Navigating financial and estate planning for high-net-worth LGBTQ+ couples

By Joe Dionisio | Senior Wealth Strategist, Citizens Private Wealth

Although the Supreme Court ruled for marriage equality in 2015 (Obergefell v. Hodges), only about 8% of LGBTQ+ Americans are married to a same-sex spouse.¹ While there are similarities in financial and estate planning for both married same-sex and heterosexual couples, unmarried but partnered high net worth LGBTQ+ couples should prepare for unique financial, tax and estate planning needs.

Planning steps to prepare for and protect LGBTQ+ families

For the LGBTQ+ community, the cost of starting a family can be much higher than for heterosexual couples, so consider incorporating the potential costs as a budget item and into your cashflow analysis before and after a child arrives as part of your financial planning.

In the United States, domestic infant adoption typically costs between $40,000 and $60,000, depending on agency fees, legal services, and birth-parent expenses, while gestational surrogacy frequently ranges from $120,000 to $200,000 or more. Assisted reproductive technologies such as IVF can add $15,000 to $30,000 per cycle, and multiple cycles are often required.^{2, 3}

In addition, unmarried LGBTQ+ couples will need to factor in the legal expenses required to establish parental rights and estate planning to protect your family, which can vary from state to state. If your partner passes away, you need to plan for how you will take guardianship of your child or children if you are not the legal parent — working with a family lawyer or estate planning attorney as needed to ensure your rights as parents are protected.

Tax planning considerations for unmarried LGBTQ+ couples

While married LGBTQ+ couples enjoy a number of tax planning advantages, those who are unmarried should plan for potential higher taxes when selling or passing down assets.

Each individual taxpayer can exclude up to $250,000 of gain on the sale of a principal residence if they meet the ownership and use tests. For co-owners which includes unmarried couples the eligibility is determined individually and not as a couple. If two unmarried co-owners each meet the ownership and use tests, each may exclude up to $250,000 of gain attributable to their interest in the property. As a result, a couple could potentially exclude up to $500,000 of total gain, depending on how the gain is allocated between them.

The $500,000 outcome can look similar on paper, but married couples have significantly more flexibility — particularly when one spouse falls short of the requirements. Unmarried co-owners must each independently qualify, which can create unintended tax exposure in otherwise identical situations.

Unmarried couples often face added complexity when co-owning assets such as real estate. For example, if an unmarried couple owns a home as joint tenants with right of survivorship, the surviving partner automatically inherits full ownership at the first death. However, unlike married couples, the income tax treatment depends heavily on how the property was funded. The step-up in basis at death generally applies only to the portion of the property attributable to the deceased partner’s contributions. As a result, the surviving partner may face a higher capital gains tax upon a future sale compared to certain married couples.

Married couples can make unlimited transfers to each other, during life or at death, without federal gift or estate tax consequences under the unlimited marital deduction, provided both spouses are U.S. citizens. However, this does not apply to unmarried couples as they are limited to the annual gift tax exclusion, which is $19,000 per recipient in 2026. The limit could be critical if one member of a couple holds more wealth or helps provide financially for the other.

If you hold significant assets and are unmarried, be aware of the potential impact on estate taxes. Any assets of your deceased partner above the estate tax exemption of $15 million for 2026 would be taxed at 40%. Married couples can combine their exemptions, allowing up to $30 million to pass free of federal estate tax with proper planning.

In addition to federal estate taxes, some states, such as New York, Massachusetts, Rhode Island, Connecticut, and Oregon, impose their own estate taxes with much lower exemption thresholds, which could significantly increase the tax burden on large estates. Unmarried couples should plan carefully to address both federal and state estate tax exposure.

Estate planning considerations for unmarried LGBTQ+ couples

If you are part of an unmarried couple, creating and maintaining an estate plan that reflects your desires takes on greater importance. Without a last will and testament, you or your partner's assets will be distributed based on their state's intestacy laws, regardless of your wishes. In many states, your assets will pass to the next of kin, such as parents, siblings or other family members, instead of your partner. Also, without a living will or other advanced directives, health care or end-of-life decisions will be dictated by state law, which usually involves a surrogate decision maker, often a family member, who may not carry out your final wishes as you intended.

Therefore, be sure your will and other planning documents reflect your desires for your assets. For example, if you want to leave behind assets to people other than your partner, such as extended family members or friends, be sure your last will and testament reflect these wishes and are kept up to date.

Beyond your estate planning documents, ensure that your beneficiary designations are accurate and current. Your estate plan should incorporate beneficiary designations along with creating a will and other planning documents.

Beneficiary designations name the person or people you want to receive the proceeds from your life insurance policies and the funds from your retirement accounts. Because beneficiary designations take precedence over a will, be sure your beneficiary designations are up to date and meet your wishes. For example, if you started your job years ago or before a relationship, ensure that your beneficiaries reflect your current situation. Also, if you name your partner as a beneficiary, be sure you also name a contingent beneficiary if your partner predeceases you.

Retirement accounts for unmarried LGBTQ+ couples

Unmarried couples, including LGBTQ+ couples, should understand that Social Security spousal and survivor benefits are generally tied to legal marital status, meaning surviving partners in non-marital relationships typically are not eligible for benefits regardless of the length or nature of the relationship; however, eligibility may exist if the couple had a valid common-law marriage recognized under state law, in which case Social Security will treat them the same as formally married spouses, provided the relationship can be substantiated.

Also, income tax benefits are limited when one member of an unmarried couple inherits tax-deferred retirement accounts. For example, an unmarried partner does not get the benefit of an IRA spousal rollover, a benefit that allows a surviving spouse to roll a deceased spouse's IRA into their own. Instead, an unmarried partner who inherits an IRA must follow the rules for non-spouse beneficiaries, which often require faster withdrawals, limit long-term tax deferral options and mandate that the assets be transferred to an inherited IRA, with minimum distributions taken and all inherited holdings distributed within 10 years of the partner's death.

Wealth managers who understand your unique needs

At Citizens, we unwaveringly support the LGBTQ+ community as part of our ongoing work to build strong communities. A professional at Citizens Private Wealth can help you create a plan that fits your needs. Connect with our Private Wealth Team today.