June is LGBTQ Pride Month, and whether you are just starting out as a couple or approaching a golden anniversary, you have every reason to be proud. You have fought for numerous rights and succeeded on many levels, including the right to marry.
Celebrate your union in June by tackling another – often overlooked – milestone as a couple: your estate plan.
If you are young and still building financial resources, it’s a mental leap to imagine you will ever have assets or be “old enough” to need an estate plan. This is a common misconception and even people who are “old” still do not have estate plans.
Rest assured, over time you will acquire “stuff” in addition to valuable personal property such as jewelry, collections or heirlooms. You will create a savings plan, invest in real estate, start an IRA or 401k or maybe inherit from loved ones. Stuff has a way of accumulating, as we all know. In this way, sometimes without even noticing, you become an estate holder. But estate plans are so much more than “who gets your stuff” when you pass away! (Read on and we will explain.)
If you are a couple that has been together forever, you may have accumulated many possessions in your life together. You may have even started an estate plan, maybe you have a Will or even some notes written on the famous dinner napkin (called a Holographic Will). Regardless, we urge you to read on. You may not be as protected as you think. (In fact, out of all of the existing plans we see, over 95% of them have fatal flaw).
ESTATE PLANNING MYTHS
Estate plans are not only for the elderly and wealthy. Everyone over 18 years old needs some level of estate planning whether you have assets or not! It’s true that the more assets you have or if you have children, the more critical it is to have a comprehensive and updated estate plan. However, every adult needs to be protected should the unthinkable happen.
- I have very few assets, and do not need an estate plan? (WRONG!)
- I am married, won’t my spouse automatically be able to handle everything? (NOPE!)
- I have kids, won’t they just automatically get my stuff? (Not necessarily and do you really want them to inherit everything at 18, should you die unexpectedly? HOPE NOT!)
- I am not going to become incapacitated and I’m going to live forever. (It’s human nature to ignore the fact that 50% of those over 80 will get dementia and need care and one day we will all die).
Here are a few additional things to consider:
- Who wants to think of incapacity or death? No one, until something tragic happens and then it’s too late!
- If you have a special needs person in your life, do you want to mess up their public benefits by leaving them a gift? Of course not!
- If you have someone close to you but you are not married, will he/she inherit from you? Not without the proper legal documents in order BUT a distant 3rdcousin you don’t like may inherit everything!
- Do you want to waste tens of thousands of dollars on Conservatorship and/or Probate? If not, you need a Trust!
An estate plan is a way to memorialize your wishes into a set of legal documents so they can be honored in the event of mental incapacity or death. The two main components to an estate plan are: (1) planning for how you want to be cared for and (2) what to do with your stuff.
As we mentioned earlier, estate plans are not just about what you leave behind when you die. If something were to happen to you and you were unexpectedly unable to care for yourself due to lack of mental capacity, then what?
Ask yourself any of these questions and see what you think…
- Who is able to communicate with your doctors and make decisions about your medical care on your behalf?
- Who has the authority to help with end of life decisions and to carry out your wishes?
- Who can make legal and financial decisions on your behalf? (Remember if you become incapacitated, no one can access your assets!)
Making medical decisions that follow your wishes, the ability to pay bills and access your money in order to care for you are important but an estate plan should also address what and who should surround you, to give you joy and comfort. And don’t forget; who has access to your social media and online accounts? If you want your loving partner to be the decision-maker, an estate plan is the only way to ensure it.
If you become incapacitated, all of these day-to-day and major decisions will hang in the balance during the court process of Conservatorship. This is where a judge will determine who will make all of these decisions after spending at least $10,000. If you think it ends there, it doesn’t. It will cost $3000-$5000 per year for the rest of your life to be conserved.
Spelling out the distribution of your assets is one vital piece of your estate plan. Not just because you want to give your loved one’s important belongings but because often, when these details are not expressed in writing, families fight. No one intends to add to their family’s grief by not having a clear plan in place if something were to happen to you, but we see it every day.
This involves all of your property, from your beloved dog, Rambo, to the condo you own and rent out, as well as those (questionable) Japanese prints you “inherited” from your college roommate. Your stuff can easily fall into the hands of someone who is not your first choice if you fail to plan. If you have assets over $150,000 and no Trust, your family may end up in probate court. It’s the law. (Don’t panic, keep reading….)
After you are gone, if you do not have a Trust, those closest to you will likely have to initiate a Probate. They will be grieving and need to find a lawyer and wait months before they have access to your assets. God forbid there is a battle between two loved ones, it could be a year before they have access to your assets. On the other hand, a trust administration is relatively seamless (when the trust is done correctly), totally private and much less expensive.
For an estate plan to protect you, it must include:
- An Advance Health Care Directive (AHCD) that specifies who can make medical decisions on your behalf and enumerates your wishes;
- A HIPAA Waiver so that the medical community will speak to those you love;
- A Durable Power of Attorney for Finance (DPOA) that names who can make financial and legal decisions on your behalf. (These two documents will avoid Conservatorship);
- A Trust if you have assets such as a house or if you are leaving your estate to young people (your kids or if you don’t have any, the kids of others); and
- A Will if you have special sentimental or financially valuable personal property items, kids or pets.
YAY ME, I ALREADY HAVE AN ESTATE PLAN!
If you have an existing estate plan, KUDDOS TO YOU! But before we uncork the Veuve Clicquot, when was the last time you updated it? (We know… sorry to be Debbie the Downerhere, but…)
- Was it done before or around 2004? HIPAA (the privacy law between the doctor and the patient) came into law in 2004 and AHCDs around that time or earlier do not include it. This means that your health care agent can make decisions, but the doctor isn’t allowed to provide any information, legally.
- Do you have a Durable Power of Attorney for Finance? It should also be updated to address online assets. Certain powers must be specifically stated, or your power of attorney may not be able to access everything to care for you.
- Do you have a trust that is more than five years old? The estate tax laws have significantly changed. You probably will not have to pay them (assuming you have less than $11.4M in 2019), but your trust may be structured to reduce estate taxes and be much more cumbersome and expensive to administer.
- In addition to people having children or changing who they want to be in charge, there are many more examples of what causes an estate plan to fail. Remember once you lose mental capacity (or of course die), you cannot update your documents.
Our rule of thumb is that every estate plan is should be reviewed every 5 years or with any major life change (marriage, divorce, births, deaths, etc.).
BUT IT’S PRIDE MONTH, WHAT DOES THAT HAVE TO DO WITH AN ESTATE PLAN?
Well, frankly, it has EVERYTHING to do with Pride Month! Think about it… the harsh truth is that not everyone respects your relationship. LGBTQ couples are particularly vulnerable to bias and prejudice if decisions about what you would want are left to be made by a judge or an unsupportive “next of kin.” We are talking about tough issues THIS MONTH in particular because we want to educate you about the legal pitfalls of not having planned for the unexpected (or the inevitable).
Being married certainly helps from a legal perspective but let’s face it, it is not a guarantee that your wishes will be fulfilled. And for those LGBTQ couples who are not married, the effects of not having an estate plan can be devastating. If you haven’t seen Bridegroom, please watch it.
If it sounds like we are trying to scare you, WE ARE. As sad as it is, even in our ever evolving, progressive community, this is a familiar reality for many LGBTQ families. Please do not let it be true of yours.
In short, estate planning can involve digging into unpleasant topics at first. None of us like to think about our incapacity or mortality. Sometimes it even involves opening up old wounds you’ve worked to get beyond. But just like anything that is good for you, it may hurt a little at first, but it’s worth it in the long run. And we will help you every step of the way.
Goldfarb & Luu brings the rare combination of expertise, compassion and reality-based planning to the table. The right estate planning law firm will counsel you wisely, preventing any cracks in the foundation of your plan. When your estate plan goes into effect, your family will need experienced, kind, and supportive counsel to help them navigate through that difficult time. Helping families maintain harmony is what we do.
As summer heats up, we are ready to make estate planning a comfortable process for partners of every stripe, with messy family drama or no drama at all. Call or email us for a complimentary consultation.