Estate Planning for Same-Sex Couples: Selected Issues
By Barbara K. Wheaton, Esq.
The following is an excerpt from Chapter 15 of XX publication. To read the full chapter, please visit: X.
This chapter reviews the special considerations in estate planning for same-sex couples under state and federal law. Not surprisingly, same-sex couples are treated differently from spouses in opposite sex relationships under many laws relating to estate planning. Given the tension between the state and federal definitions of marriage and spouse, careful estate planning is required to manage and dispose effectively of assets between same-sex partners at death or in the event of incapacity.
Financial Planning and Estate Planning
Financial planning is the process that helps you formulate your financial goals and objectives and develop strategies to manage your financial assets more successfully. Estate planning is just one of the key areas of financial planning. Six key areas of financial planning are:
Financial position—examining your current situation, including your budget, net worth, current investments and credit use.
Protection planning—assessing your needs, including having adequate levels of life, accident and health insurance, disability income protection, and property and casualty coverage.
Investment planning—accumulating and growing wealth through a diversified portfolio utilizing a mix of different asset classes to achieve your personal goals.
Income tax planning—managing income taxes through tax-advantaged investments and tax-planning strategies.
Retirement planning—maximizing Social Security, employer-sponsored retirement plans, IRAs, long-term care insurance, annuities, and distribution strategies.
Estate planning—preserving wealth by implementing lifetime and death-time estate planning strategies to transfer assets most effectively to your intended beneficiaries. Estate planning may include transfers outright or in trust at death as well as establishing irrevocable trusts and making gifts during lifetime to achieve estate tax goals.
This chapter focuses on estate planning for same-sex couples. Contrary to popular belief, proper estate planning is not just for the wealthy but for anyone who wants to control intentionally the transfer of their assets to their beneficiaries. Estate planning for same-sex couples requires particular care and attention.
A well-conceived estate plan can help reduce the adverse impact of the Maine and federal transfer taxes. However, the current uncertainties and inconsistencies in the federal and Maine estate tax create an extremely challenging tax planning environment. There is no “one-size-fits-all” estate plan in the present state of the tax laws. Given that many basic estate tax rights for opposite-sex married couples are not available for same-sex couples, estate tax planning for same-sex couples requires a proactive, carefully considered approach. The thoughtful use of various estate tax planning techniques, either during lifetime or at death, can reduce estate and gift taxes, thereby leaving more assets available for a surviving partner, children or other chosen beneficiaries.
Special Issues for Same-Sex Couples
Spouses Have Been Given Special Treatment Under State and Federal Law; Some of these Protections are Available on a Limited Basis to Registered Domestic Partners in Maine
According to 2010 Census data, there were 37,881 unmarried couple households in Maine. Of these, 7.10% were same-sex couples, or 3,958 same-sex couple households. In 2010, Maine ranked tenth among the states by number of same-sex couples per 1,000 households. The Williams Institute, “United States Census Snapshot: 2010” (http://Williams-institute.law.uclaedu).
An overarching estate planning consideration for same-sex couples is that the special treatment (almost always favorable) that spouses in a legally recognized marriage receive under federal and state law has not been available to nonspouses, no matter how committed their relationship.
The determination of what constitutes a “spouse” generally is a matter of state law. While Maine recognizes by statute registered domestic partnerships, same-sex couples cannot legally marry in Maine. On May 6, 2009, then Governor Baldacci signed into law LD 1020, “An Act to End Discrimination in Civil Marriage and Affirm Religious Freedom.” This legislation would have made same-sex civil marriages legal under Maine law. However, the effective date of the legislation was postponed as opponents gathered sufficient signatures to put the question of same-sex marriage to Maine voters in a voter referendum. On November 3, 2009, Maine voters, by a vote of 53% to 47%, voted to repeal LD 2010, such that same-sex marriage currently is not allowed in Maine. See 19 M.R.S. § 701(5) (persons of the same sex many not contract to marry).
Same-sex couples residing in Maine who wish to marry may do so in Massachusetts, Connecticut, Iowa, Vermont and the District of Columbia. These jurisdictions have no residency requirements. New Hampshire also recognizes same-sex civil marriages but due to the interplay between a 1979 New Hampshire law and Sections 701(1), 701(5) and 751(1) of Title 19 of the Maine Revised Statutes, the legal sufficiency of a New Hampshire marriage for Maine resident same-sex couples is highly questionable. These Maine statutes purport to void a marriage between Maine residents conducted out-of-state that would be void under Maine law. The New Hampshire statute would similarly void a marriage of Maine residents in New Hampshire that is not recognized by the laws of Maine.
Canada also allows non-resident same-sex couples to marry in Canada.
Maine does recognize and protect certain rights of same-sex couples pursuant to its Registered Domestic Partner statute. See LD 1579, 2004 Leg., 121st Leg. (Me. 2004), “An Act to Promote the Financial Security of Maine’s Families and Children”, codified at 22 M.R.S. § 2710. This statute defines a “domestic partner” as “two unmarried adults who are domiciled together under long-term arrangements that evidence a commitment to remain responsible indefinitely for each other’s welfare.” 22 M.R.S. § 2. It provides for a registration system whereby domestic partners (whether of the same sex or of the opposite sex) who have been legally domiciled in Maine for at least twelve months can affirm their committed status and gain access to certain important rights and benefits previously available only to traditionally married couples. These benefits are:
The right to inherit a deceased partner’s property by intestacy (18-A M.R.S. § 2-102);
The right to be considered next of kin in taking possession of a deceased domestic partner’s body and making funeral and burial arrangements for a deceased partner (22 M.R.S. § 2843-A(1)((D(1-A));
Priority to serve as guardian for an incapacitated partner and as conservator of the estate of an incapacitated partner, and the right to notice in any guardianship or conservatorship proceedings involving a domestic partner (18-A M.R.S. §§ 5-311(b)(2-A), 5-410(a)(3-A), 5-309(a)(1) and 5-408(a-1));
Priority to serve as personal representative of a deceased partner’s estate (in the absence of a contrary provision in the deceased partner’s will) (18-A M.R.S. § 3- 203(a)(4-A));
The right of one registered domestic partner to request health insurance benefits for his or her partner and the children of such partner if the employer otherwise offers domestic partner health insurance benefits. (Note, Maine employers are not required to offer such benefits. See 24 M.R.S. § 2319-A; 24-A M.R.S. §§ 2832-A and 4249(2));
The right to visit a registered domestic partner in the hospital or other healthcare institution without interference (see 22 M.R.S § 1711-D);
The right to up to ten weeks of unpaid leave to care for one’s severely ill or dying domestic partner or such partner’s child (see 26 M.R.S. § 843(4));
The right to submit a domestic partner’s absentee ballot to a Town Clerk (see 31-A M.R.S. § 1(20)).
To be eligible for domestic partner benefits under Maine law, a same-sex couple must register as domestic partners with the Office of Health Data and Program Management, a division of the Maine Department of Health and Human Services. Registration forms are available at Maine municipal offices, probate courts, DHHS offices, and through the website of the Office of Vital Records for the State of Maine.
Certain municipalities in Maine also offer limited rights and protections to registered domestic partners living within their municipal limits. These include Portland, Camden, Bar Harbor and Cumberland.
For purposes of the application of numerous federal statutes, the federal Defense of Marriage Act (DOMA), passed in 1996, defines “marriage” exclusively as a “legal union between one man and one woman as husband and wife” and “the word spouse refers only to a person of the opposite sex who is a husband or a wife.” 1 U.S.C. § 7. The statute further provides that no state “shall be required to give effect . . . to a relationship between persons of the same sex that is treated as a marriage under the laws of another state.” 28 U.S.C. § 1738C. Although a number of legal scholars have questioned the constitutionality of this statute, it nonetheless stands at this time. Although Maine recognizes registered domestic partnerships, it does not recognize same-sex marriages performed out of state. See 19 M.R.S. §§ 701(1) and 701(1-A). Consequently, the combined effect of DOMA and the limitations of Maine’s Registered Domestic Partner Statute put many of the probate, estate tax and gift tax advantages of marriage beyond the reach of same-sex couples. This makes estate planning for same-sex couples particularly challenging.
Basic Components of an Estate Plan: What They Are, What They Do, and Why They Are Needed
While the law alone poses disadvantages for same-sex couples because of the presumptions and preferential treatment given to traditional marital relationships, proper estate planning can empower same-sex couples with rights and responsibilities over their property during life and after death. Most importantly, a proper estate plan can ensure that a surviving partner – married, registered or unregistered – receives the property the decedent wants him or her to receive and plays the role in administering the decedent’s estate that the decedent wants the surviving partner to have.
Successful estate planning recognizes that each client has distinct needs and goals. In all cases, each estate plan should be custom-tailored to achieve that client’s specific objectives. When dealing with same-sex couples, meeting the personal objectives of the clients while navigating the disparate transfer tax treatment accorded to same-sex couples, as opposed to opposite sex couples, can be particularly difficult. Estate planning for same-sex couples requires some “out of the box” thinking and a fresh look at the several estate planning techniques available. This is a developing area under Maine law and is sure to present challenging and rewarding opportunities for estate planners and their clients in the years to come.