Worrisome Environment
I received a post-card “save the date” for an upcoming wedding. The post-card started as follows: “In an act of resistance, security and love, we were married in a civil ceremony at the beginning of the year.” The uncertainty over what legal developments might occur likely was the motivator for an early civil ceremony. That worry may well be valid.
More than a decade after the Supreme Court’s landmark Obergefell v. Hodges (2015) decision, some polls estimate that almost 70% of Americans approve of same-sex marriage. But a recent headline read: “The Supreme Court blessed same-sex marriage 10 years ago. Is a backlash brewing?” Few people believed that Roe v. Wade (1973) could be overturned, but that is exactly what happened in Dobbs v. Jackson Women’s Health Organization (2022). Could Obergefell v. Hodges also be overturned?
But it is not only the Courts. At least one large religious convention voted to call on the Supreme Court to overturn Obergefell. Several state legislatures controlled by Republicans have recently proposed legislation to do the same. A recent article in a major national newspaper stated that the current situation is “the most hostile political environment for L.G.B.T.Q. Americans in decades.”
Reality is actually worse. An article in September 2024 concluded: “Attacks Based on Gender Identity Up 16% from Prior Year, Those Based on Sexual Orientation Up 23%.” Caution is in order.
Caution in estate planning for the community should also be addressed.
What Might This All Mean to Estate Planning?
Be proactive to revise documents and planning in a manner that may lessen issues in the future.
Given the surge in hate crimes, it may be worth considering updating estate planning documents to change dead names, reconfirm or clarify bequests and take other actions that might avoid conflicts, and if possible avoid the need for a public court hearing.
Another point to be mindful of in wills and trusts is the definition of who is a descendant in these estate planning documents. Using vague or “traditional” definitions may leave ambiguity as to whether a child conceived through artificial reproductive technology (ART) or surrogacy is in fact a child to inherit (more on this below). Many existing estate planning documents are either not clear on these matters or worse could result in disinheriting you or your child. The clearest and simplest step is to amend wills and revocable trusts to expressly add anyone you consider to be your child explicitly to the document. If the child or other heir is specifically named that should avoid any issue. However, more should be done, especially in the current environment. Family or loved ones with wills or revocable trusts that will benefit you might also be encouraged to amend those documents to do broaden the definition of descendants, be certain references to you are correct, etc. Perhaps a broader definition that expressly includes children born by ART and surrogacy may be preferable. If you have a child and there is any ambiguity (e.g., your spouse used ART and carried the child to gestation, and you did not contribute genetic material) perhaps you should review with an attorney whether you can or should formally adopt the child to avoid a problem.
Avoiding Probate
Many people try to avoid probate and there is an industry devoted to helping people do so. But the avoidance of probate is often suggested to minimize cost and time delays. However, for members of the community, avoiding probate may avoid court meddling in your personal or family matters, and publicity that could be difficult if not actually harmful. Perhaps avoiding probate has increased benefit for the community given the uncertainty of the current legal environment. So, if you were relying on a will to distribute your assets perhaps you should proactively pivot to a revocable trust to do that (along with a pour over will) and the use of testamentary substitutes. These are accounts that Pay on Death (POD) to a named person, joint ownership with rights of survivorship (so on death ownership automatically transfers to the co-owner), etc.
What Might You Consider in New Estate Planning Documents?
When planning new estate planning documents how far can or should you go to address potential legal changes? Is it worth stating that the person you designate as your spouse shall be deemed your spouse regardless of subsequent changes in the law? What effect might that have? Even if it may bolster your bequests to your spouse if the legal definition is actually changed there would be no estate tax marital deduction. While the estate tax exemption is quite high so few people would be affected, those that will be could face costly and difficult tax challenges.
Might it be advantageous to transfer assets now while the law is known to a marital trust (such as a Qualified Terminable Interest Property or “QTIP” martial trust). It would seem that if you transferred large wealth to a QTIP trust for your spouse today and file a gift tax return reporting it (and electing QTIP treatment), the status of qualification for a gift tax marital deduction existed on the date of transfer and that a later change in law might not be able to affect that. To qualify for QTIP treatment your spouse must receive all income for life. You can designate when the trust is created to whom the remainder interest will pass. In some instances, it may be appropriate to give your spouse a power of appointment that permits them to appoint QTIP assets back to you in trust so that you can benefit. This may require careful evaluation as to what state law the trust should be created under. The QTIP assets will be included in the estate of your surviving spouse. Does this make sense to do prophylactically? Perhaps, so discuss it with your estate planner.
If you designate your spouse as your health care agent perhaps you might also add a provision stating that if that status changes as a result of a change in law and not a divorce that such person (naming them) should be permitted all visitation rights as if they were your spouse. That is commonly done for couples who are not married to assure hospital visitation and that concept might warrant adapting now even for a spouse.
Consider a Special LGBTQ Trust Protector Coupled with a Limited Power of Appointment
Given the uncertainty and potential for family conflict, litigation, and undesirable outcomes, perhaps a more robust technique can be integrated into your documents. Let’s first define the two disparate terms/concepts and then explain how they might be adapted to protect your estate planning intent.
First, a trust protector is a position in many modern trusts. The person can act in a fiduciary or non-fiduciary capacity. A fiduciary capacity is a position of trust like a trustee and with that a fiduciary has a duty of loyalty to existing beneficiaries. As such it may be best that the trust protector be stated to not act in a fiduciary capacity. Trust protectors are typically given powers like the ability to change the governing law and situs of the trust or to remove and replace trustees. Those powers may be useful in this context, but more is necessary. Perhaps the trust protector role can be given the authority to update and redefine definitions to keep up with changes in medical technology and societal norms. Perhaps the trust protector can be granted the power to reinterpret the identification of beneficiaries under the document. In that way, should a beneficiary change their name or gender the trust protector can take whatever actions they deem necessary to assure that there is no lapse in a bequest to that person. The trust protector may be given the authority to add to the class of beneficiaries any particular individual who is treated and loved as a child even though, technically, not a biological child. Another consideration is giving the trust protector the right to direct the trustee to make distributions for medical care that the trustee might otherwise refuse.
Second, the trust protector could also be given a limited power of appointment. This is a right to appoint or designate to whom trust assets may go. The term “limited” means that the trust protector cannot appoint to themselves, their creditors, their estate, or creditors of their estate. This additional power or right could be important to backstop the intent discussed above. If for example, there is a question as to whether the trust protector can add a person you treat and love as a “child” but who does not meet the will or trust definition of “child” the trust protector can exercise the limited power of appointment given to them to appoint trust assts to benefit that child.
This is a novel mechanism created to address the uncertain future and questions or uncertainties that properly applying your will or trust might create. So be sure to discuss this with legal counsel and determine if the potential benefits outweigh the uncertainties.
What About Old Trusts With Bad Definitions of Descendants?
Let’s say your grandmother created a trust to benefit you and all future descendants. What if the language in that trust is nettlesome and may disinherit your or your child? In contrast to the discussions above concerning trusts under wills or revocable trusts where the testator creating the will or settlor creating the trust is still alive and can readily modify the document, an old irrevocable trust may not be modified. So, what might you be able to do? There may be several options, but they are not without risks. These are like those car commercial warnings: “Professional driver on a closed course. Do not attempt.” The estate planning version is: “Professional estate planning attorney on a thoroughly researched estate plan. Do not attempt.”
You might be able to get the trustee to decant or merge the existing old trust into a new trust with a broader definition of descendants that encompasses children born using ART, surrogacy, etc. and which definitions would not eliminate someone who transitioned. But decanting as a general matter cannot change or add beneficiaries to a trust. So, for this approach to be viable you might need an attorney to give a legal opinion that modifying the definitions is a mere administrative change and not a change in beneficiaries. That is not clear and will depend on state law and other factors. A trustee might be wary of doing this even if a lawyer blesses it out of fear of being sued by other beneficiaries that the change added a new beneficiary and thereby reduced their interest.
A non-judicial modification agreement (NJMA) is where all the parties to a trust (settlor if alive, trustee, all beneficiaries, etc.) agree to a modification of even an irrevocable trust as long as state law permits it. But even if state law permits it, what if any one of the people involved objects? It may not succeed. Also, if the environment is hostile because of the views of one or more of the people involved, it could become an antagonistic situation and not accomplish your goal.
You might be able to have an attorney take the trust to court and have a court reform the trust document. This might require demonstrating what the settlor who created the trust intended. That may be difficult or impossible to do.
Another approach may be more indirect, but it too is not without issue. It may be possible to move the trust to a state with more friendly trust laws. Then decant the trust under that state’s laws and add to the new post-decanted trust a lifetime limited power of appointment. This is a power that the person designated to hold the power (called a powerholder) can exercise to direct where trust assets are appointed. It is a limited power because they cannot direct assets to themselves, their creditors, their estate or creditors of their estate. Perhaps some time later that powerholder appoints assets to a new trust containing more robust definitions of descendants and other administrative changes that may address other concerns.
Conclusion
The Hijra community in India has been part of Indian society and culture for over 4,000 years. The Hijra encompasses a variety of gender identities and sexual orientations. Yet 4,000 years later some in society still continue to question and challenge the community. And those challenges may be getting more pronounced. Acceptance of each other despite our differences should be a universal goal. But there is also no pride in excluding those of certain faiths, political views or professions. Perhaps Dr. Martin Luther King’s concept of a World House where we all can live together, accept each other and show each other compassion, will one day occur. In the meantime, review your estate plan and those of people who may benefit you and proactively try to address the uncertainty.
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