Navigating LGBT Home Ownership, Loan Acquisition and Estate Planning
Acquiring a mortgage, planning to buy a home, organizing your estate and so forth are complicated processes for any individual, not to mention for couples. But when the lines of the law are blurred due to constantly evolving taxes, extensive applications and standards that change at state borders, these systems become overwhelming, particularly if you are part of a same-sex couple.
In order to provide clarity we have consulted with Bretton Barber, a local defense lawyer who also does extensive work in estate planning for all couples. We want to provide information for everyone in our area, and in order to do so, Bretton has kindly shed some light on the most common questions when it comes to purchasing Arizona real estate as an LGBT couple.
Estate Planning | Acquiring a Loan | VA Loans | Types of Ownership | Relationship Agreements | Common Mistakes | When to Consult an Attorney
Q: Why is estate planning necessary?
A: It’s very difficult if you’re in a state that does not recognize gay marriage. There’s just all kinds of problems that arise. Quite frankly, it’s interesting because what I found and what I’m finding is so many people are not getting married. If you’re a straight couple and you don’t want to get married and have kids, or not have kids, you need to pay close attention to planning your estate, just as much as any LGBT couple does.
Q: What has the impact of DOMA being overturned been on estate planning?
A: As a result of DOMA being overturned, things have been fairly upended in terms of estate planning for LGBT couples. DOMA overturned a specific federal law, that being the Defense of Marriage Act. What that law said was that the federal government shall not recognize any marriage other than a marriage between one man and one woman.
That is the only law that the court was looking at. When the Supreme Court gets a case, they’re only for constitutional reasons going to answer the case that is presented. They’re not going to go out of their way to answer other questions. So, the question they were asked was, “Is this particular law unconstitutional?” and they said, “Yes, it is unconstitutional.” So, in an effort to recognize and respect the court’s ruling, the Obama Administration ordered all of the federal agencies to put their regulations in alignment with that ruling.
So, for example, the IRS, which was how DOMA really got to the court, changed all of their rules in terms of marriage because they’re a regulatory agency, and all of their rules are made by the IRS. In other words, Congress has something called delegation authority, and that’s what most of federal law is is they create the IRS or they create the Department of Homeland Security and they say, “We’re going to sort of give you an outline. You write the paper. We’re going to delegate to you the responsibility of filling in all the blanks. So, you have the power. Now, do all the fine print.”
So, the IRS changed their rules. They said, “OK. Now, we’re going to recognize marriages and if you are married to someone of the same sex, you can file a tax return with the same sex.”
Q: When it comes to applying for a loan, where should LGBT couples start?
A: Well, I mean, for a mortgage, you’re going to go with, ideally, a local bank, not necessarily a big national bank. You are better off looking for something like a credit union or an institution that is local to your state because they’re going to be more knowledgeable about the market in your area and those types of things. They’re going to make it easier for you. You can bank with whoever you want. You can have your checking or savings account with whoever. But when it comes to the mortgage, you’re better off at least checking out a couple local credit unions.
Q: What is the status on LGBT couples reaping the benefits of the Veteran’s Administration’s Loan post-DOMA?
A: The IRS changed their rules, but the problem is that not every federal benefit of marriage is a result of an agency rule. There are some federal benefits that are a result of federal law. Title 38 [Title 38 specifically adheres to veteran’s benefits] is a federal law, and that means the following: Congress did not say, “Military, you make up the rules regarding federal law.” Congress passed a specific law regarding loans that had specific language about marriage.
It’s only the Supreme Court’s responsibility to look at the laws that are before them, those other federal laws, like VA loans and like Social Security Survivorship Benefits, they’re still on the books and they’re still good law because President Obama can’t simply say, “We are not going to follow that law anymore,” because technically no court has ruled that it’s unconstitutional.
So, essentially all of these laws are going to work their way up to the Supreme Court and be overturned. But, until that happens, it’s the law.
Q: How do you decide whose name to put the mortgage under?
A: I don’t know that a lot of people recognize this, but if I have a very, very good credit score and I marry someone who does not have good credit, my credit rating is going to plummet as a result of marrying the person who has bad credit. So, the best thing to do is not necessarily what type of loan you get, it’s choosing the person who has the best credit as the one who is applying for the loan.
Q: What type of ownership is best for a same sex couple in Arizona?
A: I can only speak to Arizona law here, but it is one and only one: joint tenancy with rights of survivorship.
Q: How does this differ from other ownerships?
A: That’s the whole purpose of rights of survivorship, meaning you’re going to own it 50/50. I can’t do anything with it without your permission. You can’t do anything with it without my permission. And, if one of us dies, it automatically goes 100 percent to the other person. Nobody can go to court and fight it. It was actually originally established for businesses, people who wanted to jointly invest in a property.
Q: Is this also the best option for unmarried opposite-sex couples?
Q: And the same for same-sex couples who get married in California, for example, but then move or already live in Arizona?
Q: OK, so after a loan is obtained, what is the next step?
A: At that point, the couple would then need to go see a lawyer to do one of two things, or preferably both. One would be to establish a relationship agreement, which is essentially a prenuptial agreement for people who can’t get married.
The other thing that you’re going to want to do is get your estate planning documents in place so it clearly states that upon this person’s death, this will happen. Especially if it’s going to be anything other than “all of my assets go to this person.” Maybe you want half of your assets to go to this person and half of your assets to go to your mom for example.
Q: A relationship agreement does what for the couple?
A: A relationship agreement is just simply, like I said, a prenuptial agreement for gay people, or unmarried people, or married gay people who live in states that don’t recognize marriage. That way, they would be protected in terms of in the event the relationship went sour. It provides contractual rights to that money that they have essentially put down.
Q: What are the most common mistakes you see couples making these days?
A: Well, one of them is the whole issue of marriage. People need to really understand what they’re getting themselves into. Just because you can get married doesn’t mean you should get married. I mean, that’s obviously true for straight people, but it’s especially true for same sex couples. The other thing is just because you should get married, you need to be very careful about where you get married. If you’re going through a divorce, a lot of times one of the people doesn’t want the divorce and might not be all that ready to hop on a plane to go to the state where you were married to get the divorce.
Q: And the other mistake?
A: The other thing is: I don’t care if you’re married. I don’t care if you’re not married. I don’t care if you’re gay. I don’t care if you’re straight. I don’t care if you’re 40 and you’re a millionaire. I don’t care if you’re 18, and you’ve got nothing but student loans, and you live with your parents. You need to have, at the very least, a living will and medical power of attorney. I can’t emphasize this enough. If you don’t have any assets, you can go on the web and do it yourself. You don’t need to go to a lawyer. I mean, if you’re married or if you’re in a relationship, you need to. If you’re gay or straight and you want to be with this person forever, you do need to see a lawyer. But, you need to have that stuff taken care of. That’s, to me, the number one most important thing.
Q: At what point do couples need to consult an attorney in the home buying process?
A: Well, I mean, they really don’t need to talk to a lawyer until they have purchased the house. If they mistakenly title it the wrong way, they can undo that easily. But, once they have the home and once it is in somebody’s name, now there’s an asset. At that point, you’re going to want to see an attorney.
Q: Are there any situations in which should consult a lawyer prior to home ownership?
A: Any time you’re making significant decisions, you might want to talk to someone prior to making those decisions because I’ve had couples come into my office and they’ve already bought the home. They’ve already titled it one way or the other. I’m now asking these very morbid, pointed questions, and they never thought, “Well, I want my mom to get 30 percent of the value of that house. I paid for the whole thing anyways, and why should you get everything?” The other one is literally sitting in front of me saying, “Well, what do you mean? You love me, and I should have everything. Of course.” These situations can get complicated.
Q: What can happen if the estate planning documents are not in place?
A: One of the five powers of attorney that I would do for someone is what we call a “general durable springing power of attorney.” So, this comes into play not when someone dies, but when someone is temporarily incapacitated. For example, a person has a stroke and they’re out of it for six months. Unless they have that document in place, their significant other can’t go in and get into their bank account or pay their credit cards or do any of that. Whereas, if you have this particular power of attorney, it springs into action when that person is incapacitated so that you can go in there and do that, pay the mortgage or whatever comes up.
If you’re married, that’s not very important because by law, the spouse is going to be able to do those kinds of things. If you’re unmarried or a same-sex couple and married in another state, that’s not the case.
Bretton Barber has worked with estate planning for the LGBT community for some time now and recognizes the similarities and trends of Arizona residents who either out of choice or necessity live without a state sanctioned marriage license. As a result, Bretton focuses on preparing couples for the future and situations they do not necessarily foresee. By doing so prepares them for all of the ups and downs life has in store. If you would like to acquire more information about purchasing a home in the Phoenix area, or need to begin your estate planning process, please do not hesitate to contact us or the Barber Law Group. We are here as a resource and guide in order to help you navigate to sound and secure home ownership.
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