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Regulation and Compliance > State Regulation

Does Gay Marriage Ruling End a Financial Planning Niche?

By Bernice Napach

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Friday’s historic decision by the Supreme Court legalizing same-sex marriage across the U.S. is certain to impact financial advisors working with same-sex couples.

Up until last Friday advisors in many states had to create workarounds to provide same-sex couples the same legal benefits and protections that married couples have such as automatically inheriting pension and Social Security benefits when a spouse dies. Now advisors will be working with clients to unwind those workarounds for married same-sex couples.

“The core planning areas are now essentially the same for gay and straight couples that decide to marry,” says Joshua Hatfield Charles, founder of Financial-360, an independent financial services firm that serves the Washington, DC area. “The work we as advisors will need to do for our LGBT clients in the future will involve unwinding many of the workarounds put in place because they existed as legal strangers in their states.”

One example of such a workaround: a life insurance policy to cover estate taxes when one partner dies. Such policies will no longer be necessary because estates for married same-sex couples will pass on to the surviving spouse tax-free, just like they do for married couples.

Same-sex couples will also have the option to file taxes jointly, which can save money if one spouse earns substantially more than the other. The high court’s decision “makes everyone’s lives easier because now we can plan for same-sex as we plan for the opposite or traditional marriages,” says Cary Carbonaro, managing director, United Capital Private Wealth Counseling, based in Huntington, Long Island, New York.

The Supreme Court decision overturned gay marriage bans in 13 states. Same-sex marriage was already legal in 37 other states plus the District of Columbia as a result of state actions or lower court actions.  Justice Anthony Kennedy, referring to same-sex couples, wrote, ”They “ask for equal dignity in the eyes of the law. The constitution grants them that right.”

Carina Diamond, director and managing partner of SS&G Wealth, a financial advisory firm based in Akron, Ohio — one of the states whose same-same marriage ban was voided by the Supreme Court decision — said she hopes the decision will “encourage more financial advisors to make available their financial planning advice to all couples since similar concepts now apply to all” and “prompt gay couples to seek out more financial planning guidance.”

For advisors who have specialized in LGBT couples, like Charles, that specialty may not seem as relevant now but will still be in demand by same-sex couples and other couples that don’t marry. “Advisors should not assume that their LGBT clients, who can now marry wherever they live, will want to marry,” says Charles. In addition, he says, other couples such as Gen Xers who aren’t ready to commit and older baby boomers who cohabitate for companionship may not necessarily be ready for marriage yet. “There are still a lot of people who don’t want to get married,” says Charles. “They still need additional planning.”

Ironically, some same-sex couples who don’t marry may be in need of additional planning that they didn’t require before Friday’s SCOTUS decision. That’s because some employers may choose to eliminate benefits for same-sex domestic partners since they can now marry.

The New York Times reported Monday that Verizon, Delta Air Lines, IBM and Corning eliminated benefits for domestic partners in states where same-sex marriage was legalized and replace those benefits with spousal coverage though they provided grace periods before making the change. Now that same-sex marriage is legal in all states, more employers may do the same.

Friday’s Supreme Court decision also doesn’t address the issue of discrimination in employment, housing and other areas experienced by same-sex couples. ”Anti-discrimination laws based on sexual orientation and/or gender identity exist in fewer than half the states in this country,” says Charles. “Job security and other consequences of marrying someone of the same sex are still real issues for our LGBT clients in many states.” 

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