Today, same-sex marriages are legal in the US. This made uniform the tax and planning aspects for all married couples, whether same- or opposite-sex. It also brought about fairness in certain tax benefits that were previously only available for opposite-sex couples.

Registered Domestic Partnership

In contrast, Registered Domestic Partners are not considered spouses under federal law. Therefore, it's important to remember that many of the federal tax benefits afforded to married, same-sex couples are not available to Registered Domestic Partners.

In California, however, Registered Domestic Partners have the same rights and responsibilities as married couples, resulting in some very unique estate planning issues for couples who choose to be in Registered Domestic Partnerships.

Subsequent Marriages

The ease with which individuals may enter into Registered Domestic Partnerships can causes issues when they seek to later marry someone else.

Registered Domestic Partners who separate without taking any of the proper legal steps to dissolve the registered domestic partnership are not legally able to marry someone else. As a result, people who believe they are validly married to their new partner, may not actually be in a legal marriage because they failed to have a prior registered domestic partnership dissolved.

Divorce and re-marriage can have a significant affect on the estate plan you have in place.

First and foremost, in California, an "Automatic Temporary Restraining Order" is in effect during the marriage dissolution process. This generally hinders your ability to do estate planning as the law wants to avoid changes in your financial position during the pending divorce. 

Beneficiary Designations

If you designated your ex-spouse as a beneficiary of an asset with a beneficiary designation, for example, your retirement account, this designation is automatically revoked as a result of your divorce.

It's important to remember, however, that the divorce does not revoke the designation of your ex-spouse as the beneficiary of life insurance policies. It's therefore important to take stock of all of your assets and ensure that all beneficiary designation forms are properly updated during the estate planning process.

Remarriage

If you created an estate plan while you were single and then got married, your estate planning documents may be overridden at the time of your death, if your spouse survives you.

Your surviving spouse is entitled to the "statutory share" of your probate or trust estate. More details will be provided in another post; however, just note that if you have an existing estate plan and you get married, you must take steps to ensure that your estate plan will still be enforced despite your marriage. Most often, this can be a statement in your estate planning documents which states that you intend for your estate plan to be effective even though you recently were married.

Marriage brings with it many joys, but divorce is a precipitating event that forces many people to revisit the estate planning process. If you're going through a divorce, are contemplating divorce, or have completed a divorce, it's important to see what impact it may have on your estate plan.

In California, being married can present unique challenges to the estate planning process. More detail will be provided in other posts, but here is a preview of some of the issues that couples may face:

1. If you own community property with your spouse, you may need consent before transferring  the community property to a third party.
2. If you own community property assets that will pass without probate (for example, by beneficiary designation), then you may need your spouse's consent to name a beneficiary other than your spouse.
3. You are not entitled to designate the beneficiary of your spouse's retirement plans that are protected by ERISA (401(k), 403(b), etc.). (But see point 2, above.).

Although there may be complications, there are also benefits. For example, spouses can generally rollover the retirement benefits of their predeceased spouse. In addition, any community property that is owned by a married couple will get a full step-up in cost basis after the death of one of the spouses (which may reduce income tax consequences for the surviving spouse). Property that is transferred from one spouse to the other is also excluded from property tax re-assessment.

Asset protection generally involves planning to make sure that creditors cannot reach your assets or that the creditors of your beneficiaries cannot reach the assets that you are leaving behind for them.

Although many people will use this as a buzzword to motivate people into estate planning, in my experience, these types of issues are usually very minimal or non-existent, and are more often than not, a marketing device. Moreover, many of the more complicated techniques are quite costly to implement, and too expensive for a typical client.

Finally, if you already have creditors, the options for protecting your assets may be severely limited.

Trust Provisions

One practical way to provide asset protection for your beneficiaries (for example, if you have a trust set up for your children), is to have the distributions to your beneficiary made at the discretion of an independent third party trustee. You could also incorporate a "spendthrift" provision in the beneficiary's trust to prevent him or her from transferring or borrowing against their beneficial interest in the trust.

Retirement Accounts

Some assets have inherent creditor protection. For example, retirement accounts such as 401ks and IRAs have creditor protection features that may cause them to be attractive for those who are worried about creditors. Not to mention, retirement plans generally have great tax savings benefits as well. There are, however, limits to how much one can contribute annually to retirement plans, and generally withdrawals from these accounts are limited until one reaches 59 1/2 years of age (with some exceptions).

Asset protection should be part of the conversation you have with an estate planning lawyer; however, it's only one aspect and should be put into the context of your overall family and financial situation.