By Peter Mastrantuono
The financial challenges faced by LGBTQ couples are, in many respects, no different from married heterosexual couples. After all, money and math are blind to sexual orientation, race and gender. Nevertheless, there are some sharp differences that LGBTQ couples must consider as they chart their path toward achieving their financial dreams.
The Supreme Court decision in 2015 that required all states to grant same-sex marriages and recognize same-sex marriages granted in other states not only freed millions of Americans to exercise their love through the act of marriage, but it opened up the LGBTQ community to the many benefits that were reserved for married couples, chief among them estate planning advantages, Social Security benefits and employer benefit eligibility for spouses.
Yet, unique challenges remain. Here are some of the key considerations individuals of the LGBTQ community need to consider in their financial planning.
Life insurance is essential to protecting the long-term financial health of a surviving spouse and family. While an insurance company will never deny coverage on the basis of sexual orientation, it is important to know that some insurance companies require individuals to indicate their biological sex identity, rather than the gender to which they may identify. It’s critical to know what a life insurance company requires for gender identification since any application deemed by the insurance company to have been incorrectly completed could be cause for denying future benefit payments.
Raising children is an equally expensive proposition for heterosexual and same-sex couples. However, starting a family for a same-sex couple typically involves adoption or some form of surrogacy, both of which can be costly and require extra planning to fund the outsized expense associated with these approaches.
Putting a spouse on an employer benefit plan is one of the great financial benefits stemming from the legalization of same-sex marriage. One danger, however, is that many states have few to no protections for LGBTQ employees in the workplace, so the act of adding a spouse to an employer benefits plan can “out” an individual at work, which may run the risk of a discriminatory backlash.
Another challenge is the past history of domestic partnerships and civil unions into which many entered prior to 2015. Like any heterosexual union, break-ups will occur and for those who entered into such legal relationships, it may come back to haunt an estate plan. For example, Washington State passed legislation to make all their domestic partnerships equal to a marriage, which could create significant estate planning problems in the future since a post-2015 marriage without dissolution of a pre-2015 civil union or domestic partnership may result in multiple claims on a deceased individual’s property.
None of these challenges are insurmountable. There are many financial advisors who specialize in LGBTQ issues, and having an advisor who understands these unique planning challenges may help LGBTQ individuals confidently create their financial future.
Peter Mastrantuono is a contributing writer to www.myperfectfinancialadvisor.com, the premier matchmaker between investors and advisors. Peter worked for over 30 years in the wealth management industry, focusing on retirement planning, investing, asset allocation and financial planning.
