For LGBT individuals and couples, understanding the specific issues about your wealth can help you better protect it.

UBS Financial Services Inc.

The Brewster Wealth Management Group

John G. Brewster

Senior Vice President - Wealth Management

Senior Portfolio Manager - Portfolio Management Program

john.g.brewster@ubs.com

Randall V. Brewster

Financial Advisor

Account Vice President

Portfolio Manager - Portfolio Management Program

randall.brewster@ubs.com

Susan McGeachen

Senior Registered Client Service Associate

susan.mcgeachen@ubs.com

61 South Paramus Road

Mack Center IV, 2nd Floor

Paramus, NJ 07652-1236

201-845-4415     800-698-2707

ubs.com/team/brewsterfinancialgr

Protecting wealth presents distinct challenges for LGBT individuals and couples. For instance, in the event of death or disability, even LGBT couples legally married do not always benefit from the same financial protections as opposite-sex couples. There are, however, ways to protect wealth. Understanding these strategies can help you make decisions to protect the ones you love. Consider the following information on specific wealth protection issues. When you’re ready, we are happy to discuss them with you.

Financial Power of Attorney

A Financial Power of Attorney (FPOA) allows you to choose someone to continue the financial management of your assets when your ability to make decisions and manage your affairs is compromised. While everyone should have a FPOA, the need for LGBT couples is heightened because their default rights and access to assets is not the same as opposite-sex spouses. The FPOA ensures your partner can readily access bank accounts, brokerage accounts, retirement plans and other financial vehicles in the event you are incapacitated.

Healthcare Power of Attorney

Healthcare Powers of Attorney or Healthcare Proxies, are perhaps the most important protection in catastrophic circumstances. This document authorizes an agent to make healthcare decisions on behalf of another person if that person cannot make decisions for himself or herself. In many instances, hospitals routinely accept a spouse as immediate family and therefore an authorized decision maker. However, while hospitals and healthcare providers have become more accepting of LGBT partners as immediate family, some still refuse to allow such partners to make healthcare decisions without a valid Healthcare Directive.

Titling

How to title property is a perpetual dilemma for LGBT couples because it affects both the taxation and distribution of property at the owner’s death. It’s also confusing because there are several options. Consider the differences of owning property as sole and separate, jointly with rights of surviorship or tenants in common.

Property owned as sole and separate property must be probated before passing in accordance with the owner’s will or by state intestacy laws in the absence of a will. Keep in mind that many state intestacy laws do not recognize same-sex spouses or domestic partners, which creates an inherently dangerous situation for LGBT couples who do not have wills. Intestacy laws in several states create inheritance rights for distant relatives before LGBT partners. This underscores the importance of creating and properly executing a will to accurately and clearly explain your intent in passing property to your partner.

Property owned jointly with rights of survivorship passes directly to the survivor and therefore avoids probate. It also ensures the only possible recipient of the deceased’s share of property is the surviving owner. The valuation of the property for estate tax purposes, however, is not so simple. Unless the surviving owner can prove he/she contributed toward the purchase of the property, the entire property value is assumed to be included in the estate of the deceased owner.

Tenants in common is another option for property title. The drawback is the surviving owner does not receive the deceased owner’s interest by operation of law. Instead, the deceased owner’s share passes via his/her will or trust, or by state intestacy laws. In addition, unlike joint tenants with rights of survivorship, only the percentage interest owned by the deceased spouse is included in his/her taxable estate. For LGBT couples with Revocable Living Trusts, this is often the best option because the decedent’s trust can transfer the deceased’s share to the survivor without the time and expense of probate.

Totten trust

For bank and brokerage accounts, a simple option is a Totten trust, also known as a Transfer on Death (TOD) or Payable on Death (POD) account. Through this arrangement, the assets automatically pass to the named beneficiary at the account owner’s death. These accounts nevertheless remain part of the account owner’s taxable estate and are subject to estate tax. The trust beneficiary can be altered during the account owner’s lifetime, if there is a change in the relationship, as well.

Proper ownership of life insurance

Life insurance is a useful tool to pay off debt like mortgages or credit lines when the first partner passes. It can also create a source of liquidity to help the surviving partner meet his or her ongoing needs or to pay estate tax liability on larger estates since same-sex couples do not enjoy the benefits of an unlimited marital deduction.

It is, of course, the income tax-free death benefit of the life insurance that makes it such a valuable planning tool. This value, however, can be diminished if ownership of the life insurance is not properly structured.

Because LGBT couples are effectively legal strangers in the purview of federal law, it is sometimes beneficial to structure the ownership of life insurance similar to that of business partners creating a buy-sell cross-ownership arrangement. This can help avoid the inclusion of life insurance death benefit in the taxable estate of the deceased partner. Where the additional death benefit may push estate values into taxable territory, a partner should be both owner and beneficiary of policies insuring the life of his or her same-sex partner.

This policy ownership structure may also deflect any potential issues arising from disgruntled heirs who may be seeking assets from the estate of the deceased. While they may attempt to lay claim to the estate of their dearly departed relative, they have no rights to assets owned by the surviving partner.

Creating an Irrevocable Life Insurance Trust (ILIT) to own your partner’s life insurance can also be a useful ownership structure. The ILIT keeps the death benefit outside both partners’ taxable estates. It also provides a layer of asset protection, making the policy difficult for creditors to reach.

The measures outlined here are just a few of the important ways you can protect yourself and your partner. If you would like to further discuss how we can help you in your efforts, we would welcome an opportunity to meet with you and introduce you to the services we offer. Together, we can address your immediate and fundamental concerns, define your vision for the future and decide on appropriate next steps to help you and your partner pursue your goals.

---Disclaimer---

UBS Financial Services Inc., its affiliates and its employees are not in the business of providing tax or legal advice. Clients should seek advice based on their particular circumstances from an independent tax advisor. Insurance products are issued by unaffiliated third-party insurance companies and made available through insurance agency subsidiaries of UBS Financial Services Inc.

As a firm providing wealth management services to clients, we offer both investment advisory and brokerage services. These services are separate and distinct, differ in material ways and are governed by different laws and separate contracts. For more information on the distinctions between our brokerage and investment advisory services, please speak with your Financial Advisor or visit our website at ubs.com/workingwithus.

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