Estate planning is vital for anyone who wishes to protect his or her assets and loved ones, and it’s no different for LGBTQ+ couples and families.

In 2015 the U.S. Supreme Court ruled the federal government and all states are legally obligated to recognize same-sex marriages. All of the spousal rights (and obligations) conferred by law on marriages between a man and a woman now apply to marriages between couples of the same sex.

Prior to this, many LGBTQ+ couples engaged in what can only be described as “legal gymnastics” as they planned their estates in an effort to minimize taxes and prepare for potential challenges from family members. Now that there is marriage equality, LGBTQ+ couples can avail themselves of the planning techniques available to all married couples.

While there is no need to draft estate planning documents differently from heterosexual spouses, LGBTQ+ married couples should make a pointed effort to review their existing strategy to maximize federal and state estate, gift, and income tax planning. There are various situations where LGBTQ+ couples will benefit from having legal recognition of their marriages.

Federal and State Income Tax Filings

A LGBTQ+ married couple can file both federal and state income tax returns jointly. Whether this benefits the couple from a tax perspective will be determined by the respective incomes of those in the marriage. However, this ability to file jointly now recognizes the marriage relationship for all married couples.

Estate, Gift, and Inheritance Taxes

Under federal law there is an unlimited marital deduction for assets passing to a spouse, whether as a gift during lifetime or from the estate of a deceased spouse. Prior to the court’s ruling, LGBTQ+ couples were not able to claim this unlimited marital deduction.

A number of states impose inheritance and/or estate taxes on the estates of deceased residents. Assets passing to spouses are generally exempt from these taxes, which can be considerable. Prior to the court’s ruling, LGBTQ+ couples were obligated to pay the tax rate imposed on inheriting individuals who were unrelated to the decedent, even though many of the couples had been in committed relationships for decades. This is no longer the case.

Retirement Accounts

LGBTQ+ married couples can now take advantage of spousal survivorship rights for retirement plans such as an IRA, 401(k), and 403(b) account. Spousal rights must also be recognized with state pensions. Any requirements or benefits in an employer sponsored retirement plan for spouses must now apply to all spouses without regard of the gender of the spouses to the marriage.

Social Security Benefits

LGBTQ+ couples can now benefit from spousal rights under Social Security. It is always advisable to obtain professional guidance for these benefits, as the rules can be complex.

Charitable Giving

While charitable giving has not been directly impacted by the recognition of LGBTQ+ marriages, there are some benefits that are available to married couples not available to unmarried couples. These benefits are primarily in the planned giving area dealing with charitable gift annuities and charitable remainder trusts and should be investigated by all married couples before making a gift of this type.

Marriage equality should not be an excuse for LGBTQ+ couples to believe that estate planning is no longer necessary. To the contrary, all married couples should have an estate plan with written documents stating their wishes in the event of death or incapacity. 

The situations that such documents should address are:

  • Distribution of assets, especially if there is a desire to distribute assets other than provided in state intestacy statues.
  • Giving the authority to administer financial accounts and make medical and other “daily living” decisions in the event of an incapacity by power of attorney. 
  • Guardianship instructions should there be children in the family.

All newlyweds are well-advised to visit with an estate planning professional soon after returning from their honeymoon. For LGBTQ+ married couples, that planning is simplified now that the uncertainty surrounding the legal recognition of their marriages has been resolved.