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- Author
- William T. Trigleth, III, Executive Vice President and Executive Director of Certifications
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- Published
- June 5, 2019
Unique Issues of Your Married Gay and Lesbian Clients
Gay Marriage Legal in US for Less than Four Years
If you have gay or lesbian clients, you will want to know the unique issues which affect your Gay, Lesbian, Bisexual, and Transgender (GLBT) clients. This is especially true for your married gay and lesbian clients. Gay marriage only became legal in June 2015 after the U.S. Supreme Court ruled the Equal Protection Clause of the 14th Amendment applied to same-sex couples who wished to marry.
After the ruling by the court, gay marriage became legal throughout the United States. But the legal ability of same-sex couples to marry is very new, and many gay men and women don’t know the legal ramifications of marriage. The U.S. Supreme Court decision can be downloaded here: www.supremecourt.gov/14-556_3204.pdf.
Marriage Penalty Could Increase Taxes
An issue which confronts anyone (straight, gay, lesbian, or bisexual) who are debating marriage is taxes. Straight couples, in instances where each person earns approximately the same income and file jointly, are use to being subject to the “marriage penalty.” [2] because of the relatively recent ability to declare filing status as “married filing jointly” on their tax returns; some gay couples who marry find they face unanticipated tax issues not previously applicable.
Because legally recognized gay marriage is so recent, many GLBT couples who have been cohabitating are not aware of the marriage penalty that can increase taxes on a couple filing jointly as much as 12%. [2] Once again, because gay marriage is new, many gay men and lesbians may not have given a lot of thought to the beneficiary designations on their retirement plans.
Named Beneficiary of a Qualified Retirement Plan Will Get the Money
Financial Advisors know that whoever is listed as the beneficiary on any type of retirement plan will be the person who will get the money upon the death of the plan holder. No matter who is named as the inheritor of the estate, the decedent’s last will and testament will not override the beneficiary designation on a qualified retirement plan of any sort. Many people still don’t know this, especially same-sex couples who have only recently started to do financial planning as a couple, so Advisors must be especially conscious of bringing this issue up when providing planning services.
Three Critical Estate Planning Documents for Gay Couples
According to a paper issued by Northern Trust Company, “LGBT Financial Planning”, there are three basic documents both members of a same-sex couple need to execute: “…a will, a power of attorney for healthcare, and a durable power of attorney for property…” Straight couples should do the same thing, but gay and lesbian clients have only begun to think through these issues. You can download the report here: northerntrust/toptenLGBTIssues.
Prior to the legalization of same-sex marriage, GLBT couples could do extensive estate planning including executing the aforementioned documents. But this required sophisticated and expensive legal advice, and many couples didn’t think about it or couldn’t afford such a consultation.
Resources for GLBT Financial Planning
In 2013, Prudential issued a twenty-page report titled “The LGBT Financial Experience.” [4] While slightly dated, the report provides extensive information on the financial issues of gay men and lesbians. One of the key points explodes the myth that gay people are wealthier than straight people. Actually, the opposite is the case. You can download the report here: prudentialLGBTFinExperience
Prudential updated this report and included other groups with unique needs. You can download the update here: PrudentialFinWellDiversePopulations
Another useful resource is NerdWallet. They have a number of reports on issues facing GLBT couples here: nerdwalletlgbtfinplan
I will end by saying gay, straight, bisexual, or transgender, we all face two certainties in life: death and taxes. Helping clients deal with these inevitabilities are one of the most significant values you add as a Financial Advisor.
Resources:
[1] https://www.supremecourt.gov/opinions/14pdf/14-556_3204.pdf
[2] https://taxfoundation.org/understanding-marriage-penalty-and-marriage-bonus/
[3] https://www.northerntrust.com/documents/articles/wealth-management/top-ten-lgbt-0812.pdf
[4] https://www.prudential.com/media/managed/Prudential_LGBT_Financial_Experience.pdf
[5] https://www.nerdwallet.com/blog/lgbt-financial-planning/
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Contributing Writer: Subject Matter Expert Charles McCain
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