Same-sex couples do not enjoy the rights afforded to heterosexual counterparts under federal law, but strategies are available to help them achieve their estate planning objectives. Jeffrey Hollander, an assistant vice president in the Advanced Markets Group at MetLife, New York, delivered that message during a workshop of the Association for Advanced Life Underwriting, held here last week.
“Estate planning issues often arise because of a lack of the marital safeguards for same-sex couples,” said Hollander. “In the U.S., at both a state and federal level, laws that provide tax and planning benefits focus solely on the traditional family.”
Such laws affect a sizable portion of the population. Barbara Howard, a co-presenter of the AALU session and director of gerontology for MetLife’s Mature Market Institute, pointed to a U.S. Census Bureau report that shows 15 million plus adults over the age of 18, or between 6% and 7% of the adult population, belong to the gay, lesbian, bi-sexual or transgender (GLBT) community. And, according to the A Witek/Combs Harris Interactive survey from 2006, 83% of gay men and lesbians consider themselves “out.”
Retirement concerns among those in the GLBT community are even greater than among heterosexuals. Howard flagged a 2005 MMI report, which noted that 9% more GLBT boomers worry about retirement than do straights. GLBT boomers are also 18% more unlikely to worry about leaving money to heirs. And 16% of GLBT boomers have spent no time planning for retirement.
“We do see a greater anxiety among GLBTs about preparedness for retirement than among heterosexuals,” said Howard. “We also see that GLBTs are unwilling or less willing to change their spending habits in retirement to leave money for other people. If you’re more concerned about being healthy as you age, you may also believe that you don’t have money to deal with legacy issues.”
Those who are able and willing to leave a legacy will, however, find themselves at a disadvantage for federal tax purposes without adequate planning. Hollander noted that because the IRS does not recognize same-sex marriages (as allowed in Massachusetts) or civil unions (as permitted in a handful of states), such couples do not enjoy the rights of their heterosexual counterparts. Among them: the unlimited marital deduction, the ability to transfer assets to beneficiaries free of gift and estate tax, or to defer income tax on retirement assets rolled over from an IRA or pension plan.
Hollander noted, too, that an individual is without legal recourse when a partner who is the sole owner of a property occupied by the same-sex couple dies. Under state intestacy laws, a judge could order the property be turned over to surviving siblings and/or have the surviving partner evicted.
Similarly, the death of a “spouse” can leave a surviving partner bereft of children the couple had been raising. States that don’t recognize same-sex relationships might seek to return the children to the biological parents or other family relations.
“Horror stories abound about other family members stepping in and saying, ‘we never approved of this [same-sex] relationship’ or ‘we don’t want children living in this environment,’” said Hollander. “Planning ahead whenever possible to establish legal guardianship over the children is incredibly important in these situations.”