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 10% of LGBTQ+ Americans are married to a same-sex spouse. 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.

Expenses can quickly add up, whether that is hundreds of dollars for donor eggs or sperm or thousands of dollars for IVF, surrogacy or adoption. An advisor can help you incorporate the costs of building your family into your financial plan.

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.

For example, if an unmarried LGBTQ couple owns a home, and both meet the ownership and use test, each can exclude up to $250,000 of their share of the profit from the sale. This means they could potentially exclude a total of $500,000 if they each have a 50% ownership stake.

Unmarried couples also face increased complexity when buying or co-owning assets. For example, an unmarried LGBTQ+ couple may buy a house and title the property as joint tenants with survivorship rights. If one person dies, half the property's value goes to their unmarried partner, which could result in a large capital gains tax bill for the surviving partner if they later sell the house.

Married couples can make unlimited gifts to each other with no tax consequences — under the unlimited marital deduction, which allows spouses to transfer any amount of property or assets to each other during life or at death without incurring federal gift or estate taxes, as long as both are U.S. citizens. However, this does not apply to unmarried couples as they are limited to the $19,000 annual gift tax exclusion amount. 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 $13.99 million for 2025 would be taxed at 40%. Married couples can combine their exemptions to shield $27.98 million from federal estate tax in 2025. Note that the estate tax exemption may revert to approximately $7.2 million per person in 2026 unless Congress acts to extend this provision.

In addition to federal estate taxes, some states, such as New York, Massachusetts, 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 LGBTQ+ couples should be aware of differences in how retirement assets and accounts are handled compared to married couples. For example, a member of an unmarried couple is not eligible for Social Security spousal or survivor benefits after the death of a partner unless they live in a state where same-sex common law marriage is recognized. Same-sex couples in recognized common law marriages may be eligible for Social Security survivor benefits if one partner passes away. To qualify, the couple must prove that their common law marriage met state requirements and was legally valid at the time of the partner's death.

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. Request a call.