Georgia and Florida. Modera may only transact business in those states in which it is registered or qualifies for an exemption or exclusion from registration requirements. SEC registration does not imply any level of skill or training. For information pertaining to our registration status, fees and services, please contact us or refer to the Investment Adviser Public Disclosure web site (www.adviserinfo.sec.gov) to obtain a copy of our disclosure statement set forth in Form ADV Part 2A. Please read the disclosure statement carefully before you invest or send money.
This article is limited to the dissemination of general information about Modera’s investment advisory and financial planning services that is not suitable for everyone. Nothing herein should be interpreted or construed as investment advice nor as legal, tax or accounting advice nor as personalized financial planning, tax planning or wealth management advice. For legal, tax and accounting-related matters, we recommend you seek the advice of a qualified attorney or accountant. This article is not a substitute for personalized investment or financial planning from Modera. There is no guarantee that the views and opinions expressed herein will come to pass, and the information herein should not be considered a solicitation to engage in a particular investment or financial planning strategy. The statements and opinions expressed in this article are subject to change without notice based on changes in the law and other conditions.
Investing in the markets involves gains and losses and may not be suitable for all investors. Information herein is subject to change without notice and should not be considered a solicitation to buy or sell any security or to engage in a particular investment or financial planning strategy. Individual client asset allocations and investment strategies differ based on varying degrees of diversification and other factors. Diversification does not guarantee a profit or guarantee against a loss.
This is a sponsored section. The advisors have paid a fee to post their commentary here. Their sponsorship doesn’t influence any editorial decisions we make at NJMoneyHelp.com, or give them more or less exposure in our stories. Their posting does not constitute an endorsement by NJMoneyHelp.com.