The State of Our Unions

Estate Planning for Same-Sex Couples

Estate planning for unmarried couples has always been tricky. If one partner dies without a will, the law makes few provisions for the survivor. Having a valid will can go a long way toward protecting the survivor, but wills can be challenged, and the simple fact is that most people die without one.

Even with a will, the surviving partner must pay a hefty 10 percent tax on the assets he or she inherits. The consequences of this tax can be severe. The surviving partner may have to tap into his savings, invade his 401(k), or even take out a home-equity loan just to pay the tax. This may be especially true when the estate includes real property but few liquid assets.

Is Marriage an Option?

How then can same-sex couples protect themselves from the inevitability of death? Marriage is a possible solution, but for same-sex couples, marriage is tricky, too. A gay or lesbian couple can’t get married in Maryland, but they can be married here.

Despite expectations to the contrary, the Maryland Legislature is ending its 2011 session without having legalized same-sex marriage. Last year, however, Maryland Attorney General Doug Ganzler issued a legal opinion stating that Maryland should recognize same-sex marriages performed in states where such unions are legal.

Having your marriage legally recognized in Maryland would offer a long list of state-level benefits, including the right to inherit from each other while avoiding the inheritance tax and the right to title your house as “tenants by the entirety”—a form of ownership that offers important creditor protections. (Until the Defense of Marriage Act is repealed, however, there would be no benefits at the federal level, including any exemption from the federal estate tax or the right to file joint state or federal tax returns.)

The attorney general’s opinion on out-of-state same-sex marriage is binding on state agencies, and there have been few reported problems with its implementation. But action by the courts or the Maryland Legislature could defeat the opinion at any time, returning a couple who thought they were married to the status of legal strangers.

A Multi-Layered Approach

In the face of such uncertainty, the best solution for same-sex couples is to take a multi-layered approach toward estate planning. At a minimum, a couple’s plan should include the following essential documents:

·    Last Will & Testament, which lets you designate who will settle your estate, who will  inherit, and who will serve as the guardian of any minor children.

·    Durable Power of Attorney, which can authorize your partner (or someone else you choose) to make financial decisions on your behalf.

·    Advance Directive, which is like a power of attorney, but applies to medical decision making. This document also allows you to choose in advance what kind of end-of-life care you wish to receive.

·    Affidavit of Domestic Partnership, which allows an unmarried couple to document their relationship. The affidavit can work with your Advance Directive to allow you to visit your partner in the hospital or ride in an ambulance together. It can also exempt you from the inheritance tax for your primary residence as long as it is titled as “joint tenants with right of survivorship.”

Getting married in another state would add another layer of protection for same-sex couples. During your lifetimes, it would mean being recognized as each other’s next of kin, being prevented from testifying against each in court, enjoying the creditor protections that accompany certain types of joint ownership, avoiding the inheritance tax, and enjoying certain inheritance rights that are restricted to married couples.

The legal benefits of marriage are usually a secondary concern for a couple deciding whether to tie the knot. But regardless of your marital status, having a comprehensive estate plan is an essential way to protect yourself and your partner, no matter what lies ahead.

—Summerfield, Willen, Silverberg & Limsky, LLC

For small business, getting a lawyer is a question of when, not if.

As a litigator (courtroom attorney), I am often called when a client has an urgent problem. Whether the client has been sued or simply threatened with a lawsuit, the crisis could probably have been avoided if the client had called sooner. The simple reality is that consulting an attorney before making an important business decision can save you time, money, and a lot of frustration. Of course, it’s impossible to insulate your business from litigation completely. But a trusted attorney can help illuminate the hidden risks—and opportunities—that lie behind the choices your business may face.

For example, many businesses have their employees sign restrictive covenants, or noncompete agreements. These agreements restrict the activities of an employee after she leaves the company. Employers usually require these agreements when a new employee could compete directly with company after leaving—either by going to an existing competitor or by opening her own business.  A noncompete agreement typically restricts the former employee from attempting to hire other employees away from the company, opening a competing business nearby, or soliciting the company’s customers.  Properly drafted, these agreements are legally enforceable. An employee or former employee who violates a valid noncompete agreement can be subject to heavy penalties.

Many former employees think they should not have to abide by the noncompete agreement. The employer treated them badly, they say, or the customers they worked with are rightfully theirs and do not belong to the company. Feelings like these are understandable, especially if the relationship between the former employee and the company soured before the departure. From a legal standpoint, however, the employee is still obligated under the terms of the agreement.

An employee who does what she believes is right— without appreciating the legal consequences—can find herself in a difficult situation. Employers often move aggressively to enforce noncompete agreements. That can mean attorney’s fees, court appearances, and the possibility of paying the employer monetary damages.

In cases like these, consulting an experienced attorney is essential. The employee can be informed of her rights and come to understand her best options. In some cases, the agreement may be too broad or written in a way that makes it unenforceable. The employee who takes the time to investigate a possible course of action with an attorney will be better informed and may be able to avoid costly litigation.

Consulted in advance, an attorney can also help you set up a new business, form a corporation, or simply protect your interests as you move forward in the business arena.  Providing this type of advice is often much less time-consuming—and less costly—than defending a lawsuit that could have been avoided.

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