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Enjoying the Ride: Planning with pride

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Around the world, June is recognized as LGBTQ+ (Lesbian, Gay, Bisexual, Transgender and Queer) Pride Month to commemorate a tipping point in LGBTQ+ history. The Stonewall Uprising ocurred in June of 1969 in Manhattan, New York and lasted six days as police clashed with LGBTQ+ protesters. More recently, on June 26, 2015 the Supreme Court’s Obergefell v. Hodges decision granted Americans universal marriage rights, and on June 15, 2020 the Supreme Court granted equal employment protections to the gay and transgender community. So obviously, June is a special month for our LBGTQ+ family, friends and fellow citizens!  

Unfortunately, the recent favorable decisions have not eliminated all the financial planning complications for LGBTQ+ couples. For example, while there are now certain protections at the federal level, there are still many states that have not equalized benefits or put in place anti-discrimination laws that affect health care, housing and access to credit. There are also different rules across America about parental rights, adoption and other family financial planning options.

On top of that, more LGBTQ+ Americans are approaching retirement. By 2030, there will be an estimated 6 million LGBTQ+ seniors in the U.S. and, like any other couple, financial and estate planning are essential to ensure this expanding community is happy, healthy, and financially prepared to enjoy the years to come.

Unmarried LGBTQ+ couples should consider a living will or medical directives. Those who have not legally married will not be afforded “next-of-kin” status for each other, and in the instance of a medical emergency may even be treated as legal strangers. If you are incapacitated, that could mean your significant other would be bypassed at the hospital and a relative would be called instead. For financial matters, a partner would not be able to step in immediately and handle your money in the case of an emergency without a court order if they do not have a properly executed Power of Attorney.

Of course, a will is critical. The absence of such a document may trigger your state’s “default” distribution plan, which usually directs the assets to a legal spouse or, if none exists, to your blood heirs. Thus, a will is especially important if you are unmarried and have a personal residence that you wish for your partner to continue living in after your death, or if you have assets with no assignable beneficiary that you want to leave to a partner.

Putting assets into a trust can help heirs avoid probate and more specifically address personal and death tax issues. Beneficiary designations on certain assets (such as life insurance, retirement accounts, etc.) take precedence over wills or other instructions. That’s why it’s so important to review these beneficiary designations carefully. Always, ensure that the title to your assets properly. For example, a house titled “Joint Tenants with Rights of Survivorship” will pass directly to the surviving owner when an owner dies, rather than through your will.

Child custody issues are important to plan for as state laws vary greatly with respect to the parenting rights of LGBTQ+ couples and access to services. Some states may require additional adoption procedures if one parent is a biological parent to a child but the other isn’t. Finally, domestic partnership or cohabitation agreements and separation plans may help outline financial expectations during the partnership as well as how assets are divided if the relationship ends. 

Some advantages of being married include avoiding the so-called “marriage tax penalty” where couples filing jointly paid more than singles at certain higher income levels. Gifts of more than $15,000 annually to non-spouses eat into the giver’s lifetime federal gift and estate tax exclusion, whereas married couples can make unlimited gifts to each other. Also, married couples are guaranteed Social Security spousal and survivor benefits, which also apply if you get divorced after at least 10 years of marriage. Legal spouses may be covered by their spouse’s employer’s health plan and other health benefits like HAS accounts and childcare. 

Retirement savings accounts like 401(k) plans require the spouse to be the beneficiary unless they give written consent to designate someone else. An inheriting spouse can roll over inherited assets to their own IRA and defer required minimum distributions until they are 72 years old. Generally, under the SECURE Act, a non-spouse inheriting an IRA must withdraw the entire balance within 10 years of the IRA owner’s death. 

LGBTQ+ spouses of military members may be some of the greatest financial beneficiaries of marriage equality, because a legal spouse is eligible for a wide range of military benefits, from pension survivor benefits to health care to housing. Perhaps the most financially impactful change, however, is the estate planning ease with which same sex married couples can now transfer assets to each other without incurring taxes. 

Regardless of your lifestyle decisions, race, religion, or socioeconomic position, to protect your loved ones and safeguard your finances, it’s best to put a plan in place that specifies your wishes and designates the people you trust to carry them out. You should always consult professionals in the legal, accounting and finance fields to assist and advise you with you plans.  Summer has arrived in Southwest Montana so get outside and enjoy the ride!

Scott L. Brown is the Co-Founder and Managing Principal of Shore to Summit Wealth Management.  His wealth management career spans more than 25 years and he currently works and lives in Bozeman, MT with his wife and two sons.

Wells Fargo Advisors Financial Network did not assist in the preparation of this report, and its accuracy and completeness are not guaranteed. The opinions expressed in this report are those of the author(s) and are not necessarily those of Wells Fargo Advisors Financial Network or its affiliates. The material has been prepared or is distributed solely for information purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy Wells Fargo Advisors Financial Network and Shore to Summit Wealth Management are not legal or tax advisors. You should consult with your attorney, accountant and/or estate planner before taking any action. 

Investment products and services are offered through Wells Fargo Advisors Financial Network, LLC (WFAFN), Member SIPC. Shore to Summit Wealth Management is a separate entity from WFAFN.  Shore to Summit Wealth Management is located at 105 E. Oak Street, Unit 1A Bozeman, MT 59715 # 406-219-2900.

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