If your company is in the process of adding estate planning services to its mix of employee benefits, it is important to ensure that all employees can take full advantage. This is often required of Diversity, Equity & Inclusion (DE&I) initiatives, but can be easier said than done when tricky default laws can impact an employees’ rights.
This is a guide that highlights some important issues that impact LGBTQIA+ employees and their families in the context of estate planning. We also provide some insights on how to address these issues and how to better support employees who may be impacted.
LGBTQIA+ estate planning: history & context
Members of the LGBTQIA+ community have had to fight to be given the same rights and opportunities granted to heterosexual individuals. Laws impacting these individuals have changed significantly in the past few years, but this does not mean that they enjoy the same protections and privileges that others take for granted.
For instance, same-sex marriage was legalized across the United States in 2015. Prior to this change, same-sex couples had to find creative ways to share and bequeath assets and property with their loved ones. This made estate planning quite the challenge. While the option of marriage has resolved many issues, LGBTQIA individuals still face unique estate planning challenges and considerations.
Some will even argue that estate planning is even more critical for same-sex couples and families, as default laws may not provide the same protections or desirable outcomes as they would for heterosexual couples and families.
Here, we discuss some of the estate planning laws, issues, and considerations for LGBTQIA+ individuals and employers to review today.
Issue #1: state laws vary widely
First and foremost, it must be known that the various laws impacting estate planning matters are typically governed by the state. The laws that determine how property is divided following a divorce in California are very different from those in Illinois, for instance.
Therefore, it would be wise to spend time understanding what rights and benefits LGBTQIA+ employees are entitled to under local state law.
Further, be sure to know the differences between rights granted to couples in same sex marriages, domestic partnerships, and civil unions. These can differ widely depending on your domicile. These laws will influence estate planning decisions.
#2: estate planning is especially critical for same-sex couples & families
When an individual passes away without an Estate Plan, in legal terms they have died “intestate.” Intestacy laws are used by default to determine how the deceased individual’s assets and property are passed along. These laws also determine who should be appointed Legal Guardian for the children of the deceased, if applicable.
Unfortunately, this means that individuals in unmarried, same-sex relationships may be left entirely stranded if their partner passes away intestate (without an Estate Plan.) Not all states recognize same-sex relationships or partnerships with regards to intestacy laws and next-of-kin rules. This means that the surviving partner may not hold any legal entitlement. Real property, financial assets, children, retirement savings, and any other assets and belongings of the deceased will be passed to their next-of-kin by blood.
According to a Gallup study, roughly 10 percent of LGBTQIA+ Americans were married to a spouse of the same sex in February 2022. While the exact proportion is unknown, this means that many same sex couples are unmarried and may not have any rights if one partner were to die without an Estate Plan.
Therefore, it can be argued that unmarried, same-sex couples are amongst those who will find it most critical to put an Estate Plan in place if they wish to leave anything to their loved one.
#3: resolving any prior “situationships” is important
On another note, LGBTQ individuals should be meticulous about resolving any legal arrangements they may have made with previous partners.
Before marriage was legalized, couples could enter an array of arrangements recognized in different states, such as domestic partnerships and civil unions. Some individuals may be shocked to learn that they are still in a legal “situationship” with a prior partner, even though they’ve gone their separate ways. For example, Washington state automatically converted all domestic partnerships to legal marriage in 2012.
Some couples may be legally married without even knowing it! Resolving any past “situationships” can help prevent future claims against one’s estate.
#4: naming guardians for minor children
LBGTQIA+ families are helping shape what the modern family looks like, including mixed families with children from a previous relationship, children that were adopted, and children that were born through surrogacy and donors. Just like any parent, it is critical to address who should care for minor or dependent children if anything were to happen.
Typically, when a parent who has minor children passes away, a judge appoints a guardian for the children. In the absence of an Estate Plan, the judge must use their discretion to appoint the best possible guardian. Intestacy laws largely haven’t been updated since the 1960’s and are modeled after the traditional family unit, meaning that biological parents are often given preference.
It is imperative for a parent to create an Estate Plan, which may include a Will and/or a Revocable Living Trust at minimum. These documents allow an individual to name any adult individual as Guardian to their minor child in the case of their death. This can be a spouse, domestic partner, or anyone else. This is a legally-binding document that allows families to decide who should be Guardian in the event of death, rather than leaving it up to a judge.
#5: contemplating marriage
Now that same-sex marriage is legal, life partners of the LGBTQIA+ community have an important estate planning decision to make: whether to get married (or not.)
When two partners legally marry, the surviving spouse is entitled to at least one third of the deceased partner’s estate. This is under federal marriage law, regardless of sexual orientation or gender identity. The exact portion to which the surviving spouse is entitled varies by state.
In contrast, unmarried partners have the freedom and discretion to bequeath whatever they wish to one another. The rest of the estate can be left to others, such as their children or family members, as they so choose. They might even choose to leave nothing to their partner.
Today, same sex partners have the option to get married. However, doing so does take away certain advantages that are available to unmarried partners. Those looking to legally wed may want to consider a prenuptial agreement if they wish to preserve specific assets.
Estate planning is highly individual
Estate planning is a wonderful benefit to offer to employees. It shows that you care about their long-term financial security and wish to support them in establishing a legacy. However, it’s a mistake to assume that all benefits can be taken advantage of in an equal manner by all employees. Some employees may be impacted by unique issues and challenges, thus requiring appropriate support and resources.
Our legal system was built upon the traditional, heterosexual family system. While nearly half of American families are now blended, and the proportion of individuals who self-identify as LGBTQIA+ continues to increase, laws that impact estate planning have not been updated and are not always inclusive of modern dynamics and nuances.
This means that members of the LGBTQIA+ community must be particularly meticulous when planning their estate. The default system caters to heterosexual individuals and families, while LGBTQIA+ individuals and families must be careful (or even creative at times) to ensure that they can achieve specific estate planning outcomes. While this guide reviewed several of these considerations, it is not comprehensive by any means. This is yet another social justice issue, and employers must be aware such that they can provide proper resources.
At Trust & Will, we’re here to help keep things simple. You can create a fully customizable, state-specific estate plan from the comfort of your own home in just 20 minutes. Take our free quiz to see where you should get started, or compare our different estate planning and settlement options today!
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