Women Wealth & Wisdom

Domestic Partnerships - Financial Strategies for Gay and Lesbian Partners

Financial and estate planning strategies for gay and lesbian couples can be challenging. To create the benefits of a legal marriage, you need to understand the complex and changing tax and legal landscape.

While every situation is different, there are five areas that gay and lesbian couples should pay careful attention to when developing a financial strategy. 

The tax consequence of re-titling assets. Gay and lesbian couples often change the title of property to joint tenants with rights of survivorship. While this change may accomplish the estate planning objective of leaving an asset to your partner without going through probate, many people don’t realize that a title change involves making a taxable gift in the eyes of the IRS if the value of the property exceeds $12,000. Be sure to consider this expense before changing the title of property.

The designated beneficiaries on group retirement benefits and life insurance plans.  If you do not specifically designate your partner as the beneficiary on these plans, your next-of-kin or your estate will most likely become the default beneficiary. Your partner will almost never be the beneficiary unless you put it in writing.

The benefits of domestic partnership/civil unions in your state.  Some employers offer domestic partner health insurance and retirement benefits. Insurance companies may offer you a spousal or partner discount on some insurance plans. You may also be able to reduce tax exposure with domestic partnership. Be sure to research and take advantage of these benefits.

Proper documentation.  While domestic partnership has its benefits, it is also important to know that it is not recognized as a legal marriage in most states. You should have a will, power of attorney, living will and health care proxy to make sure your partner is able to carry out your wishes. You may also want to have a Domestic Partnership Agreement that outlines financial and other details.  Do not assume that all members of your family will be cooperative with your or your partner’s wishes.  Have a qualified attorney draft these documents for you so that they stand up in court if the need arises.

Save more for retirement.  Social Security is a federal program and does not recognize partners for survivor benefits. There are still many company and union pension and retirement plans that do not provide survivor benefits to same-sex partners.  You must fill this benefit gap yourself.

The nuances of same-sex relationships create a lot of planning issues. Each couple is unique. You’ll need to work with a financial professional who understands these issues and uses all available techniques to fill benefit gaps and achieve your goals.

 

Useful Resources & Links:

 

AXA Equitable Life Insurance Company (AXA Equitable) (NY, NY)

Securities are offered through AXA Advisors, LLC, member FINRA, and SIPC.  AXA Advisors, and AXA Equitable are affiliates and do not provide tax or legal advice.

Investments are subject to market risk, will fluctuate and may lose value.

Please be advised that this document is not intended as legal or tax advice.  Accordingly, any tax information provided in this document is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer.  The tax information was written to support the promotion or marketing of the transaction(s) or matter(s) addressed and you should seek advice based on your particular circumstances from and independent tax advisor.

 GE 68324 (5/12) (Exp 5/14)