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New angles in estate law
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July 12, 2000: 11:02 a.m. ET
Social change poses host of new questions for estate planners and lawyers
By Staff Writer Jeanne Sahadi
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NEW YORK (CNNfn) - The following is not a trick question: If your wealthy, elderly father marries a younger woman, who once happened to be a man, in a state that doesn't recognize same-sex marriage, will she receive spousal rights to his estate if he dies without a will?
If your Dad's from Kansas, the answer is no. Unless, that is, the Kansas Court of Appeals overturns a Leavenworth County district judge's recent ruling that once a man, always a man.
New possibilities, new questions
Estate planning, while never simple, has grown more complicated with the rise in multiple marriages, divorces, stepchildren and a myriad of contracts such as prenuptial agreements.
But estate planners and lawmakers face even more modern-life brain teasers as they tackle the ramifications of scientific and political developments including not only sex-change operations, but the legalization of gay and lesbian partnerships, and the use of surrogate parents and egg and sperm donors.
That's because the laws - both state and federal -- are a long way from putting to rest questions of inheritance in non-traditional family situations.
"There are an awful lot of relationships in contemporary America that are unfamiliar to traditional American law. American law is either going to recognize and accommodate them, or to ... rearrange assets in what is basically a random fashion," said constitutional law expert Andrew Koppelman of Northwestern University.
We're not in Kansas anymore
The Kansas ruling was the result of a case brought by the son of the late Marshall Gardiner, who left an estate worth $2.5 million but no will. Under Kansas law, the estate of a married person who dies without a will is divided between the surviving spouse and one's children.
 But when Mr. Gardiner's son, Joe, learned his stepmother, J'Noel Gardiner, had had a sex change operation, he contested the legality of his father's marriage and won. The judge ruled that J'Noel Gardiner's reissued birth certificate from Wisconsin stating she was female did not make the marriage legal in Kansas. Like most states, Kansas does not recognize same-sex marriages.
"It's an unprecedented situation. ... This is the first time I'm aware of a person being one sex in one state and another sex in another state," Koppelman said.
"From an estate planning perspective, it's a nightmare," said Sanford Krigel, attorney for J'Noel Gardiner. "If (Marshall Gardiner) was a resident of Wisconsin, I don't think we'd be having this problem." But, he added, this provides "a good practice tip for estate planners: they may need to explore the sex of their clients."
Joe Gardiner's attorney, John F. Thompson, said the case never would have arisen if Marshall Gardiner had left a will. "If (he) had executed a will and left his entire estate to J'Noel, then the gender issue would not be a factor, because you can leave your assets to anyone you want," Thompson said.
Bypass trusts still not an option
But even with careful estate planning, gender is still an issue for gays and lesbians when it comes to leaving assets to partners. That's because under the Defense of Marriage Act, passed by Congress in 1996, same-sex couples are not recognized when it comes to estate-tax shelters and other tax matters.
Unlike a married couple, a same-sex couple may not create a Bypass Trust to protect assets above each partner's $675,000 exemption from federal estate taxes. They also may not pass large sums of money between them tax-free as spouses do if they wish to equalize their estates in order to pay fewer taxes when one of them dies.
They may set up what will become a decedent's trust, but the amount in that trust will be subject to tax if the deceased individual's estate exceeds the federal exemption. So the amount left to earn interest for the surviving partner will be reduced, said Bill Darden, general counsel for the National Association of Financial and Estate Planning.
What's in a name?
Vermont recently became the first state in the country to grant same-sex couples the legal benefits of marriage through what it terms "civil unions."
The law does not call the unions "marriages," however, and the reach of their legal status is not yet clear.
 Those in civil unions, experts say, will not be entitled to the federal tax shelters granted married couples. "For federal purposes, civil unions are not marriages," Koppelman said.
What's more, other states may not recognize civil unions as valid. So if a gay couple from Vermont moves out of state and one of the partners dies, the surviving partner may not have his rights to the decedent's estate recognized, Darden said.
Experts expect the issue will be contested over time, but agree that in those states that have a statute saying it does not recognize same-sex "marriages," use of the word "marriage" may prove pivotal. A surviving partner of a "civil union" may have a loophole in which to argue his or her case when exercising claims on a partner's estate.
"It's a fascinating question," Krigel said.
What happens when baby grows up?
So, too, are questions concerning a child's claim on the estate of an egg or sperm donor, or surrogate, if one or more of those were used in the child's conception.
 Potentially, if a child learns the identity of the donor or surrogate, the child may be able to make a claim on part of his or her estate if legal protections are not in place.
In each of these areas, state laws will rule. But most states until now have been silent on the legality of surrogacy, for instance, said Will Halm, an attorney and CEO of Growing Generations, a surrogacy agency for the gay community in Los Angeles. But in states such as California that have made it legal, "I feel confident the surrogate will not be relevant in estate planning," Halm said.
The key question, he added, is "to what length in the legal process did the intended parents go," such as adoption or having the donor or surrogate relinquish parental rights.
Take the couple that chooses a sperm donor through a sperm bank. Depending on state law, the donor will likely remain unknown and will have no parental rights or obligations, said New York City attorney Peggy Brady. More often than not, "That child has no claim on that donor," she said.
 But if a couple chooses a known donor, from extended family or friends, the outcome may be trickier. The parties involved may draw up a contract specifying what parental rights and responsibilities, if any, the donor will have and what the terms of the relationship will be between donor and child.
But, Brady said, "It's a very complicated and unsettled area of the law. ... It's undecided whether those agreements are enforceable."
Whatever you do, write a will
Given the porous ground on which many estate cases may rest, experts say you should do all you can to insure your wishes are made clear before you die. That means writing a will and naming names to prevent any arguments after you're gone.
"It's a good idea to name people specifically if you feel strongly about not leaving something to someone," Darden said.
Dying without a will can mean headaches for your heirs and pay dirt for your lawyer.
Or, as Thompson put it, "The person who dies without a will leaves his estate to his attorney." 
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