Planning for the future: Considerations for the LGBTQ+ community

Pride month is a time to reflect and to celebrate the progress that’s been made, the strength in community, and the potential for a brighter future.

The legalization of same-sex marriage in 2015 guarantees same-sex couples certain benefits with respect to taxes, healthcare, retirement, death benefits and financial protection in the event of divorce or death of a spouse.¹ While this marked significant progress, other areas of the law have yet to catch up. For example, these benefits are not always available to unmarried partners, and 40% of same-sex couple households in the United States are unmarried.² An unmarried partner may not have the standing to request support or a distribution of assets acquired during a long-term relationship following a breakup. Similarly, an unmarried partner may not be entitled to inherit upon the death of the other absent proper planning.

The complex legal landscape doesn’t end there. Many LGBTQ+ individuals hoping to start a family face disproportionately higher costs associated with alternative reproductive technologies and the need for legal advice. LGBTQ+ parents may face additional challenges due to discrimination.

Despite the gaps in our laws and the lack of acceptance by some, there exist more resources today than ever before for members of the LGBTQ+ community. No matter who you are or what your family structure may be, J.P. Morgan is here to help you shape a future and define a plan that best serves you and your loved ones.

Parents and children

Nearly 14 million adults in the United States identify as LGBTQ+, and almost one-third of this population is raising children.³ For many LGBTQ+ parents, the child whom they love and raise is not their biological child. Some adopt, while others use a surrogate or in vitro fertilization (IVF). 

No matter your path to parenthood, establishing your legal status as a parent is essential when it comes to making medical decisions, passing wealth to your child upon your death and having access to your child in the event of a breakup.⁴ It is especially important for LGBTQ+ parents to formalize their relationships with their children, whether through marriage or adoption, or by naming a legal guardian in estate planning documents.

Just how do you go about establishing your legal status as a parent if adopting? The answer will depend on the laws of your state. All states allow a spouse to adopt the child of the other spouse. Some states also recognize co-parent or “second parent” adoptions between unmarried partners.   

It is important to note that while many states prohibit adoption and child welfare agencies from discriminating based on sexual orientation and gender identity, others allow adoption agencies to refuse to place children with LGBTQ+ couples if doing so would conflict with an agency’s stated religious beliefs.⁵ If an unmarried, non-biological, non-gestational parent is unable to adopt, the legal parent should consider naming their partner as the legal guardian of their child(ren) as part of their estate plan.

Surrogacy is an increasingly common path to parenthood within the LGBTQ+ community due, in part, to advancements in reproductive technology. It tends to be the most complex and expensive option, both legally and medically speaking. If, for example, a couple elects to use one partner’s sperm and engages a gestational surrogate to carry the child, they must pay for a donor’s eggs, the surrogate’s medical expenses (such as IVF, prenatal care and delivery costs), plus the legal fees associated with a Surrogacy Agreement. A Surrogacy Agreement and a court order may be required to establish legal status as a parent for the non-biological parent. In some cases, the surrogate also charges a fee to carry the baby.⁶ All told, these necessities may cost more than $250,000.

The bottom line: For many parents, no job is more important than raising a child. Honor the parent-child relationship by taking steps and implementing a plan to protect all parties.

Ask yourself:

1. Who is named on my child’s birth certificate?
2. Should I speak to a lawyer about adoption, surrogacy and parental recognition laws in the state where I live?
3. Have I named a legal guardian for my child?

Estate planning

The 2015 U.S. Supreme Court decision legalizing same-sex marriage made it possible for same-sex couples to take advantage of estate planning strategies that were once unavailable to them, thereby maximizing estate, gift and income tax planning. For example, same-sex spouses can now leave an unlimited amount to a legally recognized U.S. citizen spouse at death without incurring federal estate taxes. Keep in mind that an unmarried person who provides for their partner during their lifetime may be subject to gift taxes if the value of the gift is greater than the annual exclusion amount ($18,000 in 2024).⁷

A basic estate plan is important no matter who you are, but documenting one’s wishes is especially important for members of the LGBTQ+ community, and in particular, unmarried partners and non-biological parents. Without a plan of their choosing, the laws of the state where one dies will determine, among other things, who takes control of certain assets, who makes important decisions regarding funeral arrangements and organ donation, and who is awarded custody of a minor child. 

A will or “living trust” can help ensure that a surviving partner and/or child inherits the wealth and property of the person who passes. A power of attorney and healthcare directive is intended to allow a partner to make financial and medical decisions on behalf of the other if incapacitated, disabled or incompetent. A HIPAA (Health Insurance Portability and Accountability Act) authorization form allows doctors and other healthcare professionals to disclose pertinent medical records to authorized persons, often including the designated power of attorney or a trustee managing an estate. Naming a legal guardian for a child is also an important consideration.

Why are these important? They may help clarify intentions and address the risk that your wishes may not otherwise be met, as well as potentially reduce conflict in the future. If you are not married, and you die without a will or living trust, your partner (and child) may inherit nothing. If you are incapacitated, disabled or incompetent, and you have not nominated your partner as guardian by way of power of attorney and healthcare directive, your partner may not be permitted to make medical decisions on your behalf, and a court may appoint someone else. If you are not biologically related to your child and you have not established your legal status as their parent, you may be without access to that child in the event of a contentious separation.

Consider this: Members of the LGBTQ+ community are twice as likely to live alone, and four times less likely to have children.⁸ This means that as they approach their golden years, there may be no partner or adult child to help with their care. In this instance, they may be less concerned about succession planning and more inclined to plan for their health and care-giving expenses. A commercial annuity with an income stream for life, for example, may make sense.  

Beyond that, other considerations when working with a trust and estate attorney include the use of inclusive language and non-gender-specific gifts. This indicates a desire to protect beneficiaries no matter who they are. The traditional definition of “descendant” may be broadened to include a beneficiary who is treated as a child even if they not biologically related to the grantor. Likewise, it might be helpful to define for a trustee the costs that qualify for a beneficiary’s “health, education, maintenance and support,” such as expenses related to surrogacy, IVF, adoption and gender-affirming surgery. This can help to reduce doubt and conflict after death. Finally, couples with reproductive materials, such as frozen embryos, should consult with local counsel to understand how best to safeguard unused genetic material in the event of divorce or death.  

Ask yourself:

1. Are there family members I want to support long-term after I am gone?
2. Do I want to incorporate inclusive language when drafting (or updating) my estate plan (e.g., avoid gender-specific gifts)?
3. Do I want my beneficiaries to have access to funds to help pay for IVF, surrogacy, adoption or gender-affirming surgery?

J.P. Morgan can help

We understand that planning considerations may seem daunting. Even so, they are important. Until there is more legal uniformity and equality across state lines, LGBTQ+ families will continue to face unique challenges. However, together with your legal and tax professionals, we can help your family make informed decisions and implement a thoughtful plan that delivers peace of mind.

¹Obergefell v. Hodges, 576 U.S. 644 (2015).

²U.S. Census Bureau, American Community Survey Briefs, “Same-Sex Couple Households: 2019,” (February 2021).

³https://williamsinstitute.law.ucla.edu/publications/adult-lgbt-pop-us/ (December 2023).

⁴Some states will allow a so-called “third party” or “de facto parent” to seek custody or visitation with a child, depending on the best interests of the child.

⁵AZ, UT, ND, SD, KS, OK, TX, MS, AL, TN, MI, SC, VA.

⁶Some states are more “surrogate friendly” than others. Currently, two states prohibit compensated or “commercial” surrogacy: LA, MI.

⁷I.R.C. §2503(b). The rules allowing transfers between spouses to avoid transfer or income taxes do not apply to unmarried couples. I.R.C. §2056(a), §2523(a) and §1041.

⁸“Facts on LGBT Aging.” SAGE. March 2021.