Because same sex partnerships do not have all of the legal protections afforded by legally recognized marriage, ensuring the long term economic security of each partner becomes more complex, even when they own property jointly.

One such couple was profiled in the "Millionaires in the Making" column in the July 2000 issue of Money Magazine (page 28). The partners, ages 49 and 50, have total assets of $485,000. While their wealth may not be typical of all gay couples, they have the same potential for problems with shared assets, inheritance, and survivorship. Michael expects a retirement annuity of $38,000 per year, while David will receive less than half that amount in pension. Michael has $215,000 in a 401(k), while David has only $29,000. Their funds and stocks also vary widely in amount, $185,000 and $56,000 respectively.

Given the difference in their resources, what would happen to one partner if the other died? If they were a married heterosexual couple, each of them would automatically inherit the other's property unless a will specified otherwise. A difference in income and assets would be irrelevant, and the law would generally support the need for the more prosperous partner to provide for his or her survivor. This is not the case for same sex couples. Unless Michael and David have done careful estate planning with a professional, David could end up in a precarious financial situation. At best, he might own an expensive home that he can't afford. At worst, he could be stripped of any claim to Michael's property by hostile relatives and a prejudiced probate judge - despite the wishes expressed in Michael's will.

Estate planning is a central issue addressed by Peter M. Berkery, Jr., and Gregory A. Diggins in their book Gay Finances in a Straight World (New York: Macmillan, 1998.) They explain in their introduction that, beyond the legal barrier to marriage, attitudinal barriers make estate planning difficult for gay men and lesbians. Many of the products used in the financial planning process have not been designed with this population in mind, and financial institutions may be viewed as traditionally indifferent or even homophobic, creating distrust with regard to their services. For people who are isolated from their families, the support systems presumed by some areas of financial planning may not exist.

Berkery and Diggins summarize their estate planning strategies as follows: "avoid probate when it makes sense and under no circumstances allow yourself to die without a valid will." Probate is the court process of distributing a person's property after death. They point out that "if you haven't clearly stated your wishes through a valid will, it is certain your surviving partner will lose out… in no circumstances will the law provide for your partner." If Michael died without a will and his family wanted to give his property to David, taxes could be a barrier. If more than $10,000 per family member is transferred to the surviving partner, a gift tax return would have to be filed. They also provide tools for minimizing the chances of a will contest. "It's important not to allow yourself to be fooled into thinking this could 'never happen' in your family," they say. "The death of a loved one is such an overpowering event, it can cause the best of people to do bizarre and unexpected things." They suggest alternative ways to distribute property, keeping them out of probate altogether, such as joint ownership, beneficiary designations, and revocable living trusts.

Joint ownership of property with right of survivorship can help gay couples plan around probate. As the authors explain, "when one co-owner dies, the surviving co-owner automatically owns the entire property. No court proceeding is necessary to transfer title." In certain states, however, the language in the title document has to be very specific and must say "joint tenants with right of survivorship and not as tenants in common." It is important to know the rules of the state and follow them to the letter.

It is not enough to add a partner's name to an existing deed, since the transfer could be considered a taxable gift. It could also be a violation of the terms of the mortgage or could void the title insurance. For this reason, Berkery and Diggins recommend consulting with an attorney who understands both estate planning and real estate law.

To avoid probate on life insurance and retirement accounts, beneficiary designations may be an alternative. However, there are still some barriers with regard to the insurable interest of beneficiaries. An insurable interest means that the beneficiary would suffer a recognizable financial loss from the death of the insured. Insurance companies have traditionally assumed that this interest does not exist for lesbian and gay couples and could refuse to accept the proposed beneficiary. A few insurance companies, however, are beginning to recognize the insurable interest of same sex partners. It is important to keep beneficiary designations current.

Creating a revocable living trust can be a powerful alternative to probate, and has the advantage of creating a power of attorney for one trustee if another becomes incapacitated. Trusts cost more to set up than wills do and require regular maintenance. All property has to be titled in the name of the trust, and any asset that is not included will have to go through probate.

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