Suppose it is 1965 and grandmother Lannister sets up a trust to distribute much of the family fortune to her three young grandchildren, Tyrion, Jamie and Cersei. A busy, successful guy, Tyrion doesn’t pay much attention to the fine print, which stipulates that upon his death, his share of the assets go to his wife and any children. Then, one day, Tyrion dies unexpectedly, but he does not leave behind a wife or any children—he leaves behind a husband. Tyrion would want his share of the trust to go to his long-time partner—but can he trust Jamie and Cersei to do the right thing?
Not if the trio are anything like their namesakes in “A Game Of Thrones,” George Martin’s epic tale about ruthless throne seekers in a medieval fantasy world.
Even in this modern, real-life world, Tyrion wouldn’t be able to rely on the rule of law to fall back on, according to legal professionals.
Last year’s Supreme Court ruling legalizing gay marriage in all 50 states cleared up many legal issues for same-sex couples. But the architects of legacy trusts very likely never contemplated a legal same-sex marriage or a child created using donor eggs and a surrogate.
In fact, legal language in estate plans of years past that was made purposefully specific to avoid misinterpretation and conflict has now become a potential limitation for gay and lesbian heirs.
To make matters more vexing to legal professionals, the Supreme Court didn’t provide any guidance on how to unravel these documents to remain in compliance with its landmark ruling.
“The court didn’t say anything about how to interpret these old documents,” said Joshua Rubenstein, national head of the trusts and estates practice at Katten Muchin Rosenman in New York. “I’m absolutely positive it will come up in a case where somebody created a trust for a then very young person who was mentioned by name.”
Perhaps Tyrion’s siblings like his husband, or maybe they don’t. Perhaps they approve of same-sex marriage, or maybe they don’t. Either way, it boils down to a family dynamic as old as wealth itself: Jamie and Cersei want the money. So they challenge Tyrion’s husband in court, claiming that grandmother Lannister would not have wanted any amount of the family fortune to go to their brother’s homosexual partner.
Because U.S. trust and estate law falls under state jurisdiction, disputes over intent—what the creator of the trust intended—will likely be resolved one court case at a time until each state enacts rules of construction, which are rules used for interpreting legal documents. As one might imagine, legal changes made on a state-by-state basis can take quite some time to conclude. In the meantime, estate planning experts say that, legal marriage or not, same-sex couples should remain especially diligent in their planning so they’re not hit with surprises down the road.
“Avoid uncertainty to the extent you can, review the documents, and don’t assume that you know how assets can be passed on,” said Gerard Joyce, U.S. head of private wealth solutions at HSBC Private Bank.
The same rule applies, of course, if there are children involved, especially children who may have come into being using a sperm bank or donor eggs and a surrogate. In these cases, working with an attorney who specializes in this area is extremely important, estate planning experts say.
“If you have any of theses issues, it is more important for you than anyone else in the world to do planning, because the default rules don’t work for you,” Rubenstein said. “The default rules presume a marriage between a man and a woman with three natural children. And they don’t cover any of this stuff. It won’t be done for you by default. You have to do it affirmatively.”
Trusts are generally considered safer from family meddling than wills because they’re private entities that operate automatically without probate. So assets passed directly from one spouse to another in a trust may attract less public scrutiny. Dynasty trusts are more complicated though, as making changes can be tricky if the creator has passed away, especially if two or more beneficiaries share the trust. The best-case scenario for a same-sex couple in cases like Tyrion’s, where the relative did not use a general word, such as “spouse,” would be an individual trust in which the creator gave the beneficiary a broad form power of appointment. With power of appointment, the beneficiary has the legal authority to make another person the outright or beneficial owner of the trust.
A technique called decanting is also possible in some states. Simply put, decanting “pours” the assets of the old trust into a new trust that better meets the beneficiary’s needs, leaving the “sediment” behind. A shared trust complicates any scenario, though, because all the beneficiaries must be involved in the process before a trust can be modified or dissolved. So again, it’s best that Tyrion makes sure everything is taken care of ahead of time, while he’s still around to talk to his brother and sister, make his wishes clear and hopefully avoid legal battles.
"In general, family members are more likely to be swayed by another family member rather than by an in-law. And that would apply to an in-law who's a member of a same-sex couple as well,” Joyce said. “Welcome to being an in-law.”
Then again, it’s going to be tough for anyone to sway Cersei.
