Probate Avoidance for a Same-Sex Couple

Estate planning is especially important for same-sex couples.

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Estate planning is a bigger concern to Jim and Terry than it is to many other men in their 40s. That's because Jim and Terry are a gay couple, who live in a state that doesn't offer same-sex marriage, registered domestic partnership, or civil union. And because in their state the surviving member of an unmarried couple does not have any rights to any of the deceased partner's property, their closest relatives would inherit their property unless they make other arrangements.

They own two large assets together: their house, which is worth about $375,000, and a mutual fund account. Over the years, they've bought a television, computer, stereo, furniture, and other household items together, too. Each separately owns bank accounts, a car, and a retirement account.

Because they're in good health and relatively young, Jim and Terry don't want to invest a lot of effort in probate avoidance right now. They've been planning just to write basic wills, to be sure that property goes to the surviving partner. They decide to consider only some simple probate-avoidance steps—ones that won't take a lot of money or time.

The house. They start by checking the deed to their house—something they haven't looked at since they closed escrow four years ago. They find that the deed lists them as "tenants in common." That means that if one of them died tomorrow, the survivor would not automatically inherit the deceased partner's half-interest.

To solve this problem, they decide to put title to the house into joint tenancy. That way, when one partner dies, the house will automatically belong to the other. And they kill another bird with the same stone: Probate won't be required, either. All they have to do is prepare and sign a new deed, transferring the property from themselves as tenants in common to themselves as "joint tenants with right of survivorship." They record (file) the deed with the county land records office, and they're done.

That takes care of probate at the death of the first partner, but not the second. Jim and Terry decide that they're just not willing to worry about that now. There should be plenty of time for the survivor to deal with that issue—perhaps by creating a living trust or using a transfer-on-death deed—later.

The mutual fund account. Neither Jim nor Terry can remember how they set up ownership to the mutual fund account they opened together. But when they check their latest account statement, they get a pleasant surprise: They are already joint tenants with right of survivorship—or, as the statement has it, "JT WROS." Nothing to do there. When one of them dies, the survivor will automatically become the sole owner of the account.

Bank and retirement accounts. Jim and Terry decide to name each other as the payable-on-death beneficiary of the bank accounts they each own separately. It's easy and free, and again solves two problems: getting the money to the person they want to inherit it and avoiding probate. They do the same thing with their retirement accounts, by listing each other as beneficiary on the forms provided by the account custodian.

Cars, household items, and the like. Jim and Terry deal with the rest of their belongings in their wills. Each leaves his share of household items to the other, and they both also use their wills to leave gifts to family members, friends, and charities.

Those beneficiaries will probably be able to claim their property with a simple affidavit (sworn statement), without any probate court involvement. That's because Jim and Terry live in a state that offers a simple, out-of-court procedure for claiming assets when an estate contains property worth less than $50,000. Many assets—those owned in joint tenancy or held in a living trust, for example—aren't considered when determining whether or not an estate is under the $50,000 cutoff, so the estate of Jim or Terry would probably qualify for the affidavit procedure.

Jim and Terry's Probate-Avoidance Plan

Asset

Plan

House

Put in joint tenancy.

Bank and retirement accounts

Name payable-on-death beneficiaries.

Mutual fund

Keep in joint tenancy.

Cars and everything else

Pass under wills (will probably avoid probate because of state rules for small estates).



by: , J.D.

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