From the November 2007 issue of Investment Advisor • Subscribe!

Treat All Couples Equally

The recent Prideplanners conference in Washington, D.C., brought with it some sober realities for advisors. Marriage and the recognition of domestic partnerships for gay and lesbian same-sex unions have increased the financial complexities of serving this underserved market, not lessened them. Previously, planning for same-sex client couples was similar to planning for legally married couples--the challenge was to find workarounds to mimic the rights and responsibilities of legally recognized marriage.

With the recent recognition of gay marriage in Massachusetts and civil unions in seven more states, planning for same-sex clients is more complex than ever. We still have the need to find workarounds because our relationships are not recognized at the Federal level. A 2004 General Accounting Office report found 1,138 benefits, rights, and protections provided on the basis of marital status in Federal law; gay and lesbian couples are excluded from all of these. Additionally, we are wrestling with "gay divorce" and "divorce planning" because of the dichotomy between the recognition of our unions at the state and federal levels.

At the same time the community is wrestling with what it means to be married at the state level but not at the Federal level, it must wrestle with what it means to be divorced.

Moving assets between partners may be a taxable event. Lack of recognition of same-sex marriage at a Federal level means that a transfer of assets at the time of divorce is a taxable event. We need to plan for a couple's divorce over a long period of time (or use creative techniques) to ensure that an equalizing of the estates pursuant to a divorce decree isn't taxable.

Getting divorced isn't as easy if the couple moves across state lines. Couples who have a civil union in Vermont and then move to another state are required to return to Vermont to live for six months before they are allowed a "divorce." Since all states recognize heterosexual marriage, heterosexuals are allowed to divorce in the state where they reside, but civil unions and Massachusetts marriage aren't necessarily recognized in other states.

That raises a broader issue for all advisors and clients--because of the prevalence of divorce, more than a half of all retirement and estate plans will never be used by either gay or straight couples!

Same-sex marriage laws are changing rapidly. As planners, how do we give advice when we don't know what the laws are going to be like next year, much less five or 10 years from now? We need to be talking with our same-sex couples about their expectations of support, division of assets, and similar issues while they're still together and get them to put it in writing.

If you are a planner with little or no experience working with gay and lesbian couples, do not assume you can use crib notes to catch up when your paths cross with a wealthy same-sex couple. Commit to understanding the issues, become educated, and reach out to those professionals who have the experience and the skills to help your clients. PridePlanners is dedicated to keeping financial professionals aware of the needs of the gay and lesbian community and non-traditional couples and families, but we remain hopeful that our organization will become obsolete as laws change to treat all couples equally.

Dana Levit, CFP

President, PridePlanners

Principal, Paragon Financial Advisors

Newton, Massachusetts

Reprints Discuss this story
This is where the comments go.