Throughout the month of June, Pride is recognized across the world. Pride is a lively global festival in honor of the 1969 Stonewall uprising in Manhattan that celebrates self-acceptance, legal rights, achievements, and pride for the LGBTQ+ community. (For those unfamiliar LGBTQ+ includes those who identify as lesbian, gay, bisexual, transgender, queer, intersex, asexuals and others.) Even though our festivities look very different this year due to the (seemingly never-ending) Coronavirus, there is still much for us to celebrate. Here in the United States, the LGBTQ+ and ally community celebrates the recent Title VII Supreme Court ruling, making it illegal for employers to discriminate because of a person’s sexual orientation or transgender status. Despite this huge accomplishment, we still have a ways to go in fighting for full equality for the LGBTQ+ community. Although we live in a time of presidential candidate Mayor Pete, marriage-equity and RuPaul, the LGBTQ+ community still faces many challenges, especially when it comes to their money.
Let’s talk about a few of these challenges and critical conversations LGBTQ+ people should have with their attorney and/or financial advisor.
You need a plan.
Despite the recent advances in LGBTQ+ rights, the community significantly lags when it comes to financial planning. Based on a recent Prudential Financial study, LGBTQ+ clients own fewer retirement products (401k, 403b, IRA) vs. the general population. Part of this might be because of the pay gap between LGBTQ+ individuals and their heterosexual counterparts. Regardless of the reasoning, it is critical to have a plan for your finances – including children, education, retirement, etc.
The importance of an estate plan.
Estate planning is equally as important for same-sex couples as heterosexual couples. My uncle likes to say, “you create an estate plan as a way of showing your family you love them”. As I’ve written about in the past, estate plans protect your assets for your beneficiaries and address issues related to both life and death. From a legal perspective, marriage provides the greatest protection of assets at the times of death. There are many spousal benefits that are assumed (e.g., transfer of assets) that would not apply to a civil union or domestic partnership. In order for these benefits to apply, they need to be clarified in an estate plan.
One of these assumed benefits relates to your health care if you were to become incapacitated or unable to make medical decisions for yourself. If a patient is in an unmarried partnership, hospitals have no obligation to communicate with a patients’ partner, unless there is a medical directive. The medical directive outlines actions that should be taken related to a patients’ care in the event they are unable to make those decisions for themselves. This is a critical part of an estate plan for all unmarried couples.
In addition, if an estate plan was done before the Supreme Court marriage-equality ruling (June 2015), LGBTQ+ couples should review their documents to be sure language (wife / husband / spouse) is updated and consistent with current laws.
Family planning costs $$$.
Kids aren’t cheap (don’t act surprised). They’re especially expensive if you need to conceive using alternative methods such as fostering, surrogates or adoption. Fostering tends to be the least expensive, while surrogates can cost $150,000+. In addition, most insurance companies will not cover the cost of fertility treatments, which can cost nearly $20,000. My best advice – start planning sooner than later. The sooner LGBTQ+ couples make a financial plan for growing their family, the more likely they are to be able to meet the financial obligations.
Lesbians must plan for a longer life expectancy.
As of 2016, life expectancy at birth for women in the U.S. was 81.1 years, 5 years longer than the life expectancy for men. For lesbian couples, this means that you must plan for your money to last even longer than a heterosexual couple or gay couple might. And don’t forget, life typically gets more expensive as we age and need additional supports, services and medical care. It is important to work with your financial advisor to identify a comfortable withdrawal rate will ensure you do not outlive your money.
Adopting children birthed by one parent.
If you have children (especially minors), it is important to ensure they are protected. If the child is not adopted and one parent is the biological parent, the other parent will not be on the child’s birth certificate. This can lead to complications if the biological parent were to pass and guardianship is not explicit in a will. Without legal directives, relatives could take the child at that point since the child has no legally documented parent. For many same-sex couples, it is recommended that the non-biological parent consider adopting the child to establish a legal relationship and avoid a custody battle in the event the biological parent should die.
So, in honor of Pride 2020, make the effort to have these conversations with a trusted advisor. As always, if you have additional questions, the team at Bloom Asset Management is here to help.