Health and Wellness

Incapacity Planning for LGBT Individuals

Two women smiling while sitting on a bench

It has now been three years since the Supreme Court’s landmark Obergefell v. Hodges ruling made same-sex marriage a constitutional right. Most importantly, the ruling proved to be a major step on the road to genuine social equality.

Obergefell v. Hodges also eliminated many of the financial hurdles and disadvantages that were commonly associated with civil unions. From the ability to file joint tax returns and receive spousal benefits from employers and the Social Security Administration, to reduced complexity with healthcare planning and estate planning strategies, 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 parental and sibling challenges are more likely to occur.

Preparing the essentials

Accidents and unexpected health crises can happen at any time. By not preparing for that possibility, you’re essentially letting the courts decide what’s best should something happen to you. At a minimum, you should work with an estate attorney to prepare a last will and testament, a revocable living trust, a durable power of attorney, a healthcare proxy and a living will.

Your Last Will and Testament not only directs the distribution of your assets, but also determines who will be the guardian for any minor children, how and when your children will receive their inheritance, and who will serve as executor of your estate. When you pass on your Will, along with a petition and required notices, are submitted to the Probate Court which then appoints an executor (almost always the designee named in your Will) and authorizes your executor to collect your assets and distribute your estate.

With a Revocable Living Trust, you title your assets to a trust (where you can be the trustee) to be used for your benefit during your lifetime. Any remaining assets are then transferred to designated beneficiaries at your death by an individual (or a bank or trust company) whom you appoint as your "successor trustee." Unlike a Will, a living trust provides the advantages of privacy and avoiding probate, which can mean a much quicker and less costly distribution of assets to your heirs. However, to be effective you must transfer all of your assets to the trust during your lifetime, otherwise probate will likely be required.

A Durable Power of Attorney empowers a named individual to act on your behalf (if needed) in various legal and financial matters, such as filing tax returns, accessing accounts or paying bills should you ever become incapacitated. It’s important to note, however, that 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 should you become incapacitated. 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 most 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 recent University of Washington study found that 41 percent of LGBT Americans age 50 and older are living with a disability—a significantly higher percentage than their heterosexual peers.1 The likelihood that you may be unable to work for an extended period and experience a corresponding income disruption is great. It’s therefore vital that you have an appropriate level of disability coverage to provide income replacement and protect your family’s financial well-being.

Your 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

It is estimated that by 2030 the population of LGBT Americans over the age of 65 will exceed eight million. Yet research shows that LGBT seniors are twice as likely to be single, twice as likely to live alone and three to four times less likely to have children than their heterosexual peers.2 Add to this a higher rate of family estrangement, and the likelihood of being on your own later in life necessitates thoughtful planning for future care.

If you’re on your own, you’ll want to try to save more for retirement since you will be funding it entirely yourself. You may also want to consider researching LGBT-friendly retirement communities to help create a stronger support network. SAGE’s National LGBT Housing Initiative provides a searchable database of LGBT elder housing resources.

Perhaps no other cost, however, 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.3 Rather than paying out-of-pocket, you may want to consider mitigating some of the long-term care risk for you and/or your spouse by purchasing long-term care insurance.

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 (although if you never need the benefits your premiums are forfeited) to life insurance policies and annuities that offer optional long-term care benefits for an additional cost. Typically with these types of policies, if you need long-term care coverage, it’s paid out of the policy’s death benefit or long-term care rider according to a pre-determined payment schedule. Any unused portion of the policy death benefit is then transferred tax efficiently to your heirs upon your death.

Financial guidance and advice

With the legal and regulatory environment constantly shifting, it’s never been more critical for members of the LGBT community to stay on top of not only new laws and regulations, but also what may potentially be coming down the road. You face a variety of very unique planning complexities and potential pitfalls. For example, did you know that if you haven’t legally adopted your spouse’s child, you could be denied the right to make care decisions or even have visitation privileges if the child is hospitalized?

It’s just one example of the types of issues and considerations that your advisor can help you prepare for in advance. Don’t wait until it’s too late. Talk to your advisor today about putting a plan in place for various possible outcomes down the road.

Make sure your wishes are taken care of 

Your SunTrust Private Wealth advisor can help you develop a plan for your future that works for you.

1 University of Washington, “Aging with Pride: National Health, Aging, Sexuality/Gender Study,” February 2017

2 The National LGBT Health & Aging Center, 2015

3 National Clearinghouse for Long Term Care Information

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