Chapter 4 Basic Estate Planning

• Library: Estate Planning for Same-Sex Couples (ABA) (2015 Ed.)

Chapter 4 Basic Estate Planning

Preparing an estate plan can be an emotional event in many clients' life. This process requires the client to plan for his or her eventual death. This is hard for most people.

Some of my clients procrastinate about signing their wills because they believe they will die as soon as the ink dries on the page. My response? "You're going to die anyway so you might as well sign the damn thing."

There is no upside to not prepare an estate plan. These legal documents are necessary to avoid a postdeath disaster. And, while there are many online sites offering low-cost estate plans, including wills, LGBT clients are best served by having a lawyer assist in preparing a comprehensive estate plan because of the unique issues that arise with same-sex couples and LGBT individuals. The online sites rarely address the unique issues that LGBT clients present as individuals and couples.

Estate planning for LGBT clients involves more than the traditional documents. These clients need life-planning documents as well. They may be considering starting a family and need to know the legal issues that will arise in that respect.

The drafting process requires a creative approach to addressing changing legal issues. An attorney who is familiar with LGBT legal issues can explain the benefits of a complete estate plan to the client.

A New York Surrogate Court case¹ presents a grim reminder of why having a professional prepare an estate plan is often in a client's best interest. Ronald Myers signed a homemade will in 1981. He did not consult a lawyer. He left the bulk of his estate to his longtime partner, Dr. Robert Ephraim. Myers left "all monies" to his mother. Myers died in 2006 and Ephraim paid over $40,000 to the mother. He transferred the stock portfolio to himself, even though the will only mentioned "all Stocks of I.B.M." because that was the only stock Myers owned when he made the will. The mother then died intestate and her heirs claimed that Ephraim was only entitled to the I.B.M. stock. When Ephraim died—with the matter still pending—his brother took over as the fiduciary. It is now almost nine years after Myers died and the matter continues to be contested.

The surrogate issued a decision that preferred the mother to the surviving partner in distributing the disputed assets. She relied on old family priority rules and old case law. The surrogate refused to consider Ephraim as "family" and employed the presumption that there is a presumption in favor of the testator's relatives as opposed to "unrelated persons."

Had Myers consulted with a lawyer, a more detailed and comprehensive estate plan would have been developed. An experienced lawyer would have clearly designated Ephraim as "family" and the primary beneficiary. Doing so would have prevented this protracted litigation.

Preparing a "simple will" has its place and the online resources can be helpful. However, LGBT clients need to realize the potential problems that can be created by a less than complete plan.

A. Intestate Succession

When there is no will, the decedent's estate is subject to the state law of intestate succession. Intestate succession statutes are designed to distribute estate assets to blood relatives of surviving spouses.

The inheritance laws in all states will treat married lesbian and gay couples the same as heterosexual married couples. Some states that continue to recognize civil unions and domestic partnerships also cover same-sex couples under state statutes.

Most state intestate succession laws allow married couples to inherit from each other, even without a will. Under those statutes, a spouse is first in line to inherit. Sometimes, the intestate succession statute provides an inheritance to the children but the spouse receives a majority share.

Lesbian and gay couples who are unmarried are considered legal strangers in nonrecognition states. There is no statutory right to inherit and the intestate succession statutes will prevent the surviving partner from receiving any probate assets.

A will avoids the intestate succession statute. When there is no will, the results can be devastating to the surviving partner or spouse.

The decedent's surviving same-sex partner has no legal standing to inherit any part of the estate under the intestate succession statutes in the states. The assets in an intestate estate will pass to the decedent's biological family in the order specified by the statute. The goal, therefore, is to keep as many assets as possible out of probate and the intestate succession process.

A 2012 Hennepin County, Minnesota, case provides an example of how one probate court judge ruled on the issue of whether a same-sex surviving spouse had a right to inherit under the state's intestate succession statute. In that case, In re Estate of Proehl,² Judge Jay M. Quam ruled that Minnesota's mini-DOMA law does not include a prohibition against a same-sex spouse from being recognized under the state's probate law. His ruling stated the probate law does not limit "spouse" to the opposite sex.

This decision does not apply outside the Hennepin County Fourth Judicial District, but it is a well-researched opinion that presents a cogent discussion of the issues. This decision has less impact now that Minnesota is a marriage equality state than when it was decided in 2012. But the language in the decision may be useful to lawyers from other states seeking a similar result.

An unfortunate example of dying without a will occurred in Florida. A gay couple was in a committed relationship for years. The couple made the decision to hold the house, property, bank accounts, and other assets in the name of only one partner. That man became ill and died. He had no will.

On the day of the funeral, the decedent's family encouraged the surviving partner to take a walk on the beach. While he was gone, the family changed the locks, emptied the contents of the house, and took the couple's dog to an animal shelter in another county.

When the surviving partner returned he was told the house was not his, he could no longer live there, and everything in it belonged to the decedent's family—including his own clothing. The family also refused to tell him where they had taken his dog. He could not prove ownership of the dog.

With the help of a lawyer, the man obtained a court order to return to the house. It took six months. He never found his dog.

This situation was avoidable if the couple had executed wills or other documents providing for the disposition of the estate. The cost of the estate plan would have been far less than the attorney fees paid to regain the property.

B. Wills and Trusts

Many LGBT clients are estranged from their biological families. In some cases, decades may have passed since the client had any contact with their birth families. Those clients may benefit from a trust. This is particularly true if the client worries her family may contest the will or challenge her partner's right to inherit the estate.

A trust is useful for couples raising children, especially if only one of them is a legally recognized parent.

The probate court may ignore the decedent's nomination of her surviving partner as the children's guardian. The court may select someone from the decedent's birth family even if the child has had no contact with that person. A trust with the surviving partner as the trustee helps ensure continued contact with the children.

Trusts are also helpful if clients fear a will contest or interference by their birth families.

Joint trusts are not advisable for unmarried lesbian and gay couples because they require combining the separate property of each member of the couple. This commingling of assets may trigger federal gift tax consequences and other problems. Keeping property in separate trusts helps establish that certain property belongs only to one person. Married couples, however, may benefit from a joint trust. Before creating such a trust, it is wise to review the matter with an experienced tax professional.

Married same-sex couples may benefit from a joint trust that adequately protects their individual and joint interests. Couples living in community property states may also find that a joint trust works better for them. In any case, there should be a considered discussion of the pros and cons of a joint trust for the individual couple.

Verifying that the couple is actually married and not merely claiming to be married is important. The whole concept of marriage is new to the LGBT community and many couples remain either unconcerned or unaware of the legal ramifications of the institution.

C. Joint Representation

Joint representation in estate planning is common because most couples, straight and gay, ask the attorney to provide services to both. Rarely does a couple want to hire separate counsel to prepare their estate documents.

But, joint representation remains an ongoing matter of concern for lawyers representing lesbian and gay couples. In most cases, the clients will not seek separate counsel.

The key is to have an explicit joint representation letter. Include language about confidentiality, conflict of interest, and waiver of those conflicts, and review it with the clients. Make it clear that you will withdraw from representing them if a conflict arises.

The letter can also address future representation if the couple ends their relationship. For example, the letter can state whether it would be permissible for one party to retain you in the future for other services, and if so, whether written consent of the ex-partner would be required.

Finding lawyers experienced in LGBT issues can be difficult. Clients want to stay with lawyers they like. Discussing this with clients early on can make things easier later.

Make it clear that no secrets will be kept from the other partner. Have both partners and the lawyer sign the letter and give copies of the letter to each one.

Include a provision that specifies both...