Thanks to the legalization of same-sex marriage in the U.S., estate, financial and tax planning are largely the same for gay and straight unions. That’s good news for the more than 183,000 married same-sex couples counted recently by the U.S. Treasury Department.
But since the change in the law is relatively new, some LGBT households may not be aware of their rights when it comes to financial, tax and estate planning. Or they may be complacent — not unlike heterosexual couples.
“Financial planning is important for couples whether they are gay or straight, married or not,” said Alan Wolberg, a senior wealth planner at City National Bank in New York City who has specialized in financial planning for same-sex couples. “For advisors, it’s important to understand each relationship and ask the right questions so that each spouse – or partner – is able to come up with their own individual goals and objectives that then leads to a formal discussion, and ultimately, to compromise and a plan that will endure into the future.”
Awareness is key to effective estate, tax and wealth management planning for any family, encompassing a broad spectrum of activities such as how you build and protect your assets throughout your lifetime, planning for major expenses such as vehicles and mortgages, and long-term costs such as a child’s education, purchasing a home, and saving for retirement.
“The focus today with clients is awareness,” said Ellen Krider, financial advisor and vice president at Fort Lauderdale, Fla.-based CKM Wealth Management Group, a division of RBC Wealth Management. “As advisors, we need to have an affinity and understanding of the individuals, because this is such a recent thing.”
Before gay marriage was legal, some same-sex couples did a lot of sophisticated planning, which provided them with similar tax treatment to that of heterosexual couples. Now, Krider said, they may need to unwind those structures. Some couples may even choose to not marry despite legalization, due to the tax treatment in the U.S. That’s because gaining legal recognition as a married couple may put them into a higher tax bracket if they were to file their taxes jointly.
“Taxes shouldn’t be a reason to get married or not, but (tax treatment) is something to be aware of,” said Krider. “The major thing is supporting the community and understanding that just because they can, not all gay couples will want to get married. Either way, planning becomes very important.”
Additional financial considerations for LGBT couples include:
- How spouses are treated through corporate benefit plans, including health and wellness benefits, as well as pensions, which may vary by company and region.
- Although gay marriage is legal, some U.S. states have been slow to comply. This can be an issue around health-care decisions made on behalf of a spouse, which may not be recognized in some states — or even individual health-care centers. Krider recommended that couples maintain legal documents that prove their marriage status, just in case.
- “Even though the federal government says you’re just like every other couple, unfortunately, in some people’s minds, they’re not,” Krider said.
- Getting professional advice if one spouse relocates to another country, perhaps for a new job opportunity, and wants to take their spouse with them. Issues including visas and immigration can become particularly complicated if that country doesn’t recognize same-sex unions.
Advisors have a role to play in empowering same-sex couples in their financial, tax and estate planning, many of whom may still be uncomfortable talking about their personal lives, says Jennifer Lemieux, Vice-President and Branch Manager at RBC Dominion Securities Inc. in Kingston, Ont. Lemieux is co-chair of RBC Wealth Management’s diversity and inclusion initiative, which “helps make everyone feel valued, and that their voices are heard.”
“Even though the laws have changed, everyone is at a different place in their personal journey,” said Lemieux. “Some people have a difficult time coming out to their families or in their workplace, let alone walking into a professional stranger’s office and pouring out their heart and soul about their future plans.”
Part of a wealth management professional’s role is to make clients feel welcome and willing to share personal information, regardless of their sexual orientation. If a client feels uncomfortable, for whatever reason, he or she won’t feel free to move forward with the key elements of estate, tax and wealth management planning.
“Clients need to share everything that’s important to them, including people in their lives, their future plans and their retirement dreams,” said Lemieux. “The only way they get to do that is if we create a safe environment where they are able to share everything with (their financial advisor).”