Financial Planning for the LGBTQIA+ Community During Uncertain Legal Times

by | Jul 22, 2022

I remember exactly where I was and how I felt on June 26, 2015 when the Supreme Court delivered their ruling in Obergefell v. Hodges that “same-sex couples may exercise the fundamental right to marry”. Joy, freedom, happiness, and so many more emotions coursed through me as the ruling was announced and it felt incredibly long overdue as well. As a financial planner I was ecstatic to finally be able to work with my LGBTQIA+ clients in the same capacity afforded to my non-LGBTQIA+ clients with benefits, estate planning, taxes, laws, and other financial planning areas now equal across the board.

Almost seven years to the date later, the Supreme Court overturned Roe v. Wade in a ruling that left me furious, heartbroken, scared, and in total disbelief. Not only did they revoke American women and birthing people’s reproductive rights, but one justice went even further with his opinion and appallingly wrote that the court “should reconsider” the Obergefell ruling. Due to this statement, many of my LGBTQIA+ clients and community have been asking me what the hell they should do to protect themselves from the worst-case scenario. I am hopeful that the Obergefell ruling will be around for the rest of eternity, but there is a valid concern that other federal laws may be overturned to allow individual states to take their own stance on other issues, including same-sex marriage. I wanted to provide some helpful financial planning points to think through for those in same-sex partnerships and marriages in light of the recent news.

While there is a significant increase in support for same-sex marriage, 25 states would either have a ban on same-sex marriage or have no laws recognizing these marriages if the Supreme Court were to overturn Obergefell v. Hodges. Empowering Finance wants you to be prepared for the worst-case scenario so that you and your family are protected as much as possible, regardless of the uncertainty of this law going forward. 

 

Here are some steps to take now and things to be aware of:

 

  • Update /confirm beneficiaries on all accounts

Make sure all of your accounts are titled with proper ownership and beneficiaries are up to date on all of your accounts. This will help your assets be transferred quickly and correctly to the beneficiary you designate without the assets going to probate. Without a legal marriage or beneficiaries in place, your assets would go to the family as directed by your state’s laws. Make sure you have “POD” (payable on death) designated on your checking and savings accounts as well. Every asset and account you have needs to have a beneficiary associated with it. 

  • Create or strengthen your estate plan

Your wills, trusts, and other estate documents may have been created with language that requires a marriage to transfer or give your partner rights to assets. Be sure that your partner will still receive any assets you want to be directed to them regardless of the current law in place. With a legally recognized marriage and proper estate plan, the surviving spouse will inherit the partner’s estate without paying an estate or gift tax. The marital deduction and portability of the estate tax exemption allow one spouse to pass their assets on to the surviving spouse without incurring any estate tax. In addition, portability may allow the surviving spouse to use any portion of the deceased spouse’s unused exclusion amount upon their passing. Reach out to your estate attorney to review your estate plan and if you would like to be connected to an estate planning attorney, let us know.

  • Review health care directives and power of attorney

Review and update all important documents that will give authority to a trusted person to act on your behalf in the event that you are unable to do so. This could be choosing medical treatment or accessing funds that will pay for treatments.  This should be done for yourself, your partner, and the children you co-parent. 

  • Review your retirement plan: 

If the law allowing same-sex marriage is repealed, benefits like spousal social security, spousal pension benefits, death benefits, and certain employer benefits may be revoked. Talk to your financial planner to discuss how your financial plan could be affected by the loss of these benefits and what steps to take to protect yourself from these losses. 

  • Health insurance benefits: 

If you are thinking about taking a new job and the company is headquartered in a state that isn’t friendly to those in the LGBTQIA+ community, you may want to reconsider. Another financial planner in my community working in Seattle, WA has a client who has a transgender daughter. He has benefits through his company which is headquartered in Kansas. The insurance company will not cover gender-affirming care even though it has been medically prescribed, despite the fact that the entire family lives in Washington because the employer is domiciled in Kansas, and Kansas laws and regulations prevail. They are within their “rights” to deny coverage. They will have to enroll their daughter in individual coverage through the WA Exchange during the annual open enrollment for a 1/1/2023 effective date as gender-affirming services are mandated and covered in WA.

  • Tax planning considerations: 

Your tax filing status as married filing jointly or married filing separately affects many areas of your personal finances including your standard deductions, tax credits, employee benefits, student loan payment plans, retirement account contributions, and of course, your tax brackets. You could have your tax preparer run a scenario for you as filing married versus filing single to see the tax ramifications. 

  • Child care and custody: 

Having your name on a birth certificate may not be enough in a legal dispute of custody. Consider having multiple records and obtaining a court order stating you are legal parents if they are not biologically yours.

  • Divorce proceedings: 

Property division, child custody, child support, and spousal support benefits may not be possible to obtain if same-sex marriage is no longer legal. Getting a strong prenuptial or postnuptial agreement in place may be your best course of action. 

  • Other benefits that could be at risk:
  1. Health, dental, and vision insurance
  2. Sick and bereavement leave
  3. Parental leave
  4. Housing rights and tuition reduction
  5. Adoption/parental rights
  6. Property ownership as joint tenants
  7. Death benefits and transfer of wealth

 

If you are unsure if you have everything you need in place to be protected if the same-sex marriage laws are overturned, consider speaking with a family attorney, financial planner, and accountant to discuss options and next steps. We are happy to help support you in any way, so please feel free to reach out with any questions or if you would like to be connected with any of these professionals. 

As a woman-owned and LGBTQIA-owned financial planning company, we fight for a community in which every human feels valued, empowered, and safe. We believe love is love and women’s rights are human rights. 

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