Unique Estate Planning Opportunities for Gay and Lesbian Couples

Gallo, Jon J.
August 2004
Journal of Financial Planning;Aug2004, Vol. 17 Issue 8, p28
Academic Journal
While the lack of the marital deduction can generate problems, the unmarried and unrelated status of a gay or lesbian couple actually creates some estate planning opportunities that are no longer available to married couples in the U.S. In 1989, Congress added Chapter 14 to the Internal Revenue Code. Chapter 14 contains a number of special valuation rules intended to eliminate the use of various estate planning techniques that Congress viewed as abusive. One of those techniques was the use of common-law grantor retained income trusts (GRIT), which permitted property to be transferred at little or no gift-tax cost. Common-law GRIT were replaced by new creations known as grantor retained annuity trusts and grantor retained unitrusts. For the attorney or financial planner working with a gay or lesbian couple, it is important to recognize that Chapter 14 phrases the prohibition against using common-law GRIT in such a manner that it applies only to transfers for members of the transferor's family, which is defined as consisting of his or her spouse, ancestors, descendants and spouses of such persons. Common-law GRIT remain a powerful tool to transfer property to a partner or to a partner's child.


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