by Justin Fauci
Financial planning can be difficult for anyone—and for same-sex couples, it can be even more complicated. However, with a little foresight and the right information, same-sex partners can properly plan so that they and their children are prepared for major life events.
Start by asking the difficult ‘what if’ questions: Can I protect income and assets for my partner and myself? How can my partner receive income if he or she is ineligible to receive my pension benefits? What steps should I take to protect my partner or myself if one of us is hospitalized? The best way to start answering these questions is to create a financial plan to address your long-term needs and goals. That plan should encompass most, or all, of the elements below.
Make a will. A will and/or a trust confirming your intentions can help ensure that your assets are distributed as you desire. If you die without a will, intestacy laws will not leave your assets to an unrelated partner.
Designate beneficiaries. Many assets, such as life insurance, 401 (k)s and individual retirement accounts, are transferred according to beneficiary designations and typically are not subject to probate. Thus, same-sex couples may wish to list each other as beneficiaries on individual accounts and policies.
Make a property agreement. If you are going to pool money, share assets, financially support each other and incur debt together, consider creating a property agreement or joint tenancy agreement in order to address the possibilities of death or separation.
Make a durable power of attorney. A power of attorney gives a person financial authority to act on your behalf. You may wish to give someone that power in case you become incapacitated.
Make a healthcare proxy and living will. Often, in medical emergencies, hospitals and doctors do not recognize a same-sex partner as a family member. Therefore, you may wish to have a health care proxy, which designates an agent (such as your partner) to make medical decisions for you in the event of your incapacity. The living will outlines a person’s wishes with regard to feeding and other life-sustaining measures.
Designate a POD/TOD beneficiary. A number of states have payable-on-death (POD) or transfer-on-death (TOD) laws. A POD/TOD beneficiary designation lets you transfer bank accounts, securities, securities accounts and other property at death without probate.
Make a joint custody agreement. Currently, 17 states allow second-parent adoptions. If your state isn’t one, a joint custody agreement should be considered in order to ensure a partner’s rights to see a deceased partner’s child.
Special planning is necessary for same-sex partnerships. A financial consultant can work with your attorneys and other specialists to help you create a plan that provides important rights and protections for you, your partner and your children.
Justin Fauci is a financial advisor with Smith Barney, 101 Park Avenue, New York, NY 10178. He may also be reached at 212-503-2348 or at justin.m.fauci@smithbarney.com.