Question: Hi Chris – my partner and I are starting to accumulate assets together – equity in a jointly owned house, beneficiaries on each other’s life insurance, etc. Although we are legally married in Canada, as a same-sex couple and US citizens our marriage is not recognized by the federal government nor the state of North Dakota. Should we spend the money to set up a trust in order to try to avoid the debilitating taxes that the other would incur should one of us pass away? Is there a better way to try to protect each other? Thanks! David, Fargo, ND
Answer: You have a lot of work to do to financially protect yourself and your partner. I wish I could say it was otherwise, but it isn’t in the current environment. To be sure, the law is in flux in a number of states with same-sex marriage, civil unions, and domestic partnerships. But for now the burden is on same-sex couples to protect each other through a combination of a will, a living trust, power-of-attorney, and other legal documents. By the way, a trust won’t save your partner or you from a tax hit at death. The real value of a trust is that it makes it more likely that your estate planning intentions are followed by the courts.
My favorite resource for understanding and dealing with the financial issues faced by same-sex couples is The Legal Guide for Lesbian & Gay Couples by Denis Clifford, Frederick Hertz, and Emily Doskow. It’s a self-help legal guide published by Nolo.com. You can see it here. I would then work with an attorney to set up your finances in a way that protects both of you.