For LGBT couples, reaching financial goals frequently presents challenges. You may be aware of some of the issues that can affect you and your loved ones’ financial well being — others may come as a surprise. One thing is clear: when it comes to managing your wealth, it is critical that you understand your options and opportunities as well as potential obstacles.
If you are in a relationship, the first step is to include your partner. Because many domestic partners maintain separate bank accounts, they feel as though they should plan for the future as individuals. I ask my clients: Do you own your home together? Would you like to pass on a portion of your estate to your partner? If your partner became disabled, would you provide financial support? If the answer to any of these questions is yes, then you may want to evaluate your financial future as a couple.
Disparities in age present another hurdle for domestic partners. Frequently, partners may have a difference of five, 10, 15 or more years between them. Age affects the way we perceive risk with our investments and how we prepare for retirement. Younger investors are more likely to accept ups and downs in the market as they have a longer time horizon. Additionally, they have more time to accumulate funds for their retirement years. For those who find themselves rapidly approaching retirement or who have already retired, the focus shifts from building for retirement to protecting those assets they have accumulated. Balancing the need to grow with the need to protect can be a daunting task.
Other areas of concern include insurance and estate planning. You should ask yourself several questions: When I pass away, will my partner be entitled to my pension benefits? How can I best protect my partner and myself while I am alive and after I have passed away? As we know, family members do not always look favorably on the relationship and may desire to have your assets for themselves.
Believe it or not, the tax code has produced some benefits for domestic partners. Due to the government viewing same-sex couples as individuals, many higher income partners find that they can contribute more to their Roth IRAs, pay taxes at a lower rate, and have more deductions available to them than a married couple with a similar combined income. Work with your financial planner and your tax adviser to identify each of the areas from which you could benefit.
These issues apply even if you are married at the state (or D.C.) level. While some states have approved or affirmed same-sex marriage, the federal government has yet to do so. The primary legal benefit that getting married currently has is the ability to obtain a divorce. Do not become a guinea pig and test the system. Work with your attorney, accountant and financial adviser to make sure you’re doing all you can to protect yourselves.
(This article is for informational purposes only and is not intended to provide specific advice to any individual. Consult your legal, tax, and/or financial advisor to determine what is appropriate for your situation. Securities offered through LPL Financial. Member FINRA/SIPC.)