Estate Planning

Estate Planning for Non-Traditional Families

Five years ago, the Supreme Court delivered a landmark decision for the LGBTQIA+ community, holding that the right to marry is a fundamental liberty under the Fourteenth Amendment of the United States Constitution.  See Obergefell v. Hodges, 576 U.S. 644 (2015). We celebrate the progress that this decision represents, but we acknowledge that we still have a long way to go before all families achieve equal representation. In honor of Pride Month, we have summarized a few estate-planning tools for our non-traditional families.

Unmarried Couples

While Obergefell held that same-sex couples have the legal right to marry, some individuals choose to commit themselves to lifelong relationships without marriage. We have outlined several estate planning considerations specific for unmarried couples below. First, Colorado’s intestate succession laws do not include unmarried partners as heirs of the decedent’s estate.1 This means that if unmarried individuals pass away without a will, their assets will pass to the person(s) determined under Colorado’s intestacy laws. See C.R.S. § 15-11-101 (2019). In order to ensure that your partner receives your assets, you may wish to create a last will and testament. This document directs your chosen personal representative as to how your property should be distributed upon your death. A will prevents your property from passing through the intestacy statutes and allows your partner to inherit. Although a will directs your asset distribution, your medical decisions are also part of your estate plan. In the event that you are incapacitated, a durable medical power of attorney authorizes your partner to make the necessary medical decisions on your behalf.

In Colorado, an unmarried couple also has the option to create a designated beneficiary agreement. This agreement entitles the designated beneficiary to enjoy up to 16 rights and benefits that are granted to married couples, including the right to hold property jointly, the right to have priority for appointment as a conservator or guardian, and the right to make medical decisions in certain situations. See C.R.S. § 15-22-105 (2019). While a designated beneficiary agreement does allow your partner to have certain rights, it does not supersede documents such as wills, medical powers of attorney, trust instruments, and designated beneficiaries on insurance policies. If you create a designated beneficiary agreement, you should contact your retirement account and insurance policy providers to confirm that the beneficiary listed on the policy is the same as the designated beneficiary agreement. Finally, this document is revocable, accomplished by filing and recording a notarized revocation, getting married, or entering into a common law marriage. If the beneficiary passes away, the agreement becomes void.

Blended Families

For individuals that have remarried after the death of a spouse and have children from that previous marriage, a qualified terminable interest property trust (“QTIP Trust”) is an option that allows the surviving spouse and children to inherit assets from the deceased parent, even if the surviving spouse remarries. A QTIP Trust passes the assets to the surviving spouse for his or her lifetime, then to a third party, such as the children. For example, let’s say Jo and Alex have 4 children. Jo dies, leaving everything to Alex with the understanding that the 4 children will inherit once Alex dies. Alex then marries Ryan, and Ryan convinces Alex to leave everything to Ryan in the will. In this scenario, the 4 children would not receive anything from their deceased parent, Jo.

In the example above, a QTIP Trust would have provided for Alex during Alex’s lifetime, and the 4 children would inherit upon Alex’s death. A benefit of the QTIP Trust is that the surviving spouse does not have control over the Trust’s principal, ensuring that the surviving spouse and children from the first marriage receive the assets. The QTIP Trust is designed so that new spouses also do not have control over the original spouse’s assets. Additionally, a QTIP Trust may be a good tool if an individual is concerned about estate taxes. Currently, the estate tax exemption is $11.58 million for individuals and $23.16 million for couples. If drafted properly, a QTIP Trust qualifies for the marital deduction, reducing the total estate tax burden. In order to qualify, a QTIP election must be made by the executor of the deceased’s spouse.

Today, we celebrate that the Supreme Court has recognized the inherent right and autonomy of individuals to create families that represent their belief systems. Obergefell, 576 U.S. 644. See also Loving v. Virginia, 388 U.S. 1 (1967); Zablocki v. Redhail, 434 U.S. 374 (1978); Turner v. Safley, 482 U.S. 78 (1987). Regardless of your family’s structure, you have the opportunity to create an estate plan that provides for the well being of your loved ones for years to come. Each situation is unique, and it is important to create an estate plan that fits your family’s needs.

Tjornehoj & Hack LLC, 2020

  1. If a couple holds themselves out to the public as married or undertakes the formalities required for a civil union, other rules may apply. Those situations are beyond the scope of this blog post. []