What same-sex couples need to know about inheritance

Estate planning to help surviving same-sex partners

• Gay marriage is the law of the land in the U.S., but if you are unmarried, you don’t have the same legal standing, especially when it comes to inheritance.

• To protect your partner after your death, consult with a lawyer to start the basics of estate planning: Write a will and, possibly, set up a living trust.

• You can also set up your finances to help your surviving partner avoid probate as much as possible with joint ownership and transfer-on-death accounts.

• Give your partner power of attorney for health care and finances.

• Talk to an attorney about any possible tax strategies, since unmarried couples are not exempt from estate taxes, as married surviving spouses are.

The Supreme Court's 2015 ruling in Obergefell v. Hodges extended marriage rights to same-sex couples across the United States, strengthening their legal standing in a number of ways—and making inheritance from one spouse to another much easier.

However, the same can’t be said for unmarried gay couples. Even if a same-sex couple has been together for decades, the law doesn’t grant them the same rights as if they were married—especially if family members are not accepting of the fact that they’re gay.

Family members may challenge the will, or if your partner died without a will, judges will distribute inheritances based on what are known as intestacy laws. These laws, which vary by state, determine who gets what based on family relationships—and same-sex partnerships are not included.

In order to make sure your wishes are carried out after you pass away and that your partner receives the assets that you’d like them to inherit, it’s important to plan ahead and get an estate plan in order sooner rather than later.

Taking a few actions now will ensure that the financial future you have planned for is secure, no matter what happens.

Create a will or living trust

Because a will is a legal document that specifies your wishes, even if any family members try to contest it after your death or the death of your partner, it won’t be easy.

Creating a will or living trust is the most essential part of an estate plan and can be easily written up. These documents will allow you to list who will inherit your assets, have guardianship of your children, if you have any, as well as appoint an executor.

Without a will stating these things, depending on the state in which you and your partner live, who will inherit your assets will be based on intestate succession. In other words, the surviving partner may end up with nothing and they may even lose their guardianship rights to their own children.

Take actions to make probate easier

Not only can probate be a long process, but it is expensive and can complicate things that could have been wrapped up simply with the right documents. And if family members contest any part of the will, any assets in the probate process can be tied up for months or even years.

In addition to creating a living trust, two other documents to prepare to protect your partner are: transfer-on-death accounts and joint ownership on assets that belong to both partners. Joint ownership is most common with real estate and bank accounts.

Accounts that have been prepared for transfer-on-death accounts—in which funds are transferred to a named beneficiary after the account holder's death—are exempt from the probate process, no matter how much money is in them.

In addition, retirement accounts, registration for any cars you have, securities registration, and deeds for real estate can all be set up so that they’re transferable to the person you have chosen as the beneficiary upon your death.

Joint ownership, too, will avoid probate because whatever assets you share with your partner will pass to the surviving partner.

Different states have different laws and terminology in regard to joint ownership, so you want to make sure you fill out the appropriate documents so probate can be skipped and your assets go to the intended person: your partner. 

Set up a health care directive

We never know what’s going to happen to us and there may come a time that either you or your partner won’t be able to speak for yourselves due to a medical issue.

It’s in these cases that you want to make sure your partner is given the authority to make decisions for you on your behalf and vice versa.

In order to do this, you need to have a living will and power of attorney for health care documents that specify your partner, and no one else, has the final say in regard to your health care.

In some states, the health care directive has both the living will and POA together in one document, while in other states they are two separate documents. No matter what the format is in your state, make sure both parts are completed.

Complete paperwork for finances

In addition to a power of attorney for health care, you want to fill out the necessary documents that give your partner financial power of attorney.

This will be important not only when you (or your partner) pass away, but if you’re unable to make decisions for yourself due to a medical emergency.

Not only do you want a power of attorney for your finances document, but you also want to be aware of the estate tax situation in the state you live in.

For married couples, gay or heterosexual, when one spouse passes away all the assets left to them are exempt from federal estate taxes. With unmarried couples, this is not the case.

Whether it’s state or federal estate taxes, you definitely want to talk to a lawyer about what you need to set up so your partner is protected from paying taxes on things that married couples don’t have to worry about.

Prepare a list of your final wishes

Just because you and your partner may already know what you want for your final arrangements that doesn’t mean family members may not try to infringe upon those wishes.

Although final arrangement documents aren’t legally binding, they’re still taken seriously and can help make sure everything goes as planned. Be sure to sign and date them, as you would with any other document, and consider including a witness’ signature too.

While this isn’t to say that family members who never accepted your relationship with your partner or were unaware of it won’t try to interfere with what they want for final arrangements, the documents still hold some weight and, ideally, will be respected.

You may be eligible for free bereavement support. Empathy can help with everything from funeral planning to estate administration, with step-by-step guidance and real-time expert support. Many people get free premium access to Empathy as a benefit with their life insurance claim. We partner with New York Life, Guardian Life Insurance Company, Bestow, Lemonade, and other leading carriers. When you make your life insurance claim, talk to your representative about whether Empathy is a benefit they offer.