LGBTQ+ estate planning considerations

Having a comprehensive estate plan can ensure your wishes are carried out after you die—no matter how large, or small, your estate is.  

When the Supreme Court guaranteed same-sex couples the right to marry in 2015, the LGBTQ+ community breathed a sigh of relief. By receiving the same legal affirmation of heterosexual couples, LGBTQ+ individuals gained more than 1,000 federal benefits and can now more easily navigate their assets through estate planning.

Whether you’re single, married or in a domestic partnership, there are steps you can take now to make sure your affairs are in order.

Importance of estate planning for LGBTQ+ individuals

Estate planning may be particularly beneficial for those who lack family support of their gender identity and/or sexual orientation. LGBTQ+ individuals in domestic partnerships or civil unions can also use estate planning to ensure their assets are distributed per their wishes, regardless of a state’s particular laws. For those with children, estate planning is critical to name legally binding guardians instead of leaving such decisions up to the probate courts if you die without a will.

“Even with the right to marry, members of the LGBTQ+ community face several complex issues,” says TJ Uytingban, CIMA®, a Wealth Management Advisor for U.S. Bancorp Investments, an affiliate of U.S. Bank. “An estate plan, even at a basic level, can help ensure that your instructions are followed and that your identity and intentions are respected and honored.”

LGBTQ+ estate planning considerations
 

Getting started is easier than you might think. To protect your assets and take care of your loved ones, you can create a basic estate plan by establishing a will or trust, creating advance directives and naming beneficiaries.
 

1. Setting up a will or trust

A will is simply a legal document that specifies how your property will be divided when you die. Should you die without a will (intestate), you may leave decisions about your assets in the hands of state officials or probate courts.  

A will goes into force when you die, and an executor that you name when you create your will is responsible for distributing assets under the terms of your will. A will goes through a legal process called probate, a step in which the courts examine the will and approve the executor to distribute assets. If someone disagrees with the terms outlined in your will, such as a family member who expects to receive a particular asset or percentage of your assets, they can contest the will in court.

Some individuals prefer using a trust alongside or instead of a will to designate the disposition of their assets. The most common type of trust used in estate planning is called a revocable living trust. With this type of trust, the person who creates the trust—the grantor, in this case—places assets in the trust while they are alive and maintains control of those assets during their lifetime.

A revocable living trust can be modified at any time during the grantor’s lifetime. The grantor will name a trustee, or the person responsible for distributing assets once they die. Unlike a will, a trust cannot be changed or contested once the grantor dies, since assets in a trust pass outside probate.

Trusts may be more expensive to establish, but whether you choose a will or trust is a personal and financial decision.
 

2. Advance directives

LGBTQ+ people may encounter resistance when it comes to making medical and financial decisions for an incapacitated unwed partner. Advance directives can clear the path legally and ensure that the person you want making important decisions for you can be there for you, or vice versa.

Here are the basic directives you’ll need:

• Durable financial power of attorney: Empowers a partner or spouse to make financial decisions on your behalf should you become incapacitated.
• Healthcare proxy/medical power of attorney: Empowers a partner or spouse to make medical decisions for you if you become severely ill or incapacitated.
• Living will: States your wishes for end-of-life care.
   

3. Beneficiaries

A beneficiary is a person who will receive an asset in the event of your death. Here are some places where you may need to name beneficiaries:

• Retirement accounts: In order for assets in accounts like 401(k)s and IRAs to pass to the beneficiaries outside of probate, you’ll need to name beneficiaries inside all your retirement accounts.
• Life insurance: All life insurance policies require a named beneficiary or beneficiaries.
• Assets listed in a will or trust: You can name beneficiaries for specific assets, such as family heirlooms, certain investments or even the family pet.

Start the estate planning conversation

No matter how large or small an estate you'll leave behind, the estate planning process is going to bring up a lot of important questions. This process may involve conversations about sensitive topics like end-of-life care and who will inherit certain family assets. A financial professional will be able to walk you through these discussions.

“It’s always wise to ask your financial professional for their thoughts, as they can draw from their work with clients with similar experiences or in similar situations,” Uytingban says. “They can also mediate conversations between you and your family, a partner or others who you’d like to be involved in your estate plan.”

The best way to set up your estate plan is to work with an estate planning attorney, who can walk you through state and other laws and offer advice specific to your net worth, assets or philanthropic goals.

When to review your estate plan

When your life changes, it’s essential to revisit your estate plan. Marriage and divorce, buying or selling a home, and having children are all reasons to revisit your estate plan. An annual check-up is an excellent idea to make sure everything is up to date.

Examples of changes your estate plan might include:

• Adding or removing a spouse to your will or trust
• Adding children to your estate plan
• Designating beneficiaries for newly acquired assets
• Adding a charitable bequest
• Reaching a financial threshold that requires a more comprehensive estate plan, such as adding a trust above and beyond an existing will

As legal protections for the LGBTQ+ community are ever-changing, any significant piece of legislation might also indicate a need to revisit your estate plan to ensure your assets and loved ones remain protected.

Of course, no one wants to think about death, and building an estate plan requires facing your mortality. However, with some planning, conversations with a financial professional and a few notarized documents, you can ensure that your loved ones don’t have to make tough decisions without your input. You can also make sure that your identity, family and intended beneficiaries are honored when you’re no longer there.

Learn about trust and estate services at U.S. Bank.