LGBTQ Estate Planning
What were the risks if you did not work with an estate planning attorney to establish the right protections? If you were to die without any estate planning documents at all, the condition of intestacy would exist. Under these circumstances, the probate court would utilize the intestate succession laws of the state of Illinois to determine the rightful inheritors.
The succession laws are all based on direct familial relationships. Under these laws, if you were to pass away with no spouse, children, or siblings, your parents would inherit all of your intestate property. If you had parents and siblings surviving, they would get equal shares unless there was just one parent living. Under those circumstances, the parent would receive a double share.Because of this reality, gay couples that could not get legally married would have to take the right estate planning steps to make sure their assets were distributed in accordance with their wishes.
Empowering a representative in the event of incapacity is another reason why effective planning was essential for committed gay couples. Toward the end of your life, someone may be required to make decisions on your behalf because you are incapacitated. Clearly, that person would be your next of kin if you are not legally married in the eyes of the law.To account for this, you could execute documents called durable powers of attorney. The “durable” designation is significant, because this type of POA will remain effective in the event of the incapacitation of the grantor. There are durable powers of attorney for health care, and durable financial powers of attorney. A living will is another incapacity planning document that would be included.
Leveling the Playing Field
This presented some serious financial ramifications. There is a federal estate tax in the United States, and it carries a hefty 40% maximum rate. Most people don’t pay the tax because there is a high estate tax exclusion, but it is definitely a problem for high net worth individuals.The estate tax can be applied on asset transfers to anyone, regardless of the relationship, with one exception. There is an unlimited marital estate tax deduction that allows you to transfer any amount of money to your spouse free of taxation.
A New York woman named Edith Windsor married her partner, Thea Spyer, in Canada in 2007. In 2008, after a piece of legislation was passed, the marriage was legally recognized in New York as well. About a year later, Spyer passed away, and she left a considerable estate to her spouse.Windsor tried to use the unlimited marital deduction, but the Internal Revenue Service refused to accept her contention that she was married. They cited a provision in the Defense of Marriage Act that defined marriage as a union that can only exist between a man and a woman. She was forced to remit more than $360,000 out of the inheritance to pay the estate tax.
Shortly thereafter, Windsor obtained legal counsel, and a lawsuit was filed. The courts found in favor of the plaintiff, but a conservative group appealed. Ultimately, the Supreme Court ruled that Section 3 of the DOMA was unconstitutional. As a result, the federal government had no choice but to accept the legality of same-sex marriages.Once this ruling was handed down, the dominoes started to fall with regard to state laws governing marriage equality around the country. Here in our state, the Illinois Religious Freedom and Marriage Fairness act became the law of the land on June 1, 2014.