For advisors, the legalization of gay marriages in 2015 has revamped how they are able to help same-sex married couples plan for the future. Before 2015, estate planning was navigated with a series of work-arounds.
The Wall Street Journal’s article, “Estate Planning for Same-Sex Couples," explains that estate planning is the most important area for advisors to discuss with their same-sex clients. Prior to the Supreme Court ruling allowing same-sex marriage, if one spouse planned on leaving a bequest to a partner, there needed to be enough life insurance in place for the surviving partner to cover the potential estate tax. Now, same-sex couples also have the unlimited marital-tax deduction, allowing them to free up liquidity in their financial planning.
It’s important to remember to update beneficiaries and insurance plans. If you have an individual retirement account or other retirement plan, a partner can change their beneficiary to “spouse.” You should also review your health-insurance options. By adding a spouse to insurance coverage, same-sex couples can save thousands in premiums.
Same-sex couples also bring children to the relationship, so be sure to understand who’s bearing the financial responsibility. Also, guardianship needs to be discussed and resolved because there are still differences in state and federal laws over guardianship and parenting rights.
Another consideration is the fact that same-sex couples seeking guidance are typically older than heterosexual couples who are beginning the planning process, because the lesbian, gay, bisexual, and transgender community hadn’t had the opportunity to marry before 2015. Older people are likely to have a retirement-planning strategy.
While these are basics for married couples, they present a brand new world of opportunities for same sex married couples.
Reference: The Wall Street Journal (November 7, 2016) “Estate Planning for Same-Sex Couples”