First, let’s acknowledge the Supreme Court decision that allows same sex couples the right to marry. “No longer may this liberty be denied….The court now holds that same-sex couples may exercise the fundamental right to marry.” Justice Anthony Kennedy. Other than the right to marry, how does this decision affect same sex couples?
Adoption. If you are not married, it is usually more difficult to adopt. Sponsoring a foreign spouse: including getting a green card. Hospitalization: The right for your partner to make medical decisions and visitation privileges. Taxes, Social Security, and Insurance benefits: You can now receive your deceased spouse’s Social Security benefits/take part in your spouse’s health care coverage/register your partner for disability benefits/recover wrongful death benefits in a lawsuit/receive unemployment benefits if partner has to relocate for employment/receive family leave benefits from work with birth or adoption of child. Then in the estate planning context involving inheritance, the surviving spouse gets everything you leave them tax free (estate taxes are paid, if at all, on the death of the second spouse). Spouses can make burial decisions for each other and lastly, a spouse can assert the spousal privilege not to testify against a spouse at trial.
Let’s take a look at the time line in the development of domestic partner and same sex marriage:
- September 1999, California Domestic Partner law enacted; with some limited rights
- February 2004 San Francisco begins to issue marriage licenses
- June 2004, California Supreme Court invalidates all same sex marriages issued in San Francisco
- January 2005 gives domestic partners same rights and responsibilities as spouses
- September 2005 California Legislators passes freedom to marry bill. Governor Schwarzenegger vetoes
- May 2008 California Supreme Court rules that ban on same-sex marriage unconstitutional
- November 2008, voters in California pass Prop 8, a ban on same-sex marriage
- May 2009 California Supreme Court states that notwithstanding Prop 8, marriages between June and November 2008 are valid
- June 2013 U.S. Supreme Court throws out challenge to a federal court that had declared that Prop 8 was unconstitutional
- June 2015 U.S. Supreme Court allows freedom to marry, striking down remaining 13 states that continued to discriminate
Now that same-sex couples have the right to marry, it should be remembered that getting married is like sitting in the emergency row of an airplane. You need to receive special warnings and be prepared for some real uncertainties, legally speaking. Now that marriage is available, knowledge about community property is essential. What is Community Property? Married or domestic partners have a joint ownership in all property acquired during marriage including joint ownership in salaries earned during marriage, joint ownership in retirement accounts earned while working and joint ownership in property paid for with community funds, regardless of how the assets are titled.
For example, if you bring a house into your marriage and make mortgage payments on your house from your salary, or make improvements on the house from your salary, your spouse is entitled to some Community Property interest in that house you brought into the marriage.
Some estate planning challenges for LGBT couples include figuring out what are the pre and post assets and debts before marriage and who owns what. If there are any written agreements, looking to see what was previously decided between the couple about who owns what. Resolving potential community property and premarital or preregistration issues is a must. If couple holds title as joint tenants prior to marriage but one party contributed the entire down payment, there may be uncertainty as to the extent to which reimbursement rules apply. We at East Bay Probate help our clients resolve these thorny co-ownership issues.
We often help our clients with prenuptial agreements. Each party needs their own attorney unless a second attorney is waived and said waiver must be in writing. A spousal support waiver is never valid if the party was unrepresented or if the provisions in the waiver are considered by the court to be unconscionable.
Sometimes our clients want to execute postnuptial agreements. The law imposes even tougher standards than with prenuptial agreements. Separate lawyers is a must, independent counsel in every instance.
Now, what if you don’t marry and just live together? You have options too. If you don’t marry, you can write a will, create a trust, or designate your partner as beneficiary on your IRA and other holdings, in order to pass assets at your death in the same way that spouses can (spouses can do so without written documentation, as the surviving spouse inherits everything if deceased spouse dies without a will or estate plan).
Other concerns for same-sex couples include if you have minor children, who should be their guardian should you both die at the same time. And if you both die at the same time, who will manage the property and money that your children will inherit and how old should the child be before the child receives all the property and money from his or her deceased parents. Also we at East Bay Probate help our same-sex couples figure out what to do about their property, business and money should they become mentally incapacitated. We discuss who they might want to make health care decisions should they become incapacitated and what advanced decisions do they want to make about options beforehand.
Let’s talk about wills. All you and your partner may need is a will. A will specifies who gets your property. The advantages of a will is that it is easy to create, can leave property to anyone, easy to change, you can nominate a guardian for your minor children. The disadvantage of a will is that your estate must go through probate. However, with a will you can give property to minor children and use the Uniform Transfers to Minor Act (UTMA) to name a custodian to manage your child’s inherited property up until the age of 25. You can decide who you want to be executor of your will, someone who can handle money and property. A will is good if you don’t have substantial property or are under 40 and are healthy.
Then there is estate planning beyond a will. If have substantial property you can use other devices to avoid probate: a Revocable Living Trust, a Pay on Death Accounts (POD), beneficiary designations on retirement accounts, joint tenancy and life insurance.
What about revocable living trusts (RLT)? This is created by a trust document. You have the right to change or revoke your RLT at any time before you death. Creating a RLT is a paper transaction with no real-world effects. You have full control of the property in the trust. Trust transactions are reported as part of your income tax return, no separate tax forms are required. However you must fund the RLT and you will need to transfer property into the trustee’s name. And there is no need to probate property in a RLT.
There are also pay on death (POD) accounts such as a bank account where you name one or more beneficiaries to receive all the money in the account. These monies go directly to beneficiary and do not get probated. Banks have standard forms for designating your account beneficiaries. For brokerage accounts or stocks, you can add transfer-on-death (TOD) designations to your brokerage accounts or individual securities. In that way, the money goes directly to your designated beneficiary upon your death. Again, no probate.
What about your cars? This is an easy one. There is what is called transfer-on-death vehicle registration. You can register with the DMV who will get your vehicle. The owner of vehicle puts the name of who will inherit the vehicle on the back of the pink slip/title. On the first line, the registered owner’s name is used (can only be done if there is one registered owner) and on the second line, you write TOD and then the beneficiaries name. Done!
Some couples use joint tenancy as an estate planning device. Joint tenancy means that the joint tenants have a shared ownership with right of survivorship. When one joint tenant dies, the property goes automatically to surviving joint tenant. Caution, a joint tenant can sell his or her share at any time, thus destroying the joint tenancy. Also, joint tenants must own equal shares.
We help our same-sex couples create Advanced Health Care Directives (AHCD) to ensure their rights, dignity and wishes are protected if they become incapacitated. If you do nothing, and you don’t have a spouse, a judge will appoint a conservator to make decisions for you. And AHCD avoids family members from having to make agonizing decisions about what medical treatment is to be provided if you cannot communicate your desires. You state your wishes about life support and other kinds of medical treatment you wish to receive. Do you want drugs to reduce pain even though they may prolong your life? You can appoint someone (your attorney-in-fact) who will make medical decisions for you if you are unable to make decisions yourself. For example, they can decide whether or not to administer/withhold medical treatments, pain medication, antibiotics, decide if you should undergo complex surgeries. They can hire/fire doctors and have access to your medical records.
Do you want a Do Not Resuscitate (DNR) order? You may want to outline what you want to be done with your body after you die and the types of services you desire. You can outline if any parts of your body can be donated for someone else to use. We also help our clients create a durable power of attorney for finances, for management of property and personal affairs (DPOA). In a DPOA, you name someone you trust to handle your finances if you become incapacitated. It can take effect immediately or can take effect after a doctor certifies you incapacitated. Your attorney-in-fact can pay everyday expenses, buy/sell real estate, collect benefits from Social Security, invest your money in stocks and bonds, operate a family business, represent you in court, manage your retirement accounts, etc.
A complete estate plan will determine who will get your property and how much. Maximize your family assets and protect your loved ones. It will ensure that your children will be well cared for if you and your spouse die before your children become adults. You can name their guardian and managers to look after their inheritance. We can help you prepare an Advanced Health Care Directive and a Durable Power of Attorney for Finances should you become incapacitated. Now that you are married, if you have an estate that is worth more than $10,860,000.00, you will need an estate plan to reduce estate taxes you may owe after your death.
Lastly, you and your spouse can create an estate plan that avoids probate all together. Congratulations on taking your first steps in planning your estate. It’s an invaluable gift to yourself, your spouse and to your loved ones. It will feel great to get it done.