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4 Ways Financial Planning Is Different for LGBTQ+ People

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What You Need to Know

  • A same-sex spouse may not be eligible for spousal or survivor pension benefits.
  • Housing laws provide no protection for the same-sex partner of a homeowner who dies.
  • Some LGBTQ+ people go back into the closet when they need long-term care, for fear of mistreatment.

The movement towards greater equality for the LGBTQ+ community, especially in areas related to marriage, family and employment, has broadened the discussion over financial services geared towards this segment.

As LGBTQ+ individuals age and make decisions about their future and their finances, they have unique considerations to take into account. These often differ from other segments of the population, and should be considered by financial advisors that serve this community.

Here I discuss four ways financial planning may differ for LGBTQ+ individuals and how advisors who serve these clients may better tailor their services to meet their unique needs.

1. Insurance

Legal same-sex marriage in the U.S. is only about 6 years old, and marriage equality is linked to financial equality. Many LGBTQ+ retirees made decisions thinking they would never be legally married, such as taking a pension payout based on a single life, or not planning to maximize Social Security spousal and survivor benefits. It may be more important for a same-sex couple to have life insurance to make up for the loss of a single-life pension or to help make up for a lower Social Security survivor benefit (or even the lack of divorced spouse benefits or alimony from a previous relationship).

In one case, I inquired with a Fortune 500 company when the marriage laws changed to see whether a client of mine could add his husband as beneficiary, and after some research, the company came back and told me, “No.”

The pension will stop upon the retiree’s passing, and the surviving spouse gets nothing. Life insurance can be critical to help replace a lost single-life pension, and this is likely to be a more common situation with same-sex couples who lacked marriage benefits at the time of pension election.

Many insurance companies have realized this and are target marketing the LGBTQ+ community with specialized advertising, planning resources, and even targeted products like life insurance for HIV+ people.

Long-term care insurance (addressed later) is likely to be more important for LGBTQ+ people whether single or married. Many LGBTQ+ people never had children and are more at risk of aging alone, which makes having some sort of long-term care insurance even more important.

Due to the relative newness of marriage equality, many couples who were living together for years are only recently thinking of financial planning jointly including understanding the implications of being married or staying legally single. When couples focus on joint financial planning, they are far more likely to see the need and take action on things like life insurance and estate planning.

2. Legal Documents

Many LGBTQ+ people still face hostility even within their own families making it more likely that a surviving spouse or partner may face unwelcome involvement from unfriendly relatives. It may be that these relatives never recognized or approved of the same sex relationship and will insinuate themselves at a difficult time such as hospitalization or upon the passing of one spouse. It’s vitally important — even for married couples — that they have their legal documents such as a power of attorney, health care surrogate, and living will all done and available so that the couple’s wishes are carried out and interests protected. This also includes beneficiary designations, titling of accounts and property, and a will or trust.

I had one situation where a family had the water turned off on a man’s home after his same-sex partner passed away, and the house was not properly titled to protect the survivor. I took the surviving partner to an estate attorney, who told us that this was not even a case of an eviction, but an “ejection.” He had no legal right to stay in his own home. This type of situation is far more likely to occur with same-sex couples.

A financial advisor or insurance agent can be extremely helpful in making sure that beneficiaries are reviewed and updated and proper coverages in place.

Same-sex couples who are planning on adopting, using a surrogate or in vitro fertilization also have specific legal needs to protect each other and to make sure that both spouses are legally recognized as parents of their children. This is particularly true of foreign adoptions or surrogacy situations, and there are many attorneys who specialize in assisting same-sex couples in family formation.

3. Aging, Caregiving, Long-Term Care, and Senior Housing

Many LGBTQ+ older adults are going back into the closet as they age. This is an unhealthy form of isolation which brings other problems. The documentary “Gen Silent,” about LGBTQ+ aging, showed that many older LGBTQ+ people feel vulnerable and do not want to risk putting themselves in a situation of being mistreated or made to feel uncomfortable.

Many other older adults remain more socially conservative than younger people and don’t have the same comfort level with LGBTQ+ people. Additionally, with many caregivers coming from developing countries that are socially conservative and even hostile towards LGBTQ+ people, there is a need for LGBTQ+-friendly senior housing and for cultural competence among caregivers. Just as the potential caregiving needs of LGBTQ+ older adults are so great, so is the need for proper planning to pay for it, including having long-term care insurance in place.

4. Stigma and Bias

I’ve already mentioned many examples where LGBTQ+ people may face stigma and bias, and this also affects LGBTQ+ individuals in addressing their financial concerns. The insurance and financial services industries are often seen as being very conservative, which causes reluctance for LGBTQ+ people to get the financial advice and services they really need.

I see this firsthand in my office when I give out an attorney or CPA referral to an LGBTQ+ person or couple.

The next question is often: “Is he/she a member of the gay community or gay-friendly?”

This question wouldn’t be asked so much if it weren’t an issue.

It is up to us in the financial services industry to show that we are welcoming and competent, to assure LGBTQ+ people that we are serving all of our customers, including our LGBTQ+ customers, well.


David TreeceDavid Treece, AIF, is the founder of Treece Financial Group in Miami and is associated with Cetera Advisors.

(Image: Adobe)