Key estate planning tips for the 2SLGBTQIA+ community: a checklist

Estate planning is important for everyone, but it’s particularly crucial for members of the LGTBQ2+ community – whether you’re in a relationship or single.

You may not be aware of the rules and your rights when it comes to legacy planning, so an important first step is to find an advisor who understands the needs and challenges you face – and is an 2SLGBTQIA+ ally. Feeling comfortable with your advisor and being willing to talk about your financial matters is a critical component in collaborating on a legacy plan that’s tailored to your needs.

Here are some key components of an estate plan:

• Create a will: Without a legally binding will that clearly outlines your wishes, the courts could end up deciding who gets your assets – and that can be a costly, lengthy and sometimes messy process. Even if you are legally married, be sure to specifically name your partner in your planning documents to ensure they have the authority to make decisions for you.  If you have children, avoid misinterpretation about who should step in for care by appointing guardianship to your spouse or partner.
• Choose a power of attorney (POA) – A POA is a legal document that assigns someone to make decisions on your behalf if you are injured or ill and can’t do so yourself. There are two types of POAs (in Quebec, these documents are called a POA and a protection mandate):
   
  • Power of Attorney for property – If you become incapacitated due to illness or injury, this person can step in to manage your financial affairs and property.
  • Power of Attorney for personal care (also known as a healthcare directive) – This individual can advocate for you on issues like medical treatments, housing or even end of life choices if you’re not able to do so.

  Note: If you’re a member of the transgender community, be sure to choose an advocate who embraces your name and gender, and who can speak on your behalf with regards to your wishes.

• Review insurance needs. Make sure your existing life, disability and critical illness policies have adequate coverage; your advisor can help you review your existing policies to see if there are any gaps that need be resolved. You can name a beneficiary for life insurance in your will or on policy documents. Naming a beneficiary on policy documents with the insurance provider will allow claim payments to be expedited without the need for a probated will. Review and update your insurance beneficiary designations as needed, and if you own policies on your partner, or on children, make sure you’ve provided for successor ownership in the event of your death.
• Consider a trust. A trust may allow you to get specific about how you want to transfer your wealth to your beneficiaries. You can set up a trust during your lifetime (living trust) or include it in your will to come into effect after your death (testamentary trust).

A case study

Here’s how one couple used a testamentary spousal trust to meet their legacy needs:  

Steven and Peter are married and reside in Winnipeg. While they don’t have children together, Steven has several nieces and nephews to whom he has been providing ongoing financial support. They are all still under the age of majority.

Steven is reviewing his estate planning. In discussions with his legal advisor, he expresses the following wishes:

• He and Peter would like to facilitate a philanthropic legacy by supporting a 2SLGBTQIA+ charity that is important to them
• He would like to have Peter benefit from his assets if he predeceases him, but for his assets to ultimately be divided between his nieces and nephews after Peter’s death.
• He would also like to defer income taxes for as long as possible, given that he wants Peter to benefit from his assets when he has passed.

Peter and Steven decide to donate $100,000 now to Charity X by setting up a donor advised fund (DAF) with a charitable foundation. The foundation provides them with an immediate charitable donation receipt for tax purposes. The funds are then invested within the DAF which ensures that Charity X receives annual grants from the fund well beyond their lifetime.

When drafting a new will, his lawyer suggested including a provision for a testamentary spousal trust which will only come into effect once Steven dies. All or a portion of the assets in Steven’s estate can go into the spousal trust. Assets that go to Peter, whether directly or into a spousal trust for his benefit, may qualify for a tax-deferred rollover.

The spousal trust will require income earned in the trust to be distributed to Peter annually, and the trustees may have discretion to distribute capital from the trust to him while he is alive. Any capital remaining in the trust, once Peter dies, will be distributed based on the instructions provided in Steven’s will and go to his intended beneficiaries — his nieces and nephews.

If Steven had instead left all his assets directly to Peter, there could be exposure to Peter’s creditors and other future claims. Peter could also change his own estate plan and gift the assets to someone other than Steven’s relatives.

Ready to get started on your legacy plan?

Talk to us about the details of your financial situation to determine what estate planning strategies may work best for you.