What advisors need to know about estate planning for LGBTQ couples, individuals

Same-sex couples and LGBTQ individuals have overcome significant discrimination and legal challenges in recent decades. Nevertheless, they still run up against obstacles and complexities when it comes to estate planning.

“Without proper LGBTQIA+ estate planning, there is a risk that their intentions may not be respected or met," said Mitch Mitchell, associate counsel of estate planning at Trust & Will. "By being diligent and thoughtful in their estate planning efforts, LGBTQIA+ individuals and families can navigate these challenges and secure the legacy they desire."

Protecting parental rights, for example, is an area where LGBTQ individuals and couples need to consider several important steps. First off, experts say establishing legal parentage in their jurisdiction is vital. This may include adoption, assisted reproductive technology agreements or determining parentage through a court order to make sure both parents have recognized rights regarding their children.

Creating comprehensive estate plans that include provisions for guardianship is essential. Parents need to designate a trusted person or couple who will act as guardians for their children if something were to happen to them.

“Not all jurisdictions recognize same-sex relationships or marriages equally, which can complicate estate planning," Mitchell said. "Couples should understand the legal landscape in their specific jurisdiction and consider how it affects their rights and options.”

Default inheritance laws in certain states also may not align with LGBTQ individuals' intentions, so estate plans must protect inheritance rights as well. That means addressing the distribution of assets to ensure that the desired beneficiaries, including a same-sex partner or non-biological children, are safeguarded.

Family dynamics can be challenging too, as some LGBTQ individuals may face resistance or lack of acceptance from their families.

“This can complicate estate planning, as it may require additional sensitivity, communication and legal strategies to protect their wishes and ensure their chosen beneficiaries receive their intended inheritance,” Mitchell said.

Health care planning is another critical area where LGBTQ individuals need to legally protect themselves. The use of a living will, for instance, ensures that health care providers and loved ones are aware of their desires regarding life-sustaining treatments, resuscitation, and other medical interventions.

Along similar lines, designating a trusted person as a medical power of attorney allows that person to make health care decisions on behalf of the LGBTQ individual if they become unable to do.

As for financial planning, a recent Limra report said nearly half of LGBTQIA+ consumers (49%) say they have a high or very high level of stress about household finances, compared with just a third (32%) of the general population. According to Limra, life insurance coverage — or the lack of it — is one of the factors contributing to this concern.

Limra’s 2023 Insurance Barometer Study showed just 42% of those identifying as LGBTQ+ reported owning life insurance. While this represents an increase from 2022, it remains 10 points lower than the ownership rate among the general population.

"Members of the LGBTQ+ community tend to have less wealth than the general population," said Alison Salka, senior vice president and head of Limra research. "LGBTQ+ consumers, like most consumers, say a main reason for not purchasing life insurance is that it's too expensive. Yet, according to our Barometer study, most consumers vastly overestimate the cost."

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