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Special Considerations for Same Sex Couple’s Estate Planning

Estate planning is important process for any couple, but same sex couples have an even heightened reason to ensure the protection of their union. While the recent election resulted in more states legalizing gay marriage, many states, including California and the federal government still do not recognize gay marriages as legal. While the U.S. Supreme Court’s ultimate decision on the Prop 8 case may again allow same-sex couples to marry in our state, those couples would still not receive full recognition of their union at the federal level.

This means that for same sex couples in California to fully protect their relationships, significant planning needs to be done. A lawyer well versed in trust and estate planning can be of great assistance in creating a comprehensive estate plan.

In an interview with CNBC, a financial consultant with Schwab noted that “The federal government does not treat [same-sex couples] as married couples and this creates financial and tax complications.”

The first must-do item for any couple, especially same sex couples, is to create a will and trust. A will determines who receives your property, names a guardian for your children and their property, and determines and executor. Passing away without a will means you die “intestate” and your property and assets are distributed according to the intestate succession laws of the state.

In California, according to Probate Section 6400, any part of the estate of the deceased goes to the spouse. For same sex couples legally married in California, dying intestate is not an issue. However, for the majority of California’s same sex couples, dying intestate means leaving nothing to their partners or adoptive children. While California permits same sex couples to jointly adopt children, if a single partner adopts a child before the marriage and no second-parent adoption takes place, the couple’s children could be at risk for losing their second parent.

Planning to Reduce Estate Taxes
Another important reason to seek an estate planning lawyer is to create a plan which reduces the federal estate taxes that hits with the death of one spouse. Heterosexual couples can rely on the rule that allows property to pass to a married spouse tax-free. However, because the federal government does not recognize same-sex marriages, even legally married same sex couples cannot take advantage of this option.

Same sex couples can however create a bypass trust which gives the surviving spouse access to the deceased spouse’s property without having that property included on his or her taxable estate. This way the property “bypasses” taxation when one partner dies.

While same sex marriage in California could be around the corner, some issues will still plague same sex couples nationwide because of the lack of federal recognition for gay marriage. Many laws affecting same sex couples are state specific, so it is important to contact an attorney in your surrounding area, or any area in which you own real property or significant assets. In the San Diego area, the Law Office of Scott Soady is available to help with a range of estate planning and trust law issues.

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