Incapacity Planning for LGBTQ+ Individuals

It’s now been six years since the Supreme Court’s landmark Obergefell v. Hodges ruling made same-sex marriage a constitutional right. A major step on the road to genuine social equality, the ruling eliminated many of the financial hurdles and disadvantages commonly associated with civil unions, providing married LGBT+ couples with:

• The ability to file joint tax returns;
• Eligibility for spousal benefits from employers and the Social Security Administration; and
• Reduced complexity surrounding healthcare planning and estate planning

Legally married same-sex couples finally have fair and equal treatment under the law.

Equality, however, doesn’t eliminate the need for thoughtful financial planning and clear, thorough documentation of your wishes. This can be especially important in nontraditional families where parents and siblings are more likely to contest wills, custody and/or healthcare decisions.

Preparing the essentials

An accident or unexpected health crises can happen at any time. Don’t let the courts decide what’s best should something happen to you. At a minimum, sit down with an estate attorney to prepare the following five documents:

• Your Last Will and Testament directs the distribution of your assets, determines who will be the guardian for minor children, names the executor of your estate, and lays out how and when your children will receive their inheritance. Upon your death, your will (along with a petition and required notices) is submitted to the Probate Court which then appoints an executor (almost always the person you name in your will) and authorizes them to collect your assets and distribute your estate.
• With a Revocable Living Trust, you place your assets in a trust (where you can be the trustee) to be used for your benefit. Upon your death, any remaining assets are then transferred to your named beneficiaries by whoever you appoint as “successor trustee” (an individual or a bank/trust company). Because living trusts pass outside of probate, they can provide a much quicker and less costly distribution of assets to your heirs.
• If you ever become incapacitated, a Durable Power of Attorney allows a trusted individual to act on your behalf in various legal and financial matters (e.g., filing tax returns, accessing accounts, or paying bills). Each state has its own laws governing Powers of Attorney, with some states even providing specific forms for residents to utilize.
• Healthcare Proxies (also known as a Medical Powers of Attorney) are advanced medical directives that appoint a named individual as your agent to make end of life medical decisions on your behalf if you are unable. As with Durable Powers of Attorney, each state has its own unique version of this form (and some require that it be notarized).
• While a Healthcare Proxy authorizes another party to make medical decisions for you when you can’t, a Living Will makes your exact wishes known regarding medical treatment in the event you are no longer able to express your own desires.

Together, these documents will help ensure that your wishes are carried out and (perhaps more importantly for same sex couples) will potentially lessen any emotional tension that may exist between your spouse and other family members. Keep in mind that at any point in time (up to death or incapacitation), you have the right to modify these important documents.

Disability insurance for income planning

A 2017 University of Washington study found that 41 percent of LGBTQ+ Americans age 50 and older are living with a disability—a much higher percentage than the general population.^{Disclosure 1} The chance that you might experience an income disruption due to being unable to work for an extended period is high. So make sure you have an appropriate level of disability coverage to provide income replacement and protect your family’s financial well-being.

Your Truist Wealth advisor can help you assess your coverage options, as well as determine an optimal strategy for paying premiums: whether to pay with pre-tax dollars and receive a taxable disability benefit, or to pay with after-tax dollars to secure a tax-free benefit.

Eldercare and long-term care planning

LGBTQ+ seniors are more likely to be single and live alone, and less likely to have children than their heterosexual peers. Add to this a higher rate of family estrangement, and the chances of being on your own later in life make planning for future care even more important.

If you’re on your own, you’ll want to try to save more for retirement since you can’t rely on a spouse’s pooled assets. You may also want to consider looking into LGBTQ-friendly retirement communities to help create a stronger support network. SAGE’s National LGBT Housing Initiative provides a searchable database of LGBTQ elder housing resources.

But no other cost can be as financially devastating as the cost of long-term care. According to the US Department of Health and Human Services, approximately 70 percent of Americans who are currently age 65 or older will need some type of long-term care—costs that are NOT covered by Medicare.^{Disclosure 2} And those costs can run in excess of $100,000 a year.

Rather than paying out-of-pocket, there are various types of long-term care insurance—from traditional policies where you pay an annual premium in exchange for long-term care coverage, to life insurance policies and annuities that offer optional long-term care benefits for an additional cost.

Financial guidance and advice

With the legal and regulatory environment constantly shifting, it’s never been more critical for members of the LGBTQ+ community to stay on top of new (and proposed future) laws and regulations. You face a lot of unique planning complexities that your Truist Wealth advisor can help you prepare for in advance. Don’t wait until it’s too late. Put a plan in place today for all the possible outcomes down the road.