How Can Trusts Protect the LGBT Family?

We're very pleased to present the fourth in a series of articles about legal resources for same-sex couples.  They will be posted every Wednesday.  Our goal is to make sure that your gay or lesbian family is protected, both as you plan your gay wedding and continue your lives together.  The article below was written by Claire Bartholome, who in addition to being an estate planning attorney, is also a client of 14 Stories.

While basic Estate Planning, involving simple joint ownership, may solve some problems and avoid costly, time-consuming probate, Estate Planning for same-sex couples requires additional care.  Transfers of property to an opposite-sex spouse are fully exempted from both Federal estate and gift taxes, but since the IRS uses the Federal definition of marriage, this exemption does not apply to same-sex couples.  

Even if property is held jointly, the IRS includes the entire value of the property in the estate of the first owner to die unless the surviving owner can provide evidence of contribution to the acquisition of the property; this issue does not exist for married opposite-sex couples.   

While Trusts are commonly used in Estate Planning for opposite-sex couples, they may be particularly important tools for same-sex couples because: 
  • Trusts help to keep your wishes private because they avoid probate; they involve only the Trustee and beneficiaries, not the court.
  • Irrevocable Trusts can protect assets from creditors, but require relinquishing authority over assets.
  • Well-crafted Trusts are difficult for third-parties to contest and are therefore more resilient against attack by hostile family members.
While some tax-sensitive Trusts are ideally suited for couples with sizeable assets, many basic Trusts allow couples to avoid probate and protect the interests of their loved-ones.

  • For couples with significant assets, an Irrevocable Life Insurance Trust can shelter policy proceeds from estate taxes regardless of marital status.
  • A Testamentary Trust can support a surviving spouse without jeopardizing eligibility for important government benefits.
  • A Credit Shelter Trust applies the exemption from either State or Federal estate tax available to all persons regardless of marital status, minimizing the tax on passing on the combined assets at the death of the second spouse/partner.
  • A Grantor Retained Income Trust can transfer wealth at a discount from the wealthier to the less wealthy spouse or partner in same-sex couple relationships.
It is important, however, to consult with an attorney who is not only well-versed in the language of Trusts, but also sensitive to the needs of same-sex couples since some commonly-used Trust structures rely on the Federal definition of marriage and therefore will not work for same-sex couples.

    Claire Bartholome is an Attorney with the Law Office of William J. Brisk.  Her practice specializes in estate planning for same-sex couples in order to combat discrimination, legal challenges, and prejudice.  This information is not intended to provide legal advice.  For information as to how the laws apply to your specific situation, consult an attorney.

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