Five planning considerations for the LGBTQ+ community

At Mesirow, we focus on the unique needs of our clients. In this article, we highlight five financial and estate planning considerations for the LGBTQ+ community that our advisors are always mindful of..

1.     Family planning

Same-sex and LGBTQ+ couples who want to have children need to prepare for the multitude of costs associated with their family planning options. The costs of surrogacy, fertility treatments, adoption and other family planning alternatives can cost upwards of $100,000.¹ As with any major financial goal, our clients have found that the best way to achieve it is with a defined and achievable plan. Mesirow advisors can  work with your tax advisor to determine if any tax deductions or credits are available, and we encourage our clients to explore all employer-provided benefits that may be available.

2.     Long Term Care

For many reasons, a significant percentage of people in the LGBTQ+ community will not have children. This may impact planning for a person’s golden years and future long-term care needs. As a practical matter, parents often rely on their children to assist them as they age, whether that means occasional assistance with errands and chores, transportation to appointments, custodial care in their home (or the child’s home), or serving as their parent('s) advocate if skilled nursing care is needed. An alternative solution is to include the cost of care givers, assisted living arrangements and skilled nursing facilities into your retirement plan. Mesirow advisors can help you modify or create a financial plan to address these needs and provide peace of mind in retirement.

3.     Prepare your estate plan documents

Despite current legal protections for LGBTQ+ individuals, including marriage equality, prudent planning means making your wishes explicit and legally binding. This means having a comprehensive estate plan prepared by your attorney. These documents include a Power of Attorney, Health Care Directive, and HIPAA Authorization, which allow you to name your spouse, partner, trusted family member (including chosen family) to make legal, financial and health care decisions for you, and to access your private healthcare information, in case you become incapacitated. While these documents are especially important as you age, they are also critical at any time in life if you are hospitalized and incapacitated through illness or injury, even if temporarily. With valid and properly executed documents in place, your designated representative cannot be denied the ability to make decisions for you and take care of your affairs. This can be vitally important in an already stressful situation where gatekeepers may lack the appropriate empathy for members of the LGBTQ+ community.

In addition, your estate plan should include a Will or Trust that provides how your assets will pass after your death. It also allows you to name the person who will settle your estate as Executor or Trustee. LGBTQ+ persons should explicitly define who their spouse or partner is and provide for bequests to that person regardless of legal status, to preent possible challenges from disgruntled family members or changes in the law. If challenges from family are a particular concern, you should discuss with your attorney provisions to discourage such challenges, such as an “In Terrorem” clause, explicitly disinheriting potential challengers, and/or excluding such persons from serving as your Executor or Trustee.

When it comes to deciding whether a Will or Trust is appropriate for you, one consideration for many in the LGBTQ+ community is privacy. If you have a Will, your estate must be settled through a public proceeding at your local probate court. Your Will and estate inventory must be filed at the court and likely will become accessible to the public. Your chosen Executor may also face unwanted friction from the judge or court personnel who maybe influenced by their own biases. To avoid this, members of the LGBTQ+ community may wish to consider using a Revocable Trust as the means to pass on their assets after their death. Once created, you would need to transfer your assets to the Revocable Trust during your lifetime. After your death, the person you name as the successor Trustee automatically has the authority to settle your estate and distribute your assets according to your wishes. There is no court involvement or other public access to your trust document.

Let’s shift focus for a moment to anyone who has (or may have in the future) family or other loved ones in the LGBTQ+ community. They should be mindful that their own estate plan documents are inclusive. For instance, if they provide any benefit in their plan for a person’s spouse, they may wish to define the term “spouse” in the documents to include same sex as well as opposite sex partners, regardless of state law. They may also wish to define a person’s spouse by name to avoid any ambiguity. In addition, they may wish to acknowledge the past or future gender transition of a beneficiary and specify that a bequest to an individual does not lapse just because that person has legally changed their name or gender. For instance, if your document provides for a $20,000 bequest to your grandson William, inclusive drafting may avoid a family fight if they later become your granddaughter Nicole.

4.     Coordinate beneficiary-designated assets with your estate plan

Part of the estate planning process should include coordinating your beneficiary-designated assets with your estate plan. These assets include retirement plans, IRAs, life insurance, annuities and any financial account that has a Transfer or Death (TOD) or Pay of Death (POD) designation. These assets pass at death to the person named in the asset’s beneficiary designation form, no matter what it says in your Will or Trust. This will ensure all your assets pass at your death the way you intend.

5.     Who is your family?

Financial and estate planning involve not only your goals for yourself, but also your wishes for your family. When it comes to the LGBTQ+ community, the advisors at Mesirow understand that “family” can mean different things to different people. For an increasing number, it means your spouse, children and grandchildren. For many others, it means your partner, as well as your close relatives that have affirmed and supported you. Perhaps it means your chosen family who were there for you when your family was not.

For many in the LGBTQ+ community, “family” extends to charities and community organizations for which they have a passionate affinity. Mesirow can provide insight into lifetime giving options that fulfil your intentions while maximizing tax benefits. We can also work with your attorney to establish charitable giving opportunities upon your passing that also provide tax benefits, including charitable trusts, donor advised funds and private foundations.

In conclusion, your financial and estate planning goals should be as unique as you and drive the conversations with your advisor. If you, or someone you care about, would like to have that discussion, contact your Mesirow advisor today.