Gay Marriage Ruling: 5 Estate Planning Steps for Clients
The Supreme Court's decision to overturn state bans on same-sex marriage will have major estate planning impacts for your clients. The result in Obergefell v. Hodges invalidates state laws banning same-sex marriage, and same-sex spouses will now enjoy all of the state-level tax and other spousal benefits that couples enjoy.
Here are some key changes advisors should understand about this landmark decision:
Healthcare decisions. Previously, in states where same-sex partnerships weren't recognized, same-sex partners could be left out of decisions concerning an incapacitated spouse's care. Now, same-sex spouses' decisions will have priority in those matters. They'll also have a say in the event that guardianship or conservatorship proceedings become necessary.
Intestacy. Similarly, if a will or trust is contested after a spouse's death, the same-sex partner will now have a voice in the proceedings. And if a spouse dies without a valid will or trustintestacy, in legal termsa same-sex spouse will now have automatic spousal inheritance rights.
Survivorship rights. Since 2013, spouses have universally enjoyed survivorship rights when it comes to federal-level benefits and programs, like Social Security. With the Obergefell decision, they now gain access to survivorship rights at the state level, like state pensions or other retirement benefits. They'll also now enjoy any other spousal contract right where the contract was construed under the laws of a state that did not recognize the marriage previously.
State taxes. Additionally, from a tax standpoint, same-sex couples now have the ability to file both state and federal taxes jointly as a married couple. They will also enjoy any state-level tax breaksincluding on estate taxesoffered to couples.
Divorce. As well as being able to marry, same-sex spouses will also be able to divorce and to participate in adoption or child custody proceedings now.
However, it's still vital for same-sex couples to proactively plan. All couples, same-sex or otherwise, should take the time to set up wills and/or trusts and clearly set forth their wishes in enforceable legal documents. Make sure to take the following steps with your same-sex couple clients:
1. Set up durable powers of attorney: This ensures wishes concerning medical care are honored during periods of incapacity.
2. Establish trusts: Trusts preserve privacy and help families avoid the delay and expense of guardianship or probate proceedings during incapacity and after death.
3. Plan for gifts: If a couple wants to leave money to a charity or religious institution, those wishes should be built into their estate plan.
4. Build in flexibility: Good estate plans include mechanisms that allow for flexibility in administering those trusts to account for changes in the law or changes in beneficiary circumstances after death. This is done through carefully tailored choice of law, decanting, or trust protector provisions.
5. Design business transitions: If one or both spouses operate a business or professional practice, make sure plans are in place to allow for the orderly operation or transition of the company in the event of incapacity or death.
Obergefell likely represents the last word on same-sex marriage, elevating these relationships to equal stature with other marriages. While same-sex married couples are now entitled to equal protection under the laws of every state, the efficacy of those laws in ensuring dignity in disability and death, and orderly and structured distribution of property after death is very limited for all couples.
Families should always take control of their planning and leave as little to state law interpretation as possible. That is best done through careful planning with experienced professionals who can intelligently guide the family through the process.
Matthew T. McClintock, J.D., is the vice president of education for WealthCounsel, a nationwide association of trust & estate attorneys. McClintock leads the organization's continuing education efforts, helping attorneys better understand estate planning techniques and strategies.