Non-traditional families take many forms – from a grandmother raising a grandchild via an informal custodial arrangement to a same-sex couple living together in a state that does not recognize same-sex marriage or civil unions. In the past, same-sex couples were unable to take advantage of certain benefits provided to married couples. In the wake of the Supreme Court’s ruling in Windsor v. United States on the constitutionality of the Defense of Marriage Act (DOMA), however, same-sex couples married under state law are now entitled to the same federal estate and gift tax benefits previously available only to opposite-sex couples.
It is important to keep in mind that the DOMA ruling only affects federal benefits and only applies to couples married under state law. In the case of Windsor v. United States, the primary benefit examined was that of estate tax protections for married couples of the same sex. A U.S. citizen does not have to pay any estate taxes on any real estate or assets received from his or her spouse, either as a gift during life or as a bequest after death. In contrast, the surviving partner in a same-sex relationship that isn’t recognized under state law may have to pay significant state and federal estate taxes after receiving a bequest from his or her partner.
Sadly, estate taxes are not the only benefit not afforded to same sex couples in many jurisdictions. As it stands, in states where same-sex unions are not recognized, same-sex couples are not granted the same privileges to which traditional families are entitled with respect to inheritance laws, state gift and estate taxes, guardianship of minor children, and health care proxy designations.
Despite the DOMA ruling, married same sex-couples who move to another state where same-sex marriage is not recognized can still be denied significant marital rights such as: ability to own property by tenancy-by-the-entirety, homestead protection, elective share rights (entitlement to receive a minimum inheritance from spouse) as well as spousal retirement and government benefits.
An estate planning attorney can implement various strategies to safeguard nontraditional families in matters including:
- Protecting ownership of the family home
- Protecting custody of the family’s minor children
- Protecting the surviving partner’s right to manage the finances of the family’s minor children in the event of the other partner’s death
- Protecting family members’ rights to make medical decisions for their partners and minor children
- Protecting family members’ rights to make financial decisions in the event one partner becomes incapacitated
- Ensuring that state probate laws do not override the family’s wishes regarding inheritance
- Correctly designating beneficiaries on life insurance and other policies
- Minimizing the impact of estate taxes and income taxes on the surviving partner
- Planning for and minimizing will contests by family members unhappy with the decisions and bequests made in your will and other estate planning documents
- Burial instructions, or granting the right over burial decisions to the surviving partner over other blood relatives
Given the complexity of laws affecting same-sex couples, it’s important that non-traditional families carefully consider their situation and available options based on consultations with an estate planning attorney familiar with such issues. At the conclusion of a successful estate planning process, you and your family will be armed with the necessary knowledge and legal documents to ensure that you will be in control of family inheritances and vital matters impacting your family.