Financial Planning for LGBT Relationships

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Many people think that with the passage of marriage equality, folks in the LGBT community no longer need financial planning for same-sex couples. True, marriage equality made things easier for those who want to marry and ushered in many protections under federal law. However, there are still challenges in the LGBT community regardless of your relationship status.

For starters, if you want to get married you probably should. There are a lot of benefits to being married that go far beyond financial considerations. Prior to marriage, there is a lot to discuss with your potential new spouse. Everything from monthly budget responsibilities to debt to estate planning should be discussed. You need to know that going into a marriage does have its own financial challenges.

Consider that if you are both high earning individuals, you may face the so-called marriage penalty. That is, your overall burden of taxation will likely increase.

You may encounter loss of government benefits if you are receiving benefits and marry someone who is a high earner. Prior to marriage, you should seek advice and review any benefits that could be at risk.

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On the positive side, marriage can lead to some very nice financial benefits. For starters, spouses have an unlimited marital deduction. What does this mean? Spouses can transfer an unlimited amount of assets to each other, at any time, even at death, tax free!

What about Social Security? Here too, there can be a benefit. A lower-earning spouse may be entitled to a higher payout based on the higher-earning spouse’s record. This can be a financial boon for the lower-earning spouse!

What about those who choose not to marry? This is where financial planning really comes into play. First of all, if you are in a relationship, but not married, you may need more planning than a comparable married couple. Let’s look at some examples.

For starters, the above noted unlimited marital deduction does not apply to those who are in a relationship, but not married. This means that you will at minimum need to have beneficiary forms in place, a will, and possibly other documentation so that your partner receives everything you intend to leave him or her. However, your heir may still face taxation that a legal spouse would not in the same situation.

Custody, visitation, and end-of-life planning rights may be more complicated if you are not the legal spouse. Depending upon your state of residence, you may not have any legal recognition should you need to make decisions for your partner.

Me and my husband enjoying a glass of bubbly at a family member’s home in Albion, CA.

Me and my husband enjoying a glass of bubbly at a family member’s home in Albion, CA.

On the plus side of not being married, if you are both earning high incomes, you will likely be filing separately at the federal level and this may reduce your overall taxation as a couple! That may be one of the few money-saving bright spots.

Separating may also be less complicated. There will be no dissolution procedure, alimony, or other support mandated if you are simply living together and not married.

If you are in a long-term, committed relationship and do not wish to marry, you should definitely seek out a fee-only Certified Financial Planner™ to go over your options with you. It’s likely that you will at minimum need to create a co-habitation agreement, retitle bank and investment accounts, and possibly set up a trust. Even with taking these steps, your partner may still be exposed to burdensome taxation and legal challenges that married couples wouldn’t face. A qualified estate planning attorney is worth the money and time for both married couples and those living together who do not wish to marry. For those who do marry, financial planning can help with aligning your goals, maximizing benefits, taxation, and a host of other financial concerns.

As an independent Certified Financial Planner™, I can help you understand your finances, define your goals, and take charge. Contact me and let’s get started. #talktometuesday #getstarted #HowIcanHelpYou #GetHelp #Hireaplanner #Pride #Pride2019 #CFPPro #savemoney #LGBTQ #QueerMoney