Tying the Knots

Six Ways to Make Your Relationship Financially Sound

by Mark Helm
Published on March 18, 2004, 12:00am | Comments

As newspapers and televisions continue to show images of same-sex couples tying the knot, it's well worth remembering some important facts about gay and lesbian marriage -- more than 1,000 facts, actually.

That's the number of rights, responsibilities and protections that are bestowed on heterosexual marriages but don't apply to gay and lesbian relationships. Even if, for example, a same-sex California marriage were declared legally valid, it would only bring with it those rights existing under California law -- no matter what state in which you may find yourself eligible for marriage, it won't secure for you and your partner many of the federal rights and benefits accorded to a straight marriage.

These rights range from big-picture estate planning issues to something so simple as the right to visit your partner in the hospital and to be consulted about their care. They include Social Security, government pensions, health insurance -- little things like that.


Marriage is in many ways about love, romance and commitment. It's also about two people combining their resources and efforts in a way that brings them greater financial stability in the present and for the future. Gays and lesbians have the same goals in relationships, but they don't have the same system in place to make those goals instantly available as they are to someone like, say, Britney Spears.

When it comes down to it, you can call the current law unfair, unconstitutional and unkind, but you can't pretend that it doesn't exist. Whatever your feelings about the issue, you and your partner owe it to each other to use the tools available right now to protect the one another and your financial future together. With the right planning, you can reproduce many -- though by no means all -- of the rights afforded a married couple.


1. Will Power

Let's put this as clearly as possible: If you are in a long-term relationship and don't have a will, you are walking on a slippery tightrope on a windy, pitch-black night with no safety net over a pool of hungry sharks and piranha.

For anyone in this situation, run -- don't walk -- to the nearest competent lawyer or financial planner and say, "We need a will as soon as possible."

Remember those scary movies where a vampire sneaks up on someone and is about to take a bite but stops at the last second because the intended victim suddenly brandishes a protective crucifix? Well, that's how a will can protect you from relatives of a deceased partner who don't want you in the picture.

Without a will in place, state law determines the distribution of your assets and that rarely benefits the surviving partner. In most states, without a legal spouse or heirs, the state distributes assets to the closest relative, whether it be a brother or sister, nephew or niece. And if that relative doesn't want to include you, then you lose.

So what are you waiting for? Do it now.


2. Assign Your Assets

As long as we're on the happy-go-lucky topic of death, you might be surprised to discover that wills don't cover lots of property. If you own property, to make sure it goes to your partner you need to make sure it's titled in the right way. Unfortunately, banks and title companies often make faulty, potentially damaging assumptions about how property should be titled.

They assume that unmarried people want property titled jointly, which means that both partners own half equally. This means that if one partner dies, the surviving partner continues to own only their half of the property.

A better solution may be to own property jointly with rights of survivorship, not simply as tenants in common. As joint tenants with rights of survivorship, if one partner dies, the other assumes 100 percent ownership. The nice thing about owning property as joint tenants with rights of survivorship is that it allows a couple to avoid probate because the property passes by title.

Using joint tenants with rights of survivorship can be particularly useful if there is any doubt about the families of nontraditional people responding negatively to the surviving partner. A family can contest the will all they want, but they have little recourse when property passes by title. Otherwise, battles with families could drag out for years and survivors can be relatively penniless until the estate is settled. Individual retirement accounts, bank accounts and qualified plans also pass to designated beneficiaries. With these accounts, it's worth it to set up investment accounts with a "payable on death" option so they can be transferred to the surviving partner if one dies.


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3. Decision Makers

So a will and proper titling of assets can protect your partner in the event you die, but what happens if you become sick or incapacitated? If you want your partner to decide what treatment you receive -- or in some cases, even have him or her by your side -- you need legal protection.

Admittedly, this is not an area that most people, gay or straight, like to talk about. Most people accept that they will die someday and are willing to plan for it. But, for understandable reasons, most of us also like to believe that we will die relatively quickly. In our minds, we get some painless, fast-acting disease, say our good-byes to loved ones, then pass away gently as we sleep in our own bed.

Unfortunately, it doesn't always work that way. If you're like me, you can think of more than a few friends and relatives whose deaths or illnesses were not so simple. Like it or not, you or your partner could become so ill that you no longer can take care of yourself. You also could be in an accident that leaves you able to breathe but with will little or no chance of recovery.

These are things you can't control. But you can control the way you are cared for and who makes critical decisions about life support.

To protect yourself and your partner, you'll need two legal documents, an advanced health care directive (AHCD) and durable powers of attorney. AHCDs replace legal documents commonly known as durable health care powers of attorney and living wills.

Generally, without an AHCD, a non-relative cannot oversee your medical treatment and a hospital may even deny your partner visitation rights. By designating your partner as your agent, you are authorizing him or her to make decisions on your behalf if you are unable to do so. In most states, the law allows you to designate another person, called a surrogate, to make those decisions, including life-ending decisions.

If designed properly, durable powers of attorney become effective only if and when you become incapacitated, and allow you to name your partner as your financial administrator. This administration could include operation of a business; gifting of assets to dependents; transfer of assets to a living trust; buying, selling or leasing assets; or even the ability to sue on the other partner's behalf. Without these powers, your partner may be unable to conduct many financial transactions necessary to maintain your home or business.


4. Don't Bet Your Life

Life insurance is an excellent way of providing for a surviving partner or making sure there are funds to pay estate taxes. But who owns and pays for the insurance is important. When the surviving partner is the owner, it does not become part of the estate of the deceased.

Same-sex partners are penalized in a few states for allegedly not having "insurable interest" in a partner's life. But there are ways to get around this problem. A favorite of some financial planners is to have the client name a family member, and then changing the beneficiary once the policy has been issued. Another way around this is to make a living trust the owner and beneficiary on the policy, then name the partner as beneficiary to the trust. Talk to your insurance agent or financial planner about options available to you.


5. Golden Years

Married or single, retirement looms large for all of us. And it should.

Maintaining a comfortable standard of living in our old age is a tall order. You need to save enough, invest correctly and then withdraw your money in the right way. What's more, you don't get a second chance to get it right. By the time you hit your mid-50s, you've either planned well or you will work well past retirement age.

So how does all this scary talk relate to retirement planning for gay and lesbian couples? Well, it's to make this point: You have a number of pitfalls in planning for retirement -- hitting any one of them could force you to continue working for years more than you wanted.

My first rule to retirement planning for gay and lesbian couples may make me sound cynical and unromantic at best, but here it is: Couples should plan separately for retirement.

That's right, plan as if you're going to break up someday.

In terms of commitment, gay couples are like straight married couples: some stay together but many don't. But in terms of the legal protections for each member of the relationship, gay couples are nothing like straight married couples.

Poets and activists can ignore this fact, but you can't.

Just like with many straight married couples, one partner in a gay relationship may earn more money and be building the bulk of the nest egg, while the other partner uses his or her salary to pay for rent and month bills.

The danger in an unmarried relationship is, of course, that if the relationship ends, the spouse who paid all the living expenses does not have the legal benefit of claiming half of the retirement account. To avoid this problem, each partner should invest a similar percentage of his or her income for retirement. If the couple should break up, each partner will have their own savings and neither will feel cheated.

For couples where one partner doesn't work, I suggest that the working partner give a certain amount of money to the non-working partner who then invests the funds in his or her own name. The law allows an individual to "gift" up to $11,000 annually to another person without any tax consequences.

This arrangement becomes all the more important when you consider that each partner will not benefit from either the other's Social Security or, in some cases, pension.


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6. Make Your Marriage Clear

Marriage isn't just about love; it's about commitment. When a couple says, "I do," they've done more than promise their love and devotion; they've also signed a legal contract that lays out detailed rules on nearly every aspect of their financial life.

Unmarried couples don't have the same protection. For that reason, cohabiting couples should capture the nature of their relationship on paper.

Sadly, most couples -- gay or straight -- don't talk about money. So instead of taking the time to consider long-term ramifications, they make financial decisions based on emotion, often giving title to their possessions or adding their names to bank accounts as a convenience or a symbol of commitment.

Unmarried couples must decide difficult questions: Is it yours, mine or ours? Will you support me if we break up? While these issues are just as difficult for their married counterparts to decide, the laws and processes are in place for dividing assets and determining support issues when marriages end. As a gay or lesbian couple, you're on your own.

The agreement should cover all expenses of the partnership and property owned, including property each partner brought to the relationship, assets inherited during the relationship and property acquired together.

There is no right, wrong or even preferred way to write an agreement. What is important is that some guidelines are written into the agreement and a method of dividing assets is established, in advance, in the event of a breakup.

Finally, remember that while you can't get legally married -- yet -- that doesn't mean you shouldn't take as many steps as you can now to make your relationship legally solid for the long-term. And taking those steps now will make that future trip down the aisle, when it comes, all the sweeter.

Mark Helms is a business journalist and financial planner who writes Metro Weekly's "Money" column. You can find his past columns in the www.metroweekly.com Archives.


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