LGBTQ estates — when planning is a civil right

June 13, 2024 4:12 PM

LGBTQ financial advisors, estate planning lawyers and other professionals have launched the The Stonewall Legacy Project, planner Laura LaTourette told Financial Planning.

Named for the 1969 Stonewall Uprising, the older LGBTQ adults who are part of the aging Stonewall Generation are confronting specific challenges related to their identity, according to LaTourette, the founder of Dahlonega, Georgia-based advisory practice Family Wealth Management Group. She is leading a steering committee for advisors as part of the project alongside others for lawyers and nonprofit organizations and their donors.

While the half dozen areas of LGBTQ estate planning covered in the slideshow below could apply to clients of any age, gender or sexual orientation, they can take on special importance to LGBTQ clients. LaTourette said older LGBTQ adults need a place to find a directory of professionals that can serve them with an understanding of their particular needs and a central plan for work that would benefit from their philanthropy. Amid political efforts aimed at restricting LGBTQ civil rights, those missions have turned even more important, she said.

"We're a priority where it's necessary for a couple of years, and then it goes on the backburner," she said. "The AIDS epidemic was handled by the gay community. We were left alone. We were isolated. It was the gay community that saved the gay community. … If we don't pay attention right now and build out a strong national philanthropic committee, we will continue to be playing defense all the time instead of playing offense and building out our community."

For an overarching perspective on the most important estate planning issues for LGBTQ clients and their advisors, FP interviewed LaTourette and the following experts:

Elizabeth Schwartz, an estate planning attorney who is the author of "Before I Do - A Legal Guide to Marriage, Gay and Otherwise," and the founder of Elizabeth F. Schwartz Attorneys & Mediators.

Jana Davis, a financial advisor with Santa Monica, California-based registered investment advisory firm Abacus Wealth Partners

Barbara Bilello, a partner and wealth advisor in the Morristown, New Jersey-based office of RIA aggregator firm Corient

Anne Rhodes, the chief legal officer of estate planning technology and advisory firm Wealth.com

Katie Carlson, the head of wealth strategy for Bank of America Private Bank

Schwartz, the co-chair of the Legacy Project alongside Jerry Chasen, and other nascent participants are seeking "to amplify the push for all advisors working with LGBTQ+ individuals and families to have these truly courageous conversations about funding our movement at death" to "any and all LGBTQ+ nonprofits, whether local, statewide or national," she said in an email. As "one component of a broad initiative to increase planned gifts to LGBTQ+ organizations," the project will supplement the "National Planning Giving Initiative," run by LGBTQ community organization the Horizons Foundation, Schwartz noted.

The project will invite advisors or other professionals serving LGBTQ clients to sign a pledge committing to raise awareness of the generational wealth transfer and the significance of leaving assets to LGBTQ organizations.

"Our plan is to post the pledge we've created, and folks can digitally sign it to demonstrate their commitment to this mission," Schwartz said. "Every advisor who commits to this will have their name and (if they'd like) their contact information listed as a participating advisor. This information will be available on our website and function as a guide to our community."

With wider awareness, more large RIAs and wealth management firms are investing in units specifically targeting LGBTQ clients with assistance around key services like estate planning. For instance, Davis is part of one such team of seven professionals at Abacus.

"I don't want any part of the government to decide what happens to my stuff," Davis said. "Call me jaded. The more I keep the government out of my decisions, for me, the happier I will be, the better I will sleep at night. The good news for my clients is there are the tools. You just gotta get it done. Be vigilant."

At Corient, Bilello and fellow advisor Lisa Neira "created a specialty practice" focusing on LGBTQ clients, she noted. Once clients have an estate plan in place, "No one can say that your documents aren't valid," Bilello said. So it's "vitally important for this community to get up and get out there and understand what they might be missing" in their plans for the future — because there is one key difference between LGBTQ clients and others, she added.

"Regardless of whether or not you are a member of the LGBTQ community, the lion's share of the challenges and benefits are pretty similar," Bilello said. "Their relationships aren't constantly being scrutinized and debated as to whether or not they are real relationships. The critical piece to this community is, get started, pick up the phone, go to your advisor."

For insights from experts on a half dozen different areas of estate planning for LGBTQ clients, scroll down the slideshow. For more resources on working with and advocating for older LGBTQ clients, visit the website of civil rights and services organization SAGE.

And find more of FP's coverage of LGBTQ practice management, industry issues and advisor recruiting moves here:

The importance of estate planning

Laura LaTourette is the founder of Dahlonega, Georgia-based advisory practice Family Wealth Management Group.

Laura LaTourette

Estate planning gets to the heart of many financial matters affecting clients of any sexual orientation or gender, but LGBTQ clients in particular, experts said.

Estate planning has "has changed dramatically in the past 10 years" after the legalization of same-sex marriage, but there is a "heightened sensitivity" for LGBTQ clients, Rhodes said. "You have to make sure your estate plan is up to date, too."

One "simple" strategy for unmarried LGBTQ partners would be to "buy an insurance policy on your life and then designate" your partner or another person as the beneficiary, Carlson said. "Insurance solutions are something that's really critical."

Marriage and divorce affects health care, inheritance of assets such as individual retirement accounts and many other issues, according to LaTourette. "It's a problem because they're so used to being private and rejected and not telling anyone," she said of LGBTQ couples. "I explain to them how wealth transfers for married people are much more beneficial than for unmarried people."

"Most firms have LGBTQ marketing material, and there are lots of resources out there articulating what specific needs LGBTQ people have, but they have to be able to have an authentic conversation and understand where the community has come from," Schwartz said. "Sometimes financial advisors think of marketing to our community as more about bringing in business than it is being of service. Then they're frustrated when the referrals don't come pouring in. If you have a passion to serve the underrepresented, and you authentically have an interest in protecting this community, they will come. It's not just about putting a rainbow on your marketing material during the month of June."

Health care a focal point

Certain documents and employer health insurance decisions can help or hurt LGBTQ clients — depending on whether they have planned for the worst-case scenarios.

Documents known as the healthcare directive or healthcare proxy, the durable power of attorney and the hospital priority visitation are important to talk through and keep on file for "whenever you're faced with those difficult decisions," Carlson said. "It's really critical that you have those and that the individual that you have named knows, No. 1, that you have named them and, No. 2, they should have copies of those documents and they should know the attorney who has them."

The question of whether LGBTQ employees can get health insurance coverage "really just depends on the company, unfortunately," according to Bilello, who said she "can't believe it's 2024 and we're all still talking about this." She said that LGBTQ clients and their advisors need to seek out information about everything pertaining to health care. "It's the whole you don't know what you don't know and information isn't automatically going to flow in front of you," Bilello added. "Have conversations, look at the resources available to you, because it takes time to get all of these things established, and you want to be thoughtful as you're creating them."

Entrusting assets to designated heirs

Barbara Bilello is a partner and wealth advisor in the Morristown, New Jersey-based office of RIA firm Corient

Corient

Trusts serve many important purposes for the estates of LGBTQ clients.

Finding the right type of trust for clients "really just depends on how much wealth you have and the complexity of your wealth" to "avoid as much estate tax as you possibly can," Bilello said. In addition, they're "a private entity that no one can get access to without petitioning a court, whereas a will is a public document," she said. "I like to counsel the folks I work with to set up trusts," Bilello added. "They are yet another roadmap or a list of your wishes."

Davis prefers to use a "simple" revocable living trust that could be individual or joint-held entities among couples and give advisors and their clients the ability to "amend it all you want," she said. "It gives the legal heft for each of them to really spell out what they want and to get away from probate. For gay people, that's probably the one you want to avoid the most."

A grantor retained income trust consists of irrevocable gifts that can provide regular outlays during a client's life then get passed down at death, Carlson noted. "That income is received during your lifetime and then, upon your death, what's left in that trust can be distributed to your partner or others as you deem appropriate."

Chosen family

Advisors should enter conversations with LGBTQ clients about their estates without expectations or assumptions about their loved ones, experts said.

The discussion "has to be honest and open" because a lot of older LGBTQ adults "still don't believe we can get married, let alone get all the rights that come with it" and there are often "borderline stereotyping" views presupposing that they have designated friends to be their families, Davis said. "A lot of us have our chosen family. We still have to paper the heck out of it because the courts cannot decide for us, period."

Among the aging Stonewall Generation, there are many "who didn't think they were going to live past AIDS" and "even if they did, they didn't save for retirement," LaTourette said. Others may be transgender people who are "afraid to disclose who they are" to health care providers," she added. "As people age, they lose their support group because they built informal family groups with peers."

Any LGBTQ clients moving to new places should realize the extent of the paperwork that you need to really approximate a marriage" outside of the U.S. because "it's not just marriage but also adoption that gets a little tricky," Rhodes said. "Even though the United States may have made some good strides toward equality, you can't assume that it's always going to be the same if you move, especially if you move to a different state or country."

Many LGBTQ clients consider "their close friends to be their family," noted Carlson. "You really need to first start by understanding the individual's definition of family and knowing who that is. You start with understanding the family concept."

A warning about family members

Jana Davis is a financial advisor with Santa Monica, California-based RIA firm Abacus Wealth Partners

Abacus Wealth Partners

While estate planning gets messy in families of all kinds, an LGBTQ clients' family could pose a risk to their assets.

Estranged family members may decide they "want to play a greater role" all of a sudden in areas such as adoption and end-of-life health decisions, Rhodes said. "They feel they have this right because your partner happens to be the same sex or a domestic partner. They feel they can interpose themselves more so than with a 'traditional marriage.'"

Advisors and their LGBTQ clients should view estate planning as "another type of insurance" similar to policies on health, cars or homes, as "a liability is an anemic estate plan or one that doesn't exist at all," Bilello said. That's especially true in situations where one member of a couple is the breadwinner and a family member may try to intervene, she noted. "They'll question everything up or down as a family because they never really believed in the validity of the relationship. If you fail to protect each other when one of you is not around, the consequences could be dire."

Estate planning can help avoid "any kinds of things that we can't control like the rogue person who wants to interject their judgments on our lifestyle into the system," Davis said, noting that straight couples' heirs frequently fight over their assets as well. "We have to be more diligent, but the rules are kind of the same. A gay person needs to save money just as much as a straight person does," she added. "We're looking at all these ways that we have to be different, but the bottom line is there's so much that's the same."

"Because of the lack of rights, historically LGBTQ+ people have not always had their wishes followed," Schwartz said. "We've all heard the stories of the families who took money out, property that wasn't theirs and kicked out partners. So another threat is making sure that folks don't dismiss the concept of getting their ducks in a row and think 'why bother with an estate plan, my family will challenge that anyway?' We need to educate people that you can create a valid and enforceable estate plan."

Broaching the marriage conversation

Advisors venture far outside the usual conventional topics of stocks and bonds when they ask about their clients' marriage status, but that conversation may be just as important or more so than one revolving around any type of investment.

"It's about education and advice," Carlson said. "It's educating the individual around, what does their situation look like and how could it look different? They'll often say to you, 'Well I just don't believe in marriage.' And then you say, 'OK, and these are the steps we need to take.'"

"What's really important to know is that there are two unlimited deductions from the estate tax," Rhodes said. "The first one is charity, and the second one is your spouse. But you need to be married."

"The Stonewall Generation is four times less likely to have children than their heterosexual counterparts," Schwartz said. "Not having children is not so much a threat as an opportunity, and there are countless LGBTQ organizations who would benefit from post-mortem contributions much the way folks leave them for arts institutions, universities, hospitals and the like. Also, with the arrival of marriage equality, many folks somehow think that they were doing estate planning solely to legitimize their relationship under the law because they didn't have the freedom to marry and now that they can marry, they don't need to worry about such things. That's bonkers! Of course all people need to plan, to do advance directives stating their intentions and not only who the primary decision maker and beneficiary would be, but also who would the alternate be if that first person doesn't survive."

While advisors should approach the topic of whether clients are married "gingerly," they ought to remember that, "It's our job to ask the question, and so we need to be very comfortable in asking them," Bilello said. "I owe it to my clients that I have as much information as possible so I can give the best advice that I can provide," she added. "It's important, and if we're not asking those questions, then we're not doing right by our clients."

Homes, life insurance policies, Social Security and pensions revolve around the marriage question, Davis noted. "I actually have a good time with this conversation. Part of how I add value is that I get to be the unromantic one," she said. "I don't shy away from that conversation. I love it. … You guys aren't married. OK, how much do you want to take care of each other from the grave?'"