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Information on this website is not legal advice or a substitute for legal advice. Every situation
is different. You should contact your attorney to obtain advice on your
particular issue or problem.
Use of and access to this Web site or
any of the e-mail links contained within the site does not create an
attorney-client relationship between Kate Fitz Gibbon and the user. Contacting Kate Fitz Gibbon by any means, including mail, phone, fax or email, does not create an attorney-client relationship. The opinions expressed at or through this site are the opinions of the individual author alone.
In general, laws are oriented towards a family consisting of a married couple and their children. Automatic legal protections for property rights, inheritance, and medical decision-making are not always available for families with unmarried partners.
Unmarried partners can be gay or straight. Often older people who have been previously married don't want to marry again for financial reasons or reasons of inheritance, or simply because it does not feel like the right thing to do. At the same time, these couples want to be sure that they and their loved ones are cared for.
Nontraditional couples that wish to create marital-like agreements related to taxes, inheritance, employment benefits and privacy rights must often do so through advanced planning documents and contracts.
The situation for gay and lesbian individuals and couples is generally better in states that have enacted domestic partnerships or civil unions that mirror some of the privileges and benefits of marriage. New Mexico, unlike many neighbor states, does not recognize either domestic partnership or common law marriage.
The New Mexico State Legislature has several times failed to pass a domestic partnership bill. However, as more and more states move toward acceptance of civil unions and even gay marriage, it seems inevitable that New Mexico will eventually to enact a domestic partnership law of some kind. Until that time is here, nontraditional couples must take extra steps to protect their partners.
Even where states recognize common law marriage, same-sex marriage, civil union or domestic partnership, there are often gaps and inconsistencies in state laws. Same-sex couples with relationships of many years duration can usually only secure shared income and property interests dating back to the time of registration as a couple. Some choose to stay outside the state systems: many older couples will not marry or register for domestic partnerships or civil unions even when such official recognition becomes available.
When planning for the future to protect children and
loved ones, rights of
inheritance can be protected through wills and trusts.
My goal is to build a legal structure that respects each client's individual wishes and meets their needs in planning for their own, their partner's and their children's future.
What makes a family?Every family is a real family, but sometimes the law treats different kinds of families differently. Tax and intestacy laws protect spouses in a traditional marriage of one male and one female and their birth children.
These laws rarely provide for the needs of partners in non-traditional families. Many couples choose to live together permanently outside of marriage, with or without children. A couple living together may have children from previous marriages.
A person may have a single life partner, or several persons with whom they are or have been partners. Families may include biological or adopted children of one or both partners or children from prior marriages; some individuals regard younger relations like nieces and nephews almost as if they were their own children. Individuals may wish to include close friends or former partners in estate plans along with biological family.
Since laws often don't automatically recognize these important relationships, agreements between partners and other kinds of contracts fill the gap.
How are legal relationships reinforced? Regardless of the ways in which partners chose to formalize their relationships - through marriage, domestic partnership, or through private contracts - it is very important to use repetitive legal documentation to serve as evidence of the alternative family structure, to document the duration of relationships and the intent to make the partners the beneficiaries of estate plans and to give each other authority for medical decision-making or financial management when the need arises.
Gay and lesbian partners with relationships of long-standing may have a personal partnership agreement that covers joint bank accounts, joint ownership of property, parenting arrangements, or strategies for handling future contingencies. Among the legal mechanisms that have been used to create legal relationships for the purpose of ownership or inheritance of property are cohabitation agreements, “pooling relationships,” adult adoption, cross-adoption of children, and business partnerships.
What are cohabitation agreements?Cohabitation agreements (sometimes called “living-together contracts”) are essentially contracts that contain provisions on how income and expenses will be shared and handled, children cared for, residence managed, and conflicts resolved. They should have provisions setting out terms for ending the relationship and the division of assets acquired during it. As contracts, they should be straightforward and specific and include descriptions of what is contributed by each partner to the relationship and what will remain separate.
What are “pooling relationships”? Many couples have an informal “pooling relationship,” in which the parties’ income is pooled together and shared equally. This can create real tax problems, not only because each partner must file and pay full taxes on the income that each earned, but also because when one party earns more than the other, the IRS may view the pooling as a net transfer of income and treat it as a taxable gift. The same income may be taxed twice, once when it is earned, and again on the amount treated as a gift. In addition, past “gifts” over the yearly exemption level may be included in the calculation of the total estate at death. Generally, there are not tax consequences simply from creating a joint bank account for household expenses, vacations, and other mutual expenses. Tax ramifications result when a lesser contributing partner withdraws funds from a joint account for his or her personal benefit. The Internal Revenue Service may also regard some living-together
arrangements or contracts as employer-employee relationships, as if the
transfer is equivalent to a purchase of companionship, housekeeping, or
other services.
What about joint tenancy?Couples with long term relationships often co-own real property in joint tenancy with a right of survivorship. This situation occurs in single home ownership and in ownership of investment property. In any joint ownership situation in which the partners’ incomes and their contribution to the purchase of the property are not equivalent, there are concerns about creating a taxable “gift” from one partner to the other that triggers a gift tax reporting requirement. Unless the surviving partner can prove that he or she made contributions, the entire value may be included in the estate of the deceased partner. Some planners suggest that one solution to these problems is to make any transfer a purchase rather than a gift. Another possible solution is for the higher earning partner to gift a percentage of the property each year equal to or less than the annual gift tax exclusion. Another reason for caution and good planning is that assets in a joint tenancy may be claimed by creditors of the co-tenant.
How can you use life insurance policies in estate planning?
Life insurance policies are a common probate-avoidance tool and are especially useful for couples that do not have the ability to pass on survivorship pension benefits. Life insurance policies can be one of the most private means of transferring assets; partners can take out their own insurance policies and list a trust benefiting the other partner as beneficiary if there are concerns about exposing the relationship. A trust that holds a life insurance policy is often used for this purpose. Note that the inclusion of any specific instruction for the use of the trust may be considered to show controlling ownership by the grantor, and the tax-free status of the insurance proceeds may be disqualified.
What are POD Accounts and TODDs? “Payable on death” accounts are simple ways to make a transfer to a trust or directly to a life partner. IRAs, 401Ks and other retirement accounts may also name remainder beneficiaries on death. A Transfer on Death Deed or TODD automatically transfers real property directly to a beneficiary, outside of probate, on the death of the owner. It has no effect on ownership while the owner is alive and can be altered or invalidated by the owner at any time prior to his or her death.
How are business partnerships used?Business partnerships have been very useful as a means of linking and protecting shared financial interests for domestic partners. To meet IRS rules, couples may establish a “syndicate, group, pool, joint venture through or by means of which any business, financial operation or venture is carried on.” Business partnerships have many advantages, including standing in suits involving finances, insurable interests, and valid consideration for mutual promises.
In the event of the death of one of the partners, however, a closely held business and real property will be valued higher for estate tax purposes for a gay partner than for members of a traditional family.
Can estate planning minimize gift and estate taxes?
Estate planning is necessary to ensure that an individual receives the personal care he or she desires when they age or become incapacitated. Planning can facilitate the smooth transfer of wealth at death to the person or persons the elder wishes to benefit with a minimum of taxation. In this area especially, straight, gay and lesbian unmarried couples are strongly disadvantaged by their inability to utilize the estate and gift tax exemption offered to traditional married couples. For traditional married couples, property transfers without tax from one spouse to the other at death. In comparison, gifts over the yearly exemption amount ($13,000 in 2009) from one domestic partner to the other are calculated into estate taxes due at the death of the gifting partner.
Why do you need a traditional will?
Wills, trust documents, and insurance policies and retirement accounts can all direct the allocation of wealth at incapacity and death. Any trust arrangement should be complemented with wills providing pour-over clauses that move either specified assets or remainders into one or another trust.
A will is one of the primary tools of estate planning, and even if all of a client’s known assets have been disposed of through trusts, insurance policies and other non-probate instruments, a will is still an essential vehicle for appointing agents for administration, identifying relatives to be skipped over or dispensing limited bequests, inserting a no-contest clause, leaving funeral or burial instructions, and directing hitherto unknown assets and remainders to designated beneficiaries or trusts. In cases where a will may be challenged, it is helpful to update wills over time, revoking but not destroying earlier versions. This process establishes the testator’s intent over time, before there are any issues of competency, and if a will is successfully challenged, may result in the previous will being revived.
Why use a trust?
Trusts are often favored as estate planning devices because they offer greater privacy than wills, and if properly structured and funded, they will avoid the trouble and expense of probate. A revocable intervivos trust established during life permits the grantor to retain control until death or incapacity and can be adapted to a client’s specific circumstances and wishes, for example, to provide for a surviving life partner during his or her life, and then to pass the remainder to children or other relatives. Irrevocable trusts must be very carefully planned as the terms of the trust cannot be altered; these are used more often in larger estates.
What are GRITs and GRATs?In one of the few advantages that non-married gay couples have over married traditional couples, non-family members can utilize Grantor Retained Income Trusts (GRIT) and Grantor Retained Annuity Trusts (GRAT) that enable a grantor to transfer major assets by making a gift to an irrevocable trust, while retaining interests such as the income from the assets. In the case of GRATs, it is possible to establish a predetermined annuity that is paid to the grantor over a period of years. Charitable lead annuity trusts (CLAT) and charitable remainder trusts (CRT) may be good trust vehicles for partners without children, especially in situations in which one partner is substantially wealthier or younger than the other, and where it is desirable to move assets from one partner to another without incurring high gift and estate taxes. High appreciating or earning property with limited marketability and restrictions on transferability placed into such trusts will be substantially discounted, lowering its value for gift tax purposes. Annual distribution to charitable beneficiaries would be substantial, assets would be transferred gradually over a number of years, and there would be little or no effect on the lifetime exemption amount. Similarly, a lifetime annuity interest for both partners could be preserved in a “two-life flip” charitable remainder unitrust, providing first for one partner, then for the survivor, and the remainder interest passing to charity.
Can you use more than one trust?
Another trust-based solution suggested (in this case to deal with a Lee Marvin type palimony situation) is to establish two separate trusts: one for assets which both parties would agree is the sole and separate property of one of the parties, and the other trust containing assets that both parties would agree should be treated as if the assets were held like a tenancy in common.
Are there negative consequences of entering a registered same-sex relationship?At the present time, the State of New Mexico does not officially recognize same sex relationships (although the state does provide state employee benefits to partners). Even in a state where registration is possible, entering into a registered domestic partnership or civil union is not always economically advantageous to an older same-sex couple. Couples that habitually share income and assets are likely to find additional security through registration. Couples with children will likewise. Couples without children, who maintain property separately, who have approximately equal assets and income, or who do not intend to bequeath their assets to their partner may not wish to register, unless there is a compelling emotional or social reason to do so.
Registering a domestic partnership or other legal relationship can also involve exposure to partner’s debts, tax uncertainties, and in the event of a separation, spousal support claims. For these reasons, individuals should consider entering separate agreements covering property co-ownership and defining how property will be owned and managed before entering a domestic partnership. If registering partners have concerns about income or assets becoming part of the community, then there should be discussion prior to entering a domestic partnership about how these financial assets will (or won’t) be shared. Couples also need to determine whether oral or written agreements made before registration will be valid after registration (and in the event of a dissolution) and may need to modify such agreements to meet the legal standards for pre- and post-nuptial agreements.
What about employment benefits under domestic partnership? Currently in the U.S., state and local government employers offer some of the most substantial benefits to domestic partners. State and local government benefits for domestic partners, in comparison to benefits offered by private employers, tend to be more encompassing and may include retirement benefits that may figure as assets in the even of a partner’s death. New Mexico is one of 17 states currently offering benefits for domestic partners of state employees.
Most private employers that offer domestic partner benefits to their workers provide only benefits with short-term availability such as family, bereavement, or sick leave, relocation benefits, access to employer facilities, and attendance at employer functions. However, because many employers – both public and private - regard domestic partner benefits as both cost efficient and an effective means of retaining well-qualified employees, it is likely that such benefits will be expanded in the future.
Homosexual singles and couples pay the same FICA deductions as all other Americans, yet because of federal DOMA laws, domestic partners and other single-sex couples are unable to access the Social Security safety net when one of the couple retires, becomes disabled, or dies. Nor can single-sex couples take advantage of the ability of heterosexual married couples to utilize a higher-wage-earning spouse’s record in situations where one partner has compromised their own career in order to raise children or worked while another studied. In the same way, single-sex couples that elect to dissolve a domestic partnership cannot benefit from a partner’s retirement benefits. Denial of social security benefits can hit particularly hard when children are concerned. For example, if one partner in a lesbian couple died, and that partner had worked while the other bore children and took care of the household, the children would not receive the benefits they would otherwise be entitled to until age sixteen if the couple had been able to marry. Same-sex partners are not now eligible to receive veteran’s benefits or disability insurance, also federal programs.
However, there is hope for change. President Obama has stated that he favors repeal of DOMA, and States offering benefits for same-sex partners of state employees. The recently passed (Mar 2009) omnibus spending bill includes language urging the federal government’s Office of Personnel Management to "consider" federal health benefits for same-sex domestic partners of federal employees.
How do you use a financial advance directive and power of attorney?
The ability to grant a durable power of attorney to a trusted agent is especially important for non-traditional couples who do not wish biological family members to serve as decision makers in the event of incapacity. The express appointment of an agent can make a conservator unnecessary and allow the person of choice to conduct financial affairs, manage banking or brokerage accounts, employ caretakers, arrange for housing, make gifts and transfers, arrange for financial assistance or Medicaid and name a conservator should that become necessary. In the event of illness or incapacity, a durable power of attorney naming an agent to direct financial affairs may be as necessary as a medical directive, because ensuring appropriate medical care may require access to the ailing partner’s funds. It is important to follow the statutory requirements for drafting a durable power of attorney in the applicable jurisdiction. In New Mexico, unless an incapacitated person has created a financial power of attorney document, the court may order a conservatorship and designate an agent to make decisions on an incapacitated individual's behalf.
Are health care directives and powers of attorney a good idea?Domestic partners should establish agency agreements that include powers of attorney covering financial matters, living wills, and advanced medical directives whenever appropriate. The ever-present threat of accident or illness should incline everyone to provide appropriate direction in the event of their incapacitation, but gay individuals are especially in need of these protections. A gay person may have special needs for privacy, or may be very uncomfortable with an unknown physician, or may find him or herself in a care facility unfriendly to gays. Documents that appoint an agent to make medical decisions for another, known as the health care proxy or durable health care power of attorney, are now recognized in all jurisdictions, and many states provide simple forms and encourage their use. Powers included in many standard documents include the power to consent to or refuse treatment, to withhold or withdraw artificial nutrition or hydration, to make decisions on pain relief, to determine who has access to the patent in visitation, access to medical records and consultation with attending physicians, and to give permission for donations of organs or for autopsy.
Some specialists suggest that medical directives or powers of attorney should avoid including a limiting provision allowing a physician to make a determination regarding capacity. Others recommend including an appointment of a guardian, if needed, in a medical directive, finding that courts are likely to honor such a nomination. If having a guardian is desirable, then consider including such a guardian appointment in multiple documents: the durable power of attorney, health care directive and your will. Repeating the appointment will encourage the court to recognize your choice over a possible challenge.
What about Medicare/Medicaid coverage?Medicare is available to all persons after retirement age, covering essential hospital care and with optional additional coverage paid by the patient, physician services and some post-hospitalization home health care. Medicare Supplement Insurance may supplement the unpaid portion of Medicare.
Medicaid, which among other benefits can provide nursing home care, requires that an elder impoverish him or herself in order to be eligible. Congress has been diligent in eliminating loopholes in the law that allowed transfers of assets that impoverish an individual for Medicaid purposes; such transfers now trigger a period of ineligibility which can last as long as 60 months.
However, although married spouse’s assets will be scrutinized prior to determining eligibility for applicants, same-sex partners are not presently considered spouses under federal law and their assets will not be considered. Employer-based medical coverage rarely covers unmarried partners or their children and alternative coverage may need to be purchased for them.
Some long-term care insurance policies are tax-qualified and benefits are received tax-free. The choice of long-term care insurance may enable a preferred choice of facility care where gay patients feel more comfortable, but in other respects gay patients are at no greater disadvantage in the system than other patients.
What happens when there are children in a relationship?One of the most difficult issues facing single-sex couples has to do with the legal relationships between unmarried or non-biological “parents” and their children. If there are minor children in a same-sex relationship, one of the most important tasks facing the couple is ensuring for their care and protection in the event of the death of a parent. Unless a child has been legally adopted by the non-biological parent (or by both parents) the death of a single parent could result in the child being placed with unsympathetic family members or even in foster care. Formalizing parent-child relationships to secure children's inheritance rights is an essential task for non-biological and non-adoptive parents, because without such arrangements, their children may be excluded from inheritance through laws of intestacy. Equally important, appropriate legally-defined relationships may enable a grown child to play an essential part in the care of aging non-biological parents. Many adult children expect to take on a caretaker role for an ailing parent when the parent’s partner is unable to do so.
In many states, unmarried couples or same-sex couples use the co-parent adoption procedure. This procedure permits a person who shares parental responsibility for the child with the child's biological or adoptive parent to adopt regardless of whether or not the adopting parties are married.
Are there special challenges and conflicts of interest in representing unmarried and gay couples? Yes. Legal practitioners need to take steps to reduce conflicts of interest. Practitioners should strive to have as much disinterested documentation as possible and encourage separate representation or review before undertaking crucial documents.
Careful, repetitive documentation of the client’s capacity and of his or her intent is very important. Contractual agreements and statements of intent may “save” a disposition by will, permit a trust to remain private, or enable your desired outcome to withstand a legal challenge. The formal appointment of your partner as agent and guardian or conservator in a trust, a medical directive, and a durable power of attorney may give them standing even in a hostile legal environment. An attorney needs to ensure that doctors, caretakers, and service providers understand the client’s wishes for care and his or her nomination of agents. The attorney must be prepared to act on behalf of the client in a health emergency to be sure the client’s wishes are honored.
Copyright © Kate Fitz Gibbon 2009
This is a communication for the purpose of providing information and a legal advertisement.
Information on this website is not legal advice or a substitute for legal advice. Every situation
is different. You should contact your attorney to obtain advice on your
particular issue or problem.
Use of and access to this Web site or
any of the e-mail links contained within the site does not create an
attorney-client relationship between Kate Fitz Gibbon and the user. Contacting Kate Fitz Gibbon by any means, including mail, phone, fax or email, does not create an attorney-client relationship. The opinions expressed at or through this site are the opinions of the individual author alone.
Photo Source= Library of Congress files and [http://www.flickr.com/photos/45889748@N00/5629266/
Nuclear Lesbian Family #2] |Date=January 11, 2004 at 10:26
|Author=[http://www.flickr.com/people/45889748@N00 Emily Walker] from
Wellington, Ne). This is a communication for the purpose of providing information and a legal advertisement.
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