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Financial Planning Challenges for LGBTQ couples.Submitted by Watters Financial Services, LLC on September 27th, 2018
At Watters Financial Services, LLC, one of the areas we specialize in is Fee-Only Wealth Management and Financial Planning for LGBTQ couples. 20 percent of the families we work with are members of the LGBTQ community. We have been working with clients in the LGBTQ community for over 20 years.
In the United States, the legal and financial rights of LGBTQ people depend on where they live. While it is true that the U.S. Supreme Court ruled states could not bar same sex marriage in 2015, some states still have laws on their books that actively discriminate against LGBTQ individuals and couples. While the rights of LGBTQ people are more established in some states, like New York, New Jersey and California, they aren’t as protected in other states. “In Mississippi, state law permits a wide array of individuals, businesses, and service providers to discriminate based on their religious or moral objections to same-sex marriage, extramarital sex, and the recognition of transgender identity. In Michigan, adoption and foster care agencies that receive support from the state are explicitly empowered to refuse to place children with LGBTQ parents on account of the agencies’ own moral or religious objections.” – according to an article dated February 19, 2018 published by Human Rights Watch.
“Yet, even in states where LGBTQ people have full equal rights, they still face special challenges when it comes to their personal financial planning,” according to Tim Watters, CFP®. One important factor that affects LGBTQ couples in their personal financial planning is life expectancy.
One of the planning challenges facing LGBTQ couples is their life expectancies. Currently, a 45-year-old opposite-sex couple in the U.S. has a median joint life expectancy of 88.5 years, compared to 90.5 years and 87 years for same-sex female and male couples, respectively. Meanwhile, same-sex female couples are more likely to have one member live past the age of 100 than opposite-sex couples or same-sex male couples, according to a recent article from Bloomberg.com. As female couples tend to live the longest, they should focus on how to plan for their financial resources to last longer than for an opposite-sex couple. This means that LGBTQ couples need to focus on budgeting, estate planning, risk management, asset allocation and other issues. We need to have discussions relating to each partner’s income and contribution to the household.
Tax Planning is also another challenge that needs to be addressed. Many LGBTQ couples have separate tax advisors, yet this is not advisable. A good tax advisor can look at your tax situations to see who will benefit best from a certain deduction and to look at how best to file the tax returns.
Real estate ownership can be more complex for LGBTQ unmarried couples. Who bought the property and who contributed to the upkeep, down payment and improvements? Should the properties be held separately or jointly or in a trust? Having good records makes a big difference if the couple ever split up or if there is a death. This is an issue for all owners of real estate, not just LGBTQ couples.
Clients with children need to consider going for second parent or step parent adoptions as well so that in the event of a death of a birth parent, the child stays with surviving parent.
“Estate planning is another key issue LGBTQ couples sometime struggle with,” says Colin Watters, CFP®. In estate planning, there is a distinction between planning for married and unmarried couples. Benefits entitled to opposite-sex couples such as responsibility for a partner who is hospitalized can sometimes still be a challenge for unmarried couples. Financial account access is another area to research. One partner may not have given access to their financial accounts to the other partner.
We make sure that our clients have estate planning documents in place and we review beneficiary assignments and guardianship provisions regularly. We work with our LGBTQ clients to meet with Attorneys who specialize in the planning challenges of same sex couples. According to Judith Turkel, Esq, “for LGBTQ married couples, you have to look beyond the date of marriage to when they began their financial life together and look at their relative assets to help them to determine how to establish their estate planning. You must dig deep and ask questions. For unmarried LGBTQ couples, in addition to a health care proxy and advanced directives documents, it is critical to have a Hospital Visitation Rights document and to understand the client’s relationship with their family of origin. Unless handled properly, the family of origin, and not the unmarried partner can and will determine financial and healthcare decisions”. It is critical to have a Durable Power of Attorney, Health Care Proxy, Living Will in addition to a Last Will & Testament. We review all these documents with our clients periodically and recommend that they meet with their Attorney to review the documents and amend them if necessary. NOT planning is a big mistake. If you do not plan, the state will do it for you and your assets may be inherited by a distant relative instead of the people and/or charities you wish to inherit your assets.
In the end, our goal is to ensure that the client’s legacy is executed according to their plan. With a focus on detail, communication and coordination, we help our clients leave behind their own private legacy.
While there are many important factors for LGBTQ couples to consider, we are confident that our expertise and experience can help you. Please call us today for a free introductory phone call to learn how we can help 201-843-0044.Information in this article in general in nature and for informational purposes only. Prudent financial advice will require us to learn more about your specific circumstances and your personal financial objectives.