It Doesn't Have to Happen to You - LGBT Estate Planning

The You Tube video "It Could Happen to You" set out above has gone viral with well over two million views.  The video shows exactly what can happen when same sex couples fail to take proper steps to ensure that family bigotry and/or hostile cultural settings do not lead to horrific and cold hearted results.  Here in Virginia - a decidedly anti-gay state - there are some things same-sex couples can and should do to provide for some of the legal protection automatically conferred on heterosexual married couples.  The story set forth in the video does not have to happen.  One can even specify who will plan one's funeral and make all related decisions.  Unfortunately, far too many LGBT couples fail to take these relatively simple steps to avoid the adverse and/or unexpected effects of current Virginia law, in particular the “Marshall-Newman Amendment” to the Virginia Constitution enacted in November, 2006.

NECESSARY DOCUMENTS AND STEPS:  There are some basic documents and steps that every unmarried couple and every same-sex couple in a committed relationship should have prepared and duly signed.  These documents will stand up under the Marshall Newman Amendment and include:

            Will - A will specifies how you wish your property to be distributed upon your death. In a will, you designate the person you wish to handle your estate -- your partner or another individual. Without one, your partner receives absolutely nothing.  Pursuant to § 64.1-46 of the Virginia Code, anyone who is over the age of 18 years and not mentally incompetent may make a will and thereby dispose of any estate to which he shall be entitled, at his death, including any estate, right or interest to which the testator may be entitled at his death, notwithstanding he may become so entitled subsequently to the execution of the will. Inasmuch as neither § 64.1-46 or other provisions of the Virginia Code restrict permitted devisees to spouses or blood relatives, both unmarried heterosexual couples and same-sex couples may make wills leaving assets to their partners.

            Trust - A properly established and funded trust avoids publicly probating assets owned by the trust at the time of one’s death and is more difficult to challenge in court than a will.  In addition, a trust can provide beneficiaries with creditor protection in certain circumstances.  Properly structured, a trust can provide support for one’s surviving partner for the remainder of his or her life, with the remainder to pass to other relatives and designated beneficiaries, bypassing potential taxes associated with the surviving partner's estate.  Chapter 4, Title 26 of the Virginia Code governing the appointment, qualification, resignation, removal of fiduciaries, including trustees, contains no provision restricting permitted trustees or trust beneficiaries to spouses or blood relatives.   Therefore, both unmarried heterosexual couples and same-sex couples may create trusts naming their partners as beneficiaries in a manner that does not purport “to bestow the privileges or obligations of marriage.”

            * Health Care Power of Attorney - A health care or medical power of attorney allows one’s partner regardless of gender to make medical decisions on your behalf in the event you are not able to do so due to incompetency or other incapacity.   Properly drafted, a health care power of attorney can also ensure hospital visitation rights to the designated attorney-in-fact

            * Advanced Medical Directive - § 54.1-2983 of the Virginia Code provides that any mentally competent adult may, at any time, make a written advance directive (i) authorizing the providing, withholding or withdrawal of life-prolonging procedures in the event such person should have a terminal condition, and (ii) appointing an agent to make health care decisions for the declarant under the circumstances stated in the advance directive if the declarant should be determined to be incapable of making an informed decision.  Advance medical directives must be signed by the declarant in the presence of two subscribing witnesses who cannot be the spouse or blood relatives of the declarant. 

            There is no statutory restriction that one’s agent must be a spouse or blood relative.  Rather, §54.1-2982 of the Virginia Code provides that under any such advance medical directive, an agent means “an adult appointed by the declarant under an advance directive, executed or made in accordance with the provisions of § 54.1-2983, to make health care decisions for him. . ." Such authority includes visitation rights, provided the advance directive makes express provisions for visitation.  Therefore, properly drafted and executed advanced medical directives by a same-sex couple should not be deemed to “bestow a privileges or obligations of marriage.”

* Legislation passed in 2007 authorized a central statewide repository where these documents can be filed and accessed by healthcare providers.  The system is still not yet operational.

            General/Business Power of Attorney - This form of power of attorney allows a member of either an unmarried couple or a same-sex couple to authorize their partner to handle their financial affairs in the event of disability or unavailability.

Child Care Power of Attorney for Non-Adopted Children - Another common difficulty is that non-adoptive, non-birth parents are NOT considered to be the parent or guardian of the children of the birth parent in the relationship.  Thus, they are legally “strangers” and have no right to be involved in health care, educational, or other decisions for their partner’s children.  In this context, it is critical that the birth parent execute a child care power of attorney in favor of their partner so that the non-birth parent partner authorized to communicate with make decisions with school personnel, doctors, dentists and other providers.

            Title on Deeds and Accounts - How title to property is held can effect both future  ownership and tax liability. Joint tenancy with rights of survivorship, for example, will ensure that the surviving partner will have full ownership upon the death of the deceased partner and avoid ownership disputes with surviving blood relatives.  However, it can create certain negative estate tax treatment depending on the size of one’s taxable estate. Historically, deeds creating a tenancy by the entirety have been reserved for husband and wife couples.   In light of the Virginia Affirmation of Marriage Act cited above, such a deed conveying title to a same-sex couple even though validly married in another state such as Massachusetts would not be effective in Virginia.

BENEFICIARY DESIGNATIONS: Most securities and retirement accounts provide for the designation of beneficiaries.  These should be reviewed periodically to ensure that desired goals are achieved and also should include the designation of contingent beneficiaries to ensure the desired parties are named in the event of the death of the principal beneficiary. 

LIFE INSURANCE: Properly utilized, life insurance can provide funding for payment of estate taxes, outstanding mortgages, charitable trusts, education of minors, and other functions.

SPECIAL NEEDS TRUST: If a loved one is disabled, you will want to consider establishing a Special Needs Trust for that individual. A Special Needs Trust can be created by the donor during his or her life or it can be created by one’s Last Will and Testament.  The purpose of such a trust is to enable the donor to provide for the continuing care of a disabled partner or child so that the loved one will have access to the trust assets for purposes other than those provided by public benefits programs. Of equal importance, the beneficiary will not lose eligibility for needs-based benefits, such as Supplemental Security Income ("SSI"), Medicaid, or low-income housing.

NOTE: This article contains a general discussion of estate planning matters which vary greatly in asset structuring needs and potential tax liability based on the particular facts and circumstances of individuals and the nature of their assets.  Therefore, it should not be relied upon as a substitute for individualized legal advice addressing one’s particular situation.