Your finances, your future - it's all in how you plan

Financial advisor and Advocate contributor Joe Kapp and his colleague Nick Burkholder, both registered representatives and investment advisor representatives with Lincoln Financial Advisors Corp., have penned an article in the March 2008 edition of the Journal of Financial Planning that focuses on the issues concerning financial and estate planning for gay men, lesbians, and same-sex couples. We posted a link to the article yesterday, but this topic is so important that we wanted to draw attention to the main points of the Executive Summary:

• Gay men, lesbians, and same-sex couples present significantly different financial and estate planning issues from traditional married couples. This article addresses those differences and shows planners how to work with this underserved niche market.
• Under federal law, same-sex couples may not marry. Yet there are 1,138 federal statutes in which marital status affects the ability to receive federal benefits. Furthermore, states have their own complex and often contradictory sets of laws in this area.
• Before the first client meeting, planners should review, among other things, their documents in order to avoid such terms as “Mr.” and “Mrs.” They also should review their software programs, which typically make calculations for couples on the basis that they are legally married.
• Estate taxes are a concern to same-sex couples because they cannot benefit from the unlimited marital deduction. Hence, the use of life insurance is often critical—yet it, too, presents planning challenges, such as the issue of insurable interest and being sure the insurance is out of a client’s estate.
• Assets must be titled carefully when setting up jointly owned banking and investment accounts, or buying property, and clients may need to make creative use of the annual gift exclusion and the lifetime gift exemption. Same-sex couples may make especially good use of the grantor retained income trust.
• The advisor needs to inquire about the client’s family situation, as family members may not know or approve of the client’s sexual orientation, which can result in financial and legal complications upon death.
• Adoption of children is a common option, but complicated and typically expensive for many same-sex couples.
• More companies are offering benefits for same-sex domestic partners, but it’s not always advisable for the partner to accept the offer because of potential income-tax liability.

This article is a must-read for everyone in our community. You can download a printer-friendly copy of the full article here (.pdf)