Celebrate Pride Month By Strengthening Your Financial Plans

With Pride month in June – it’s a good opportunity for same-sex couples to review – and implement – financial plans. Taxes are done, statements are organized, and now we are meeting with our clients to discuss their investments and future financial planning. These are important life considerations every couple should make irrespective of their marital status including:

The number of American adults who identify as LGBTQ+ has more than doubled in the last 12 years, according to new polling from Gallup. And same-sex marriages are now legal in more than 30 countries and territories around the world, according to a new Pew Research Center analysis. On June 26, 2015, the U.S. Supreme Court’s decision in Obergefell v. Hodges established a nationwide right for same-sex couples to wed. Estate planning for same-sex couples has evolved significantly over the years, especially since the passage of the Marriage Equality Act. Here are some key points to consider:

• Prenuptial Agreements: Prenuptial agreements: commonly known as prenups, are legal contracts that help protect assets.
• Experts agree that disagreements about money are one of the biggest causes of marital problems and that open communication about finances is an important key to a successful marriage.
• Reviewing existing estate plans – Couples should review their existing estate plans with a team of advisors to confirm that their planning reflects their current wishes.

• The Social Security Administration (SSA) recognizes same-sex marriages in all states. Same-sex spouses who wed in the United States are entitled to the same spousal, survivor and death benefits as any other married couple.
• With social security and retirement distributions, the marriage date matters. However, same-sex couples who couldn’t legally marry before 2015 may have decades-long relationships that predate their official marriage. Continually updating legal documents is crucial to preserve separate and joint assets.
• Check out: What Same Sex Couples Need to Know (ssa.gov)

Considering establishing a living trust – A revocable living trust, which is a trust set up during an individual’s lifetime that may be changed or revoked at any time, can be used as an individual’s main dispositive document instead of a will.

• Estate planning for same-sex couples should include essential documents like living trusts, financial powers of attorney, and medical powers of attorney.
• A living will and medical power of attorney ensure that your partner can make end-of-life decisions on your behalf
• For couples planning to pass their wealth on to the next generation, it’s important to understand that they have the ability to combine their lifetime exemption credits, which is currently $11.4 million for an individual. This allows a married couple to pass up to $22.8 million to their beneficiaries without incurring any federal estate or gift taxes.

Updating advanced directives – Couples should consider having advanced directives in place, including a health care proxy (which allows one partner to make medical decisions for the other in the event the first partner is unable to do so), a power of attorney (which allows one partner to handle the other’s financial affairs), a living will (which evidences an intent not to be kept alive in a vegetative state), and a HIPPA privacy authorization form (which allows health care professionals to disclose medical information).

Setting up an Estate plan:

• Although about 6 in 10 Americans have a retirement account, only 1 in 3 have an estate plan according to Caring.com’s 2023 Wills and Estate Planning Study.
• According to a 2023 study by Caring.com 2 out of 3 Americans do not have any type of estate planning document.

Medical: Do you have an advance directive? Couples should consider a living will, Power of Attorney Medical and Financial, Health Care Proxy, and Anatomical donation form, and a HIPPA privacy authorization form.

Updating beneficiary designations – Couples should also periodically review (and update) their beneficiary designations. If a partner passes away, an outdated or blank beneficiary designation could spell disaster for the surviving partner, resulting in an unintended beneficiary receiving the funds.

• Review your beneficiaries: Make sure all your beneficiaries are up to date and titled the way you want.
• If you have a Trust, are your non-retirement accounts titled in the Trust?

If you were recently married, is your name still the way you want it? If recently divorced did you change your beneficiary? Do you want to title things in joint, trust, or TOD (transfer on death)?

Are the beneficiaries listed on your retirement account still the people you want on in case something were to happen to you?

Protecting the children – Same-sex couples with children often face a unique set of estate planning challenges if only one parent is biologically related to the children. Particularly for unmarried couples or couples who marry with existing children, children who are adopted or biologically related to one partner should be clearly identified in all estate planning documents of both partners to provide for their financial future.

• When it comes to starting families, a Gallup poll showed that same-sex couples are four times more likely to adopt a child and six times more likely to become foster parents.
• Family Planning Expenses: Same-sex couples are more likely to adopt or become foster parents. Planning for family-related costs is crucial, including adoption fees, childcare, and education expenses.
• Prenups are particularly important for couples who have children from previous marriages.

Remember that estate planning is crucial for both married and unmarried same-sex couples. We like to introduce this conversation with our clients as early as the first financial planning meeting. It’s important to consider what will happen to your assets in the future. Consulting with a qualified estate planning professional can help you navigate the complexities and tailor your plan to your unique circumstances.