Why wealth planning is a must for LGBTQ+ couples

When planning for retirement, LGBTQ+ people between the ages of 45 and 75 rely largely on their own knowledge and education, according to a study conducted by Services and Advocacy for LGBTQ+ Elders. However, 51% of LGBTQ+ older people are very or extremely concerned about having enough money to live on.

Thanks to the same-sex marriage legalization in 2015, estate, wealth and tax planning are largely the same for gay and straight unions.

Estate planning refers to planning who will receive your assets after you die, how those assets will be distributed, how you would like to be cared for if you become incapacitated before death and guardianship of any minor children.
Wealth planning includes a broad spectrum of activities: 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 or saving for retirement.
Tax planning informs both wealth and estate planning, helping to anticipate what taxes must be paid during different life stages.

Before marriage equality became law in 2015, some same-sex couples did a lot of sophisticated planning, which provided them with similar tax treatment to that of heterosexual couples. Now, even with the ability to enjoy the legal benefits of marriage, some couples may choose to not tie the knot due to tax considerations. That’s because gaining legal recognition as a married couple may put them into a higher tax bracket than if they were to file their taxes jointly.

Another financial consideration for couples choosing to marry is how a spouse is treated through corporate benefit plans, including health and wellness benefits, as well as pensions, which may vary by company and region.

Same-sex couples may also need professional advice if one of them relocates to another country, perhaps for a new job opportunity, and wants their spouse to come with. It can become particularly complicated if that country doesn’t recognize samesex unions.

Planning for children/heirs

Many same-sex couples have children. These may be children from a previous relationship, or perhaps from an adoption, surrogacy or other arrangement. While the law in these areas is complex and varies widely across jurisdictions, estate, wealth and tax planning goals for children are similar to that of heterosexual couples.

For wealth planning, couples should save for their kids’ education, as well as any other expenses they want to help out with, such as buying a first car. Estate plans may need to be updated to include children, and if they’re not yet adults, guardianship. With tax planning, same-sex couples may also consider taking deductions as part of their joint taxes for expenses such as a child’s education, whereas before 2015, they may have claimed it only on one person’s taxes.

Having equal rights as parents also means potentially having to pay child support if the same-sex couple seeks a divorce down the road.

When LGBTQ+ couples choose to marry, it’s important for couples to meet with their financial professional(s) to develop wealth plans that match their lifestyles and goals.

Your financial professional can also collaborate with your attorney(s) and accountant(s) to develop appropriate estate plans and tax strategies for your wealth management goals.

NMG Capital Group helps high net worth individuals, families, and small to mid-size institutions grow and sustain their wealth through innovative and scientific investment practices. We offer a wide array of services to businesses from retirement planning and risk management to strategic and corporate finance advisory services.

The articles and opinions expressed in this advertisement, prepared by Newkirk Products, Inc., are those of the author and are not necessarily the same as those of Clearing & Custody. Clearing & Custody did not assist in the preparation of the material and makes no guarantee as to its accuracy or reliability or the sources used in its preparation. Please note that Clearing & Custody does not act as administrator or record keeper for 401(k) plans or any other defined contribution plan. The material contained herein is for informational purposes only and does not constitute tax or legal advice. Plan sponsors and investors should consult with their own tax advisors or attorneys with regard to their personal tax and legal situations. All information as of 03/05/2021.

RBC Clearing & Custody, a division of RBC Capital Markets, LLC, Member NYSE/FINRA/SIPC, provides clearing and execution services and/or custody services for accounts managed by your financial professional. The referenced product or service is available through that relationship.