In this article, we will discuss estate planning for non-traditional families, where we define the non-traditional couple as a same sex couple. There is a disconnect between state and federal laws. Where certain State laws (11 at the time of this writing, in May 2013) may permit marriage of same sex partners, Federal laws still do not provide for recognition of this union. That being said, the same sex partners who are married are not entitled to federal benefits that the traditional married individuals receive. Those benefits that are denied to same sex partners who are married include: the intestate right; the right to elect against the estate of the other spouse; social security benefits of the other spouse; military benefits of the other spouse; ability to arrange funeral matters of the other spouse; ability to obtain COBRA benefits from the other spouse’s employer; the right to receive under ERISA a portion of the other partner’s pension plan; the right to take action in a wrongful death or worker’s compensation claim.
This disconnect between state and federal law, is also seen in a disconnect between states. Normally, an order of a court from one state is given full faith and credit in another state. However, such is not the case if the order of the court relates to a same sex couple marriage. This type of order may not be considered valid in another state that does not recognize same sex marriages. Currently, Ohio does not recognize same sex marriage and therefore, does not recognize a marriage determined as valid in another state.
If you live within this concept of non-traditional family, the following bullet points are issues of concern for you:
- When drafting a will or trust, caution needs to be taken to expand the definitions of child/children, spouse, and “issue”;
- Transfers of real estate into the name of the same-sex partner could trigger a taxable consequence;
- Deposits into joint accounts could trigger a taxable consequence;
- Health benefits offered to same sex partner could be taxable;
- Certain state laws could cause insurance companies to fail to pay upon death, if such state states that there is no insurable interest in the life.
Heterosexual unmarried partners also have difficulties that are similar to many of the above issues. One of the more interesting cases involved the lead singer of The Doors, Jimmy Morrison. He was not married when he died and if did not have a will, his estate would have transferred to his parents. However, he DID have a will, and when he passed away, his estate went to the beneficiary named in his will, that being his then-girlfriend Pamela Courson, which included 25% of his interest in The Doors (and of course the music). Less than three years after Jimmy Morrison’s death, Pamela Courson died of a heroin oversose. Unfortunately because Pamela Courson died intestate, her fortune (that being the Morrison estate) transferred to her parents.
Estate planning is complex, and when there is a non-traditional family involved, it becomes even more complex. The advice of an attorney, combined with the advice of an accountant is extremely invaluable.