Michael Stewart

Michael Stewart

Michael’s passion for helping families achieve financial security began in the sixth grade when his father decided to share his investment portfolio with young Michael

Estate Planning For LGBTQ Couples: Uncharted Waters, Or Smooth Sailing?

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In terms of the LGBTQ community, society has come quite far.  The dissonance between heterosexual and homosexual is becoming smaller, and with the long-awaited legalization of same-sex marriage, couples are now having to look at familiar situations through news lenses: housing, representation in media, travel abroad and, namely, finances — and not only how to effectively plan and protect oneself and family, but how to stretch one’s dollar the farthest and use it in the same way as a vote in a ballot box.

LGBTQ money has real power. According to The Advocate, in 2017 LGBTQ buying power was over $917 billion; that would equal the 10th largest economy in the world. Their spending power was an ultra-recent realization, stemming from the legitimization of same-sex individuals and couples as a minority with rights and protections, which has subsequently piqued the curiosities of many different industries and companies. Have you been noticing more gay-friendly commercials, labels and other marketing outside of Pride months? Yeah, that’s no accident.

With this newfound validation, comes potential issues. There arises a need to protect oneself and one’s family and, until now, there was little tax or law advice to be found on the subject. The changes in these laws are new and are largely considered uncharted waters — the situations (or transitions) that families and professionals might face could be the first they’ve ever experienced of this type, so it is important for couples to be aware and advocate for themselves, in addition to employing a team of experts whom they trust.

Though the legality of same-sex marriage is no longer in question, it doesn’t mean equality is guaranteed. Inclusive environments provide the other half to the equation; because what is a person who is knowledgeable in LGBTQ issues if they do not provide a comfortable and safe space for those people in question to co-exist? Studies have shown that the LGBTQ community proves to be incredibly brand-loyal, finding the companies they want to support and sticking with them — so, a person’s level of comfort is one of the most important considerations from buying a product from the supermarket, to hiring a financial professional and even when choosing a stock portfolio. This ensures that your money does double duty: not only will you increase your overall net worth by making sound investments, but you will be supporting companies and industries that, in turn, support you.

As far as financial planning goes, newly married LGBTQ couples should concern themselves with these major financial areas: building and protecting assets, major expenses such as buying a home, retirement, estate/tax planning and corporate benefit plans. If it feels overwhelming, that’s because it has the potential to be. Financial planning for one person is a lot, but financial planning for two? That’s why LGBTQ-knowledgeable Professional Financial Planners exist, and couples can rest on the fact that they do not have to go after their financial goals alone anymore. We’ll go over some of these topics below, together.

Though budgeting is unlikely a new topic, it is still a worthy consideration. Now that two people are tied together in the name of the law, how does one person’s spending habits affect the other’s — and how can two people of differing spending habits come together to achieve a common goal? Budgeting is often a sensitive, highly-emotional topic for people. It is often a wise idea to employ a financial professional to help mediate these conversations.

That brings us to an idea that is new to those couples taking advantage of their new ability to marry legally: joint financial income and assets. The answers to these questions will differ for everyone, but it is important to calculate your joint worth and then ask yourself:

  • How will your joint income affect your threshold for healthcare coverage?
  • Consider social security or pension spousal benefits. What will happen to the benefits if a spouse dies?
  • Will a low-earning spouse lose any federal credits or subsidies?
  • Will you and your spouse incur the marriage penalty when tax time rolls around?
  • Is filing separately or together better for your individual situation?
  • For all tax-type questions, it is suggested that couples consult a tax expert.

Estate planning is another bear entirely. Before the legalization of same-sex marriage, it was possible for couples to plan their estates around one another, but it was a convoluted experience that required careful planning and foresight. Now that same-sex marriage is identical to that of heterosexual couples, estate planning is simpler, albeit, different. Other than guardianship and funeral directives, trusts are one of the most important aspects of estate planning for LGBTQ couples who wish to protect themselves in the case their loved one dies.

When you create a trust, you protect your assets from those who might seek to infringe upon them: creditors, future spouses, and additional inheritance taxes. A will says who gets your assets, but a trust says how and when. What types of trusts are available to LGBTQ spouses? We’re glad you asked…

  • Testamentary Trusts, or Living Trusts: These trusts are used when the Grantor leaves an asset to a beneficiary, but wants to specify a time when those assets become available to them. Its main purpose is to avoid probate.
  • Qualified Terminable Interest Property Trusts, or QTIP Trusts: With this trust, the grantor provides the ability to control how assets are distributed after the surviving spouse also passes.
  • Irrevocable Trusts: Now available to everyone (not just the uber-wealthy), an Irrevocable Trust gives power to the beneficiary and removes the grantor’s rights of ownership to the assets and the trust.

Trusts are an important part of estate planning, but they are not the only part. Paperwork is a fact of life, and having these 4 basic documents on hand will ensure that things go smoothly just in case life doesn’t go as planned. We suggest:

  • Last Will and Testament: This document states who receives your assets and nominates a guardian to care for minor children.
  • Living Will: This document specifies your wishes regarding medical treatment in certain circumstances.
  • Health Proxy: This document appoints a person to make health care decisions if you are unable to express them yourself.
  • Power of Attorney: This document specifies who can act on your behalf in financial matters if you are unable to do so.

Estate/Financial planning is never a fun topic to discuss with loved ones, but it is essential for the people you care about to be comfortable in case any unfortunate events arise. To newly-married LGBTQ couples, you don’t have to navigate these waters alone. At BARR Financial Services, we intuitively understand the unique conditions and concerns that same-sex couples (and individuals) need to consider when planning their finances and estates. Schedule your consultation with a Professional Financial Planner at BARR Financial today!

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