What are some of the issues that same-sex couples must consider when it comes to life insurance?

Unmarried couples have additional concerns to consider when evaluating life insurance policies: income replacement, tax liabilities, and above all, the titling of policies, which can result in tax liabilities for the inheritor. However, all unmarried individuals must be careful when purchasing life insurance to ensure that it meets their needs.

Most people do not realize that, while life insurance is a non-probate asset and therefore does not pass through your estate, it is taxable. Although the federal estate tax exemption is $5.34 million (adjusted annually for inflation), the New York State estate tax exemption is only $2.065 million  - also annually adjusted for inflation but depending on the amount of the estate, you could unwittingly trigger a tax of the entire estate, not just the amount over the exemption.

With the change to New York's law as of April 1, 2014, many people do not realize that the majority of the life insurance benefit to their beneficiary could be eroded by the estate tax liability that accompanies it. There are methods to assist with the estate tax impact on life insurance, such as Irrevocable Life Insurance Trusts (ILIT), that you should discuss with your estate attorney to consider whether it is right for your situation.