The Arrival of Nonbinary Gender Designation

Take-Away: Several states now permit individuals to use gender-neutral ‘X’ markers on their state driver’s licenses, identification cards, and other official documents. This third gender option is prevalent in the European Union, and it appears to be gaining traction in the U.S.

Background: A 2016 study at UCLA found that the percentage of trans adults, which is the phrase that is used to describe individuals whose gender does not match with the sex that they were assigned to at birth, had doubled in the prior 10 years, going from 0.3% to 0.6% of the U.S. population. That is about 1.4 million individuals in the U.S.

United States: Ten states now offer gender ‘X’ identification cards and driver’s licenses: Arkansas, Oregon, Minnesota, Maine, Utah, Colorado, California, Indiana, Nevada, and Vermont. Maryland, New Hampshire and Hawaii will soon offer gender ‘X’ as an option for legal identification documents. Washington and Pennsylvania have also announced plans to recognize that third gender option. That is almost one-third of the states that have, or are planning to recognize, a third gender designation.

Nonbinary Gender Implications: While gender ‘X’ is an interesting cultural phenomenon, it can have far-reaching implications for estate planning.

Life Expectancy Tables: The tables that the IRS historically uses to value life estate interests, which translates into the tax value of gifted remainder interests are divided into only male and female categories.
Cost of Insurance: Insurance coverage has historically priced premiums based upon the applicant’s gender. Back in 2012, the European Union adopted new rules that required all auto insurance companies to not discriminate in their premium underwriting based on the applicant’s gender. California, Hawaii, Massachusetts, Montana, North Carolina and Pennsylvania now require gender-free rates for auto insurance premiums. To date, only Montana imposes unisex rates for the underwriting of life insurance contracts. Example: Should I tell a middle age outdoorsman who needs life insurance to take a long hunting trip to Montana, and while there apply for insurance? The cost savings with unisex underwriting for the life insurance policy might pay for his extended hunting trip.

Questions: How a nonbinary gender phenomena plays out in the years to come will be interesting.

Anyone who has applied for a life insurance policy in recent years will recall that only M and F are the options available when completing the insurance application. What happens when the applicant is a trans adult? Will the applicant continue to shop until they find an insurance company that recognizes unisex as an insurance category?
Will the life insurance company be subject to liability under civil rights discrimination laws if it continues to provide only M and F options for insurance coverage when the applicant is gender ‘X’?
Will trans adults be able to choose their insurance rates, just as they would have had they marked their insurance application with either M or F?
Will insurance companies adapt and begin to offer unisex premium rates? For auto insurance, like the EU, or for all types of insurance coverage, including life insurance?
Will insurance rates go up, or down, if unisex rates are required to blend both M and F life expectancies in the created unisex premium rate?
Will the existence of a required unisex premium rate cause existing M and F premium rates to increase, as the insurance company moves to reduce its new risks associated with offering coverage with a unisex rate?

Conclusion: Presidential candidates Warren, Buttigieg and Booker have each included in their campaign platforms the issuance of federal government passports and other forms of identification with a nonbinary gender option. We are going to hear a lot more about this as the campaign heats up.