Having lived and worked in San Francisco and New York, I’ve had the great privilege of knowing and supporting many LGBTQ+ families. Here are some of the family, estate, and financial planning considerations facing the LBGTQ+ community.
An LGBTQ+ couple may or may not choose to get married. This can be very impactful when it comes to the question of estate planning. Estate planning, most simply, is the process of ensuring that your wishes be carried out tax-efficiently and swiftly in the event of death or incapacity.
Legally, without a spouse, healthcare proxy, living will, advance health care directive or power of attorney, decisions about your life fall to your next of kin in the event of incapacity. In many cases, if you have living parents, it would fall to them. Planning in advance can designate trusted individuals, including friends or life partners, to make medical and financial decisions on your behalf if you became incapacitated. By addressing these scenarios in advance, you can alleviate the burden on your loved ones and ensure your wishes are respected.
Like with incapacity planning, planning for the event of your passing is essential if you would like to choose how your assets are distributed. Having appropriate will substitutes, including but not limited to a trust, can allow assets to pass to your beneficiaries without going through probate. Probate is a costly and extensive process where the court reviews and distributes your assets to who they deem fit, making your estate a matter of public record. Below are some financial aspects of mortality planning:
· Providing a plan for liquidity, usually through insurance, could prevent a discount sale of a property or business.
· If you may end up with a taxable estate down the road, planning early could reduce or eliminate estate taxation for your heirs.
· Investing early and planning around distribution could result in much more sizable assets passing to your heirs.
· Ensuring correct beneficiary designations could prevent significant taxes down the road for the intended beneficiary, including property tax increases and gift taxes.
Consulting with a qualified estate planning attorney is a crucial step in creating a personalized plan that addresses the unique needs and circumstances of each couple.
LGBTQ+ families considering adopting, surrogacy, an egg donor, or a sperm donor face much higher potential costs associated with starting a family than couples who do not utilize these methods. You should plan accordingly, budgeting as you might for any major purchase and holding much more in cash and cash alternatives than you usually might.
I know a couple who decided on the surrogacy route and wanted two children, one by each of them. To plan for the enormity of this expense, one of the spouses immediately liquidated $200,000 in company stock. This allowed him to plan for costs over time without having the funds subject to market volatility. For many couples, this option or this level of excess funds might not be immediately available, so saving is essential.
Whether couples are planning to adopt or use one of these other methods, I would advise consulting a qualified family law attorney. This can work to not only protect you and your family today, but it can also allow you to make advance decisions about lifestyle, guardians, and the future of the child if you passed away prematurely or became incapacitated.
Family, estate, and financial planning are essential to LGBTQ+ couples. Thinking through some of these things early, working with professionals, and putting needed legal documents in place can go far to ensure that your financial and personal goals are met while you are living and when you pass on.