The US Supreme Court handed down an historic ruling on June 26, 2015, requiring all states to recognize same sex marriages. Same sex couples who are legally married and those who will be should be aware of the benefits they may now take advantage of that were once denied.
Most of these have to do with tax advantages in estate planning that were limited to heterosexual married couples. These include the following:
Rollover of IRAs
For legally married couples who each have an IRA, you can roll over the funds in your deceased spouse’s IRA into your own without having to take the required distributions. You can wait until you are 70 ½ before taking out funds or liquidating the account to a taxable account.
401Ks and other Qualified Retirement Accounts
Your spouse is the beneficiary of your 401K. To get someone else named as beneficiary, your legally married spouse needs to give consent.
Gifting to Avoid Estate Taxes
To avoid onerous estate taxes, an individual is allowed to make gifts to any one individual of no more than $14,000. Because you are married, you can now combine your annual exemptions and and give $28,000 to a single individual.
Previously, only married couples could pass any amount of their assets to their spouse without incurring a gift tax. Same sex couples had been given single tax payer status before their marriages were recognized.
For LGBT Couples Not Legally Married
If you are not married or do not wish to be, here is some estate planning advice for LGBT couples:
- Draft a will. A will is the only way to specify who should be the guardian . Name your partner as personal representative.
- Set up a living trust. There are various types of trusts that you can establish including spendthrift, special needs, or charitable to name a few. You can place your house and other valuable assets into trust and continue to control it during your lifetime. When you pass, the trust assets get distributed to your beneficiaries without without any need for a probate process.
- Buy life insurance. Proceeds from a life insurance policy will go to your named beneficiary without the need for probate.
- Create a durable power of attorney. You can grant your partner power of attorney to make important and material decisions regarding your finances and health if you become mentally incompetent or incapacitated. Your partner with POA can visit you in your hospital room as well and consult with your doctors. You should check with your bank or medical facility if the form you used is acceptable and its language adequate, or if you need to use their own form.
- Execute an advance medical directive. You should have this in place even if your partner is given power of attorney. You will want to ensure that your wishes if you end up in an end-of-life or permanent vegetative state situation are known.
All couples, heterosexual or LGBT, may now enjoy the benefits afforded by the laws, state or federal, affecting inheritance, taxes, health or financial issues. For estate planning advice if you live in the Denver area, contact attorney Dan McKenzie who has been advising LGBT couples on estate planning issues for years and can review or outline for you an estate plan tailored to your unique needs.