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Estate Planning for Same-Sex Couples After Obergefell
Many areas of the law are left unanswered by Supreme Court's decision in Obergefell , but the fundamental question of whether same-sex individuals can marry has now been answered. There have traditionally been many obstacles LGBT individuals face when it comes to estate planning and taxes, but those obstacles have been cleared a great deal by the Obergefell decision. Married same-sex couples now have access to new tools concerning estate and tax planning that will help them benefit in the same ways that only heterosexual marriages have until now.
There are ramifications in the area of taxes on estates and inheritance at the time of a same-sex spouse's death. For instance, there is now portability, which is the right of a surviving spouse to add the unused estate tax exclusion amount (currently at $5.43 million) of the deceased spouse to his or her own unused exclusion amount under federal law. Under Kentucky law, the inheritance tax (a tax on the right of a beneficiary to receive property from a deceased person) depends on the relationship of the person receiving the property and the deceased. Class A beneficiaries, which include spouses, do not have to pay an inheritance tax, and Kentucky's Department of Revenue has already issued guidance that includes same-sex spouses as recognized Class A beneficiaries.
The Obergefell holding will change how the estates of married same-sex couples are treated in Kentucky at death. For instance, married couples are entitled to a form of estate known as tenancy by the entireties. Only married couples may hold property in this form of estate, but it includes a joint right of survivorship, payable on death. Furthermore, creditors of one spouse cannot attach the property unless both spouses are creditors, so these protections are powerful (the creditors of the spouse can attach the debtor's interest in the property, however). For example, if Bob and John get married and buy a house together, John will automatically receive the house upon the death of Bob - it does not become part of the estate, it does not pass through probate. All newly-recognized marriages should consider re-titling property to take advantages of this form of estate.
Another tool the Obergefell decision provides same-sex married couples is that the surviving spouse may now renounce the will and take the surviving spouse's statutory share of the estate, which is the same as the intestate share that the decedent's spouse would receive. If the couple does not have a recognized marriage, however, there is no intestate share. The only way to ensure that an estate passes in the intended manner is through an estate plan.
A complete estate plan will include a Power of Attorney for both financial and health care purposes. These documents are necessary for a spouse to make financial or health related decisions for the other spouse in the event he or she becomes incapacitated. The fact of being a spouse alone will not give anyone Power of Attorney over his or her spouse's affairs. That document must be executed no matter what the relationship is.
In addition, everyone should complete a health care directive, also known as a "living will." It protects one's right to refuse unwanted medical treatment or to request wanted treatment in the event of incapacity. If a significant other or spouse does not have a good relation with his or her spouse's blood relatives, this document is vital to ensuring that the person you want to be making your decisions can do that.
There are other protections and benefits to marriage as well, as same-sex spouses are now able to serve as the personal representative of the spouse's estate or can be appointed as a guardian or conservator if the spouse becomes incapacitated. Special rules regarding IRAs, qualified retirement plans, Medicare and Social Security all apply to married couples, so those with newly-recognized marriages or those considering marriage should contact a professional to understand the impact that marriage will have on their estate, taxes and other financial benefits. The attorneys of McBrayer can assist same-sex couples with estate planning, tax planning, family law and other areas where the law is changing as a result of the Obergefell decision. Contact us today!
Click here to listen to the McBrayer podcast of the Obergefell decision.
Terri R. Stallard is a Member of McBrayer, McGinnis, Leslie & Kirkland, PLLC and practices from the Lexington and Louisville offices. Ms. Stallard concentrates her practice in the areas of estate planning, trust and estate administration, and charitable planning. She is licensed to practice law in Kentucky, Georgia, and Tennessee, and in the U.S. Tax Court. She can be reached at firstname.lastname@example.org or (859) 231-8780, ext. 258.
This article is intended as a summary of federal and state law and does not constitute legal advice.