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Plugging a Hole in the Advisor's Advanced Planning Curriculum

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Among the grumblings often heard about education for life insurance and financial service professionals is that there are too many professional designations. It’s a fair criticism: Advisors can now choose from scores of programs, many of which cover retirement planning for seniors.

And yet, there remains a critical need for technical expertise in one area that is experiencing rising demand: counseling for domestic partners. This group encompasses gay and lesbian couples, whose planning issues I explore in my feature article beginning on p.14. It includes also bisexual and transgender folks, as well as unmarried heterosexual couples and grandparents living with adult children.

According to 2005-2007 U.S. Census estimates, more than a 12 million unmarried partners live in the U.S. The need for insurance and financial planning is significant: Nearly half of GLBT boomers say they do not expect to retire until age 70 because of a lack of financial preparedness. And just 31% of LGBT boomers say they are financially prepared for retirement.

Such numbers are hardly surprising, given that they dovetail with the abysmal statistics among pre-retirees generally. What concerns me is that many advisors lack a proper grounding in the planning needs of unmarried couples, as well as same-sex couples whose marriages are recognized by their home state, but not under federal law.

The dearth of planning expertise is likely to be keenly felt in coming years as more of these couples seek counseling on the full panoply of financial issues: marriage, divorce, wealth accumulation and wealth transfer, business and retirement income planning, among other areas.

Advisors can save their clients heartache by becoming familiar with tools that many domestic partners are likely to need. Example: a transfer- (or payable-) on-death bank account, which allows individuals to bypass probate court when passing assets to heirs. One need only complete a form, provided by the bank, naming the domestic partner (or other heir) as the beneficiary of the money at the account holder’s death.

Lynn Elmer, the Principal Financial Group advisor I interviewed for my feature, says she counseled a gay couple of 27 years to do this–but only after the bank of one of the partners had failed to bring this strategy to his attention. Without a TOD account, the partner’s assets could be directed to blood relatives by a probate court, leaving a surviving partner bereft of a nest egg.

Many other techniques are available to domestic partners and other unmarried couples to help guard against unintended consequences and minimize tax costs connected with asset transfers. To its credit, one institution–the Denver, Colo.-based College for Financial Planning–has brought them together in a new curriculum leading to an Accredited Domestic Partnership Advisor designation.

Available as either a self-study or an instructor-led online mentor course, the ADPA program addresses issues that distinguish financial planning for domestic partners from planning for married spouses, covering such areas as wealth transfer, taxation, retirement planning and estate planning.

What can graduates expect to come away with? College for Financial Planning Professor Gregg Parish, who spearheaded ADPA’s development over the past year, says the program will point practitioners to scenarios in which domestic partners are treated differently from married couples under federal law. And students will learn about vehicles–the charitable remainder trust, charitable lead trust, irrevocable life insurance trust, among others–that can help minimize wealth transfer costs and facilitating other planning objectives.

The curriculum comprises three modules: one covering the mechanics of wealth transfer; a second that explores income and transfer tax issues; and a third that addresses retirement income and relationship issues.

Parish points to the importance of drafting a domestic partnership agreement. Analogous to a prenuptial agreement for married couples, a DPA can stipulate, for example, how issues are to be handled while partners are together (such as child-rearing, in the event that one partner brings children to the relationship); and how assets are to be divided should the partners separate.

To be sure, no amount of planning can fully compensate for the inequality under federal law between domestic partners and married couples. Domestic partners don’t enjoy the unlimited marital deduction, so they have to adopt techniques that add time and cost to planning.

But this is a caveat most domestic partners of means can live with. What they won’t abide–and what the industry shouldn’t tolerate–are ill-educated advisors. The College for Financial Planning’s ADPA program is thus a welcome addition to the profession’s alphabet soup of credentials. Other educational institutions would do well to follow suit with similar programs.


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