You just got a hysterical call from a long-time client. She’s uncontrollably upset because he’s had a massive heart attack and things don’t look good. They’ve lived together for nearly 10 years, shared all their assets, and have discussed starting a family. But they aren’t married. With his next of kin estranged and out of state, and no established will, she has no legal control over his medical treatment or their assets, and should he die, she could lose their home.

Now picture this same situation, only the couple is of the same gender. Not only does the healthy partner have no control over medical treatment and assets, but she could also be denied access to her loved one in the hospital. Do you want to be the one to tell her why these basic needs weren’t planned for?

“The act of marriage in this country confers around 1,400 protection and responsibility benefits,” says Sandy Reynolds, a planner in Westport, Massachusetts, and founder of the PridePlanners Association, a national association dedicated to educating planners about the needs of the gay and lesbian community, as well as non-traditional couples and families. “That’s 1,400 different planning items you need to look at for non-married couples, regardless of whether they are gay or straight.”

These clients have to address everything–from homeownership and employee benefits to retirement and estate planning– more carefully, adds Jill Hollander, a planner in Berkeley, California. For example, “you can’t file your taxes jointly and you can’t receive each other’s Social Security benefits,” says Deborah Neiman of Neiman and Associates Financial Services LLC, in Watertown, Massachusetts. Additionally, “many private companies that have pension plans will only allow you to specify a spouse as a beneficiary, and many employees don’t have health insurance benefits for partners.”

While most advisors will admit (off the record) that they prefer as clients the traditional married couple, the demographics of American life in this area are changing. No matter what your moral views are on the subject, if you haven’t already served such couples, you or your competitors probably will. More than ever in the United States, couples are getting married later in life, and in many instances, opting not to get married at all. According to the 2000 Census, there are 5.4 million unmarried couple households in the United States.

Where do you begin? We consulted several planners who specialize in gay, lesbian, and unmarried couples, and discovered that while planning for these clients can be more involved, it can be done.

Getting Started

The way a planner handles the initial client meeting with unmarried heterosexual or homosexual couples is different than that same meeting with married couples, says Hollander. When an unmarried couple walks through your door, the first thing you need to do is get written consent from each partner authorizing each to have access to the other’s financial information. All of that information is confidential, she says. “The last couple I met with, I planned for separately, but they wanted to plan together going forward, so they gave me permission to hear the other’s stuff.”

Access to a client’s personal information is another initial issue planners have to be aware of. Most advisors hope clients are being completely honest about everything, but it isn’t uncommon for clients to withhold details about their personal lives for fear of judgment or discrimination. In a situation where a client is gay or lesbian, their “not disclosing their relationship is an issue,” says Neiman. “Advisors need to acknowledge the [unique] emotional and economic needs these clients have,” she says. Homophobia is often an internalized fear within a same-sex couple, and as a financial planner, you can’t prepare for someone’s future when you aren’t aware of the client’s significant other. If the client knows the advisor is aware of those needs and is still willing to work with him, a mutual trust can be established, which can lead to better communication.

“As planners we all have new client questionnaires in some form or another, and if you put down ‘spouse/partner’ [as an option] on the form, it gives the potential client the knowledge that you know not everybody is married with 2.3 children,” adds Reynolds. “You can’t make assumptions; I give my clients every opportunity to disclose to me who they are.”

Once she knows of her clients’ lifestyle, Neiman begins to learn about the couples’ financial arrangements. “I have seen all kinds of permutations as to how a household is set up,” she says. “From owning everything in common, as in the traditional married model; to hers and hers or his and his; to hers, hers, and ours.” This initial exploration will set the stage for future planning. “It may also just be a situation where the two people keep everything in their own name, and both parties are comfortable with that, and want to leave everything to their families,” Neiman says. “It’s when they want to take care of each other” that sticky situations arise.

After initially meeting with same-sex-couple clients and assessing their overall financial situations, Reynolds will suggest that the couple establish what’s called a partnership agreement. “Courts have viewed partnership agreements as binding legal contracts,” Reynolds explains. The purpose of the agreement is to protect both partners, as in a marriage. Remember those 1,400 items? This agreement offers same-sex couples a good portion of the protections and responsibilities that marriage confers.

For example, if you are planning for a couple where both partners have 401(k)s but one has a company match and one doesn’t, you wouldn’t suggest maxing the one that isn’t matched, Hollander explains. If one partner is contributing to the couple’s retirement and the other is instead paying the car insurance and saving for a home, what happens when they break up? “There are no [legal] protections for ‘breaking up,’” she says. “Unless things are written down in a domestic partner agreement, it can get really ugly.”

Last year, Reynolds says she drafted several of those agreements. The very act of drafting them forced the couples to consider each other’s financial goals and expectations, confirming for Reynolds the wisdom of such agreements for all couples.

Separate but Equal

Keeping assets together or separate is a decision your clients will have to make, but in terms of reviewing a couple’s overall finances up front, Reynolds says they must be considered as separate individuals, because “that is how Uncle Sam looks at them.” Even jointly held property has to be addressed individually. Comparing treatment of a married couple to an unmarried couple when one of the partners dies, the federal government “will presume [that] the married spouses contributed equally, regardless of who actually made the down payment on the property,” she says. “So only 50% of it is included in the estate of the person who died.” With an unmarried couple, the government presumes that whoever dies first wholly owned the property, so “the entire value is in their estate.” That creates a problem when the surviving partner is living in the home and equally contributed to it, financially or otherwise.

In order to prove that both partners contributed to the property or any other financial asset, advise your clients to keep a clear paper trail that proves where the money came from for items like housing down payments, mortgage payments, and savings contributions, Reynolds says. “They need to have records for everything.”

Covering All the Bases

Hollander, after going over her clients’ expectations, begins planning for unmarried-couple clients with estate documents. “If one of the partners has all the money and the other does not, that has to be addressed,” she says. In a marital relationship, such an inequity makes no difference, especially in community property states like California. “But there is no such thing [as community property] for a same-sex couple,” Hollander notes. To resolve this, Hollander prefers setting up individual trusts rather than joint trusts. “When the first person dies, you want everything to go to the partner. When the second person dies, it may go someplace else. But by keeping individual trusts, you create the different beneficiary lines,” she says. Hollander uses the same approach for retirement planning. “If something happens to one, how is the other going to live?” she asks. Planning for an unmarried couple will tend to use business property law “to get around some of these issues,” she notes.

For instance, having the ability to make legal and financial decisions for your partner in a hospital can be resolved through drafting a health care power of attorney or general power of attorney. She recalls a story she once heard where a gay couple was celebrating their 21st anniversary, and one partner died in the middle of the celebration. “The surviving partner could not even give the paramedics permission to move the body,” she says.

When people are married, they make the assumption that what’s mine is yours and what’s yours is mine, Hollander explains. “In the world of nontraditional couples, that is not true because neither the legal system nor the tax system sees it that way.” Take, for example, a mortgage, she offers. Regardless of who is paying the mortgage, it is generally the partner with the higher income who will claim the mortgage interest deduction on his or her income tax return. What they are essentially doing is gifting one another. “One is gifting part of the down payment and the other is gifting the mortgage and part of the principal,” Hollander says. Keeping records of all of this will protect the partner with the lower income later.

Family Matters

Regardless of sexual orientation, married or not, the most important issue for all couples is “protection of the survivor,” says Hollander. In a marriage, the surviving spouse is left with everything. In an unmarried couple, especially a same-sex couple, family can get in the way of the deceased’s intentions. “Assuming that the deceased’s family won’t challenge anything [like the legal beneficiary] because they have always honored the relationship is a blind spot most people have,” Hollander explains. There is a difference between families tolerating, accepting, and advocating a non-traditional couple, she says. “I have seen a number of cases where a couple is accepted, but then one dies, and the relatives swoop down and try to take everything.”

There are, however, ways to get around that like disinheriting someone in writing. If your clients are disinheriting family members, advise them to have a letter addressed to that relative explaining the choice. “In fact, the more documentation you have that says [your client is] doing this intentionally, the better.”

Bulletproofing your client’s estate plans is the only way to avoid this type of situation, warns Neiman. Disgruntled family members will fight without hesitation. “But if you prepare, and have all their financial plans in place, like a transfer on death for example [available for everything from pension plans to deeds], nothing goes into probate, and then nothing is up for debate.” In a transfer on death, all the surviving partner needs to do is present the transfer certificate to their financial institution and the funds from their late partner’s account are available to them immediately.

Part of the planning process is to prepare your clients for the possibility of a disgruntled family, even though it may be uncomfortable for them to think about it. “They have to take a realistic view of the truth,” Hollander says. “The worst time to find out there is a problem is when you can’t do anything about it.”

For Help, Network

If you have recently come across unmarried clients–gay, lesbian, or straight–and are unsure of how to proceed, here are some thoughts. “Try to find gay attorneys and other planners who work within the community to learn as much as you can,” offers Hollander. As the planner, “if you’re not comfortable handling that kind of couple, or don’t have the right information, then you should pass the client on to some who is.”

Also, she suggests advising your unmarried clients to keep their “advance directives and durables” (such as their wills, their partnership agreement, and any financial records clearly showing who owns what) in their car, especially on trips. “You never know where you are going to be when you need to have that authority on behalf of your partner.”

If you are having a hard time convincing your clients of the necessity of preparation, Neiman suggests going through two scenarios. “First, go through things the way they are now assuming their current plans–or lack thereof–play out when one or the other passes on. Diagram who gets what,” she says. “Now, show them the more optimal scenario assuming all documents are put in order.” It may take time and some hard discussions, but the clients will eventually come around.