For a variety of reasons, lesbian, gay, bisexual and transgender (LGBT) couples have a lot to be concerned about when it comes to Massachusetts estate planning. One of the most glaring reasons for this is the federal government’s refusal to recognize same-sex marriages as having the same legal standing as heterosexual unions. Even though gay marriage is legal in Massachusetts, same-sex couples should know how federal law can affect their estate plan.
As Suze Orman pointed out in a recent CNN article, same-sex couples are not able to take advantage of the same asset protection strategies available to heterosexual couples without advanced planning. For example, every heterosexual married couple is able to seamlessly transfer jointly held assets upon the death of one spouse free of tax to the survivor. However, in order for same-sex couples to inherit jointly owned assets federal estate taxes would have to be paid.
As Orman points out, the Supreme Court will consider the constitutionality of the federal Defense of Marriage Act this spring when it hears a case brought by an 83 year old woman who was hit with a $363,000 federal estate tax bill after her same-sex partner of 40 years passed away. Had they been straight, no estate tax would have been due.
Another issue to consider is how Social Security benefits may be affected. Married heterosexual couples can maximize their Social Security retirement benefits by taking advantage of the highest-earner’s benefit. When both spouses are alive, the lower earner can opt to collect a monthly benefit check that is equal to 50% of his or her spouse’s benefit. For many married couples, that 50% spousal benefit is often much higher than what the lower-wage-earning spouse could collect based on his or her own earnings record. Most important, when the high earner dies, the surviving spouse is allowed to collect 100% of the deceased’s higher benefit.
Because same-sex marriages aren’t recognized federally, gay and lesbian couples are not eligible for these Social Security spousal benefits. Also, without a Will and/or trust in place, same sex couples will not inherit from each other at all under the laws of intestacy, which will instead direct their assets to their next of kin.
If you or someone you know is at risk of having their assets taxed or distributed against their wishes because of their sexual orientation, call the Heritage Law Center to discuss the options available to protect your rights.
