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.
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