California Estate Planning For LGBT Partners

by April C. Ball, Esq.

Estate planning is important, especially for same-sex families. While California registered domestic partners have the right to hospital visitations and make medical decisions for their registered partner, it is advisable to have such wishes in writing. And, without an estate plan, state law will determine who your beneficiaries will be, and how much their distributions may be.

Also, while registered domestic partners may be appointed by the court as administrator of their registered partner’s estate upon death, it is prudent to avoid the time and expense of a court process in order to be appointed.

The answer is a complete estate plan. Not only will a complete estate plan avoid the consequences of poor planning, it will also ensure that your intended beneficiaries receive the gifts that you desire as quickly as possible.

What is an Estate Plan?

An estate plan protects personal and business wealth through a revocable plan that distributes and manages assets, while reducing estate-tax liabilities.

Why is an Estate Plan Important?

An estate plan will help you to preserve your assets for your family and provide for their security in the event of your incapacity or death. When properly completed, an estate plan provides you with the peace of mind that your minor children, partner and beneficiaries will be cared-for as you wish, and not as a court decides.

Your estate plan allows you to provide detailed instructions on the distribution of your assets upon death. It may provide for your domestic partner, whether or not you are allowed to register or formalize your relationship in your particular state. If you have minor children, it will name guardians for their care and may name custodians for any money they may inherit while they are minors in order to ensure their proper support and education. You may decide at what age your children receive outright distributions of assets and how you prefer your real estate or business to be managed.

The federal government and some states impose a tax on the value of your estate. Currently, the federal estate tax is as high as 46% for amounts after the federal tax exclusion rates are applied. Therefore, the amount of federal tax that your estate may owe can be directly influenced by how your assets are distributed. With proper estate planning, you may also minimize estate tax liabilities.

Without a valid and proper estate plan, the laws of your state will dictate who will make your health care decisions, who will receive your assets, who will care for your minor children and how much taxes are owed. This is particularly alarming for same-sex couples living in states that do not have any legal protection for their relationship. Even in states with legal protection, it is advisable for couples to specify their wishes in writing in order to avoid unnecessary court battles.

Which Estate Plan is Right for Me?

Golden EggAn estate plan begins with a choice: Last Will and Testament or Trust? A Last Will & Testament directs the transfer of your assets to your named beneficiaries, names the person(s) to manage the transfer [called an Executor or Personal Representative] and determines the guardian for any minor children. In most cases, a Last Will & Testament must be supervised by the Court, which is called a Probate. This means that there will be Court fees and costs and a public record of your personal affairs. In California, there are also statutory attorneys fees that may be imposed, based on the value of your estate. Further, the Probate of a Last Will & Testament may take several months to years, delaying the delivery of assets to your beneficiaries.

A Trust also directs the transfer of your assets to your named beneficiaries, names the person(s) to manage the transfer [called a Trustee] and prepares for the guardian for any minor children. Unlike a Last Will & Testament, a Trust is not Court supervised; it is pre-planned to avoid Probate. The pre-planning involves two steps: 1) creating a Trust that suits your current needs and that may be updated from time-to-time to account for changes in your family and 2) transferring your personal assets into the name of your Trust. Then, upon your death, your Trustee simply supervises the distribution of your assets, avoiding the time and expenses associated with the Court system. And, because there are no courts involved, the Trust and its contents are kept private.

What Additional Documents Will I Need to Complete My Estate Plan?

A Power of Attorney is a document which allows the person or persons you name to act as your legal agent (sometimes called your attorney-in-fact) should you become incapable of making decisions for yourself. There are different types of Powers of Attorney. For example, a Power of Attorney for Property Management authorizes the named person(s) to manage your assets, financial and personal affairs. This would include items such as making mortgage payments for you should you become incapacitated, caring for your pets or even signing documents on your behalf. A Power of Attorney for Health Care authorizes the named person(s) to make health care decisions on your behalf, per your specific wishes concerning items such as hospital care, pain relief, autopsy, organ donation and burial decisions.

Without valid Powers of Attorney, your partner may need to go to Court to be granted the power to act on your behalf for your health care decisions (called a Conservatorship for your Person) or financial affairs (called a Conservatorship for your estate). Conservatorship proceedings can be costly and time consuming. An Advance Directive (commonly referred to as a Living Will) contains your end-of-life instructions, including your wishes regarding life support issues.

What if I Have a Large Estate?

California abolished the state inheritance tax. For federal estate tax purposes, every person has an exemption of $ $2,000,000. For individuals with estates greater than the exemption amount, there are additional planning tools to help minimize the impact of any estate taxes. Such tools include: an Irrevocable Life Insurance Trust (ILIT), gifting of family limited partnership interests or charitable remainder trusts. A charitable foundation or non-profit organization may even be created with your estate assets.

How Should Business Owners Plan?

A proper plan for a business owner is one that ensures that both the individual estate plan and business documents protect your beneficiaries. Therefore, your estate planning documents should contain language providing for business continuance and asset succession, such as: language for the operation of “S” corporations, specific bequests of certain business assets, and, for California Registered Domestic Partners, clarification on the vesting of the business as separate or community property. To correspond, the business documents should also address your estate planning wishes, which may be reflected in: Bylaws, Partnership Agreements or Operating Agreements; Stock, Partnership or Membership Certificates; Corporate Shareholder Minutes; and Buy-Sell Agreements.

When Should I Plan?

With estate planning, the key is to act now. It is critical to create an estate plan that suits your needs. It is also important to update it from time-to-time as matters in your life change. Don’t procrastinate and, therefore, allow a Court to choose your beneficiaries and appoint persons to make decisions for you and your partner’s family.

Information published on The Rainbow Babies website is not a substitute for proper medical advice, diagnosis, treatment or care. Always seek the advice of a physician or other qualified health providers with any questions you may have regarding a medical condition.

Disclaimer: The Rainbow Babies provides sample contracts and legal/social health articles for informational purposes only—please do not consider it as legally-binding advice of any kind.