Financial Planning Considerations for Unmarried Gay and Lesbian Couples
Leisl L. Cording, CFP®
Senior Vice President & Financial Advisor
Creating a plan to meet financial and life goals can be a long and painstaking process for any couple. For unmarried couples, it’s more complicated and for unmarried gay and lesbian couples, even more complicated still. The lack of benefits and protections afforded to married couples, combined with a potential lack of family or community support, presents special challenges.
But with proper planning and guidance, unmarried gay and lesbian couples can create a strong financial plan and secured future for themselves, and for each other. Here are some of the major things to do and to consider.
Establish a Domestic Partner Agreement and Other Legal Documents
As an unmarried couple, you lack many of the protections and benefits the law extends to married couples, so you must create your own safeguards and execute certain legal documents to protect your rights. A domestic partner agreement is a legal contract that primarily addresses the sharing of income, expenses, and property. It can also delegate responsibility for nonfinancial matters.
It doesn't address the many other areas requiring protection, though, and these agreements are not legally binding in all states. So in order to provide more complete legal coverage, you should consider supplementing it with other documents like a durable power of attorney for health care, durable power of attorney for finances, a living will and a will or living trust, and parental rights documents, if applicable.
You may also want to set up a domestic partnership registration (sometimes called a living together agreement or a cohabitation agreement), which provides official recognition of your union. Be sure to examine your rights and responsibilities and consult an attorney or advisor before registering.
Consider Your Insurance
In addition to the usual financial planning challenges all couples encounter, if you’re estranged from your family and have no children you may lack familial or community support. In this case you should consider planning for a higher level of financial resources to see you through a crisis or an extended period of disability. This may include higher-than-average policies for health and disability insurance.
When it comes to health insurance, some employers offer domestic partner benefits to the unmarried partners of their employees. But before your partner signs up there are a couple of important things to consider.
One is that the value of the benefits your employer offers to your partner, unlike those offered to a spouse, is generally taxable on the federal level unless your partner qualifies as your dependent for federal income tax purposes (this is not always the case on the state level, however).
The other is that the health insurance your partner can obtain through his or her own employer may be less expensive, especially when you factor in the additional tax – so be sure to compare the total annual costs of each plan before selecting coverage.
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Consider Your Estate Planning Wishes
Estate planning is an important activity for any couple. As a partner in a same-sex couple, you may have even more reason than a partner in an opposite-sex couple has to be concerned about whether your wishes will be respected after death. Don't take anything for granted. Get your estate plan in order now.
There are four ways in which you can transfer your estate to your surviving partner: automatically, by holding property in joint tenancy with rights of survivorship (this can apply to any property with a title, such as real estate, vehicles, bank accounts, stocks and bonds, and mutual funds); by designating your partner as the beneficiary of your life insurance policy and/or retirement account; through the provisions of a living trust; and through a will using the probate laws of your state.
Consider Your Parental Rights
Parenting rights that are automatically conferred on married couples don't necessarily apply to unmarried parents. For example, if you are a non-legally recognized parent you may not be allowed to authorize emergency medical treatment for your child or stepchild; you may not be automatically granted custody or visitation rights if your relationship with your partner ends; and you may not automatically become the legal guardian of your child or stepchild if your partner dies, no matter how long you've raised the child.
Consequently, securing legal ties to your children is often a major concern. You'll want to seek legal advice from an attorney experienced with family law in your state who can help you with key legal documents like your child's birth certificate, a paternity statement, a co-parenting agreement, a nomination of guardianship clause in a will, and a form authorizing consent to medical treatment.
Consider Your Taxes
In many ways, the federal tax code treats you, as an unmarried couple, differently from a married couple. For example, you may find it difficult to qualify for the head of household filing status, which can be advantageous for those who qualify. Heads of household must generally be related to their dependents by blood, marriage, or adoption. The qualifications are fairly strict, and because of the beneficial tax treatment, the IRS monitors this closely. You also cannot claim deductions for your partner's medical expenses unless he or she qualifies as your dependent. Be sure to consult with a tax professional for help with your individual situation.
After considering all these factors, be sure to get a solid plan in place.
There’s a lot to consider and many safeguards to put in place as an unmarried gay or lesbian couple. But planning well now can make all the difference for you and your partner in the future. Meeting your shared and individual goals, for both your finances and your lives.
If you’d like help creating a strategic financial plan to help meet the financial and life goals that you and our partner share, our team at Weiss, Hale & Zahansky Strategic Wealth Advisors can help. We use our strategic Plan Well, Invest Well, Live Well process to help our clients create a financial plan that’s tailored just for them, helping them to live well now and in the future.
Contact us at (860) 928-2341 or email@example.com to get started.
Presented by Senior Vice President, Financial Advisor, Leisl L. Cording CFP®. Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. These materials are general in nature and do not address your specific situation. For your specific investment needs, please discuss your individual circumstances with your financial advisor. Weiss, Hale & Zahansky Strategic Wealth Advisors does not provide tax or legal advice, and nothing in the accompanying pages should be construed as specific tax or legal advice. 697 Pomfret Street, Pomfret Center, CT 06259, 860.928.2341. http://www.whzwealth.com