LGBTQ+ Financial Planning: Marriage & Benefits

David Treece |

Often I find there's a lack of education about marriage rights for LGBTQ+ people. And they think things that are not true, because marriage is still pretty new for many same-sex couples. They are still learning about things like spousal IRAs and the over 1,000 federal benefits that come with marriage. 

In addition to better understanding how marriage affects financial and life planning decisions, it’s important to realize that marriage doesn’t override the need to do other legal documents - not everything automatically includes or goes to your spouse. 

There are lots of do’s and don’ts to consider before saying “I do.” 

For example, if you said, “Well, we’re married, so we don't believe we need a power of attorney.” 

Wrong. You have to still have a power of attorney. 

Consider this scenario …

You are married. You both have IRAs, and I am managing the investments. Your wife or husband calls me and says, Oh, so and so's in the hospital, he had an accident, we need to take a little withdrawal from his IRA. And I can't process that just because you're married - you need a valid power of attorney document. 

You have no right to access your spouse's account without their knowledge and approval, unless you've got a power of attorney. So then I get the power of attorney, we send it to the custodian, they attach it to the account, and it's reviewed and approved. And then yes, you can go ahead and we can process transactions based on your instructions. 

I don't know why people put this off. But I think that most LGBTQ+ people have had so many issues, other things to worry about, and maybe less familiarity with this. Less family support. Less financial education. So that is definitely different for many same-sex couples. 

For example, when we do paperwork to move money out of a retirement account, if you're married your spouse may have to sign off on it. They know about the account, they have to give you permission to move it, or if you're naming a beneficiary who is not your spouse, they have to sign off on it and agree. 

If you are married, and your spouse inherits your IRA, he or she has the right to treat it as though it were always their own. It's not considered a non-spousal transport, which has different rules. 

Same-sex couples have also been less likely to have planned around Social Security for spousal and survivor benefits. 

We often find couples have been retired, they're older, and they may have not planned on Social Security jointly. And so they might not have optimized their benefits. And there are also divorced spouse benefits. 

You have to have been married for 10 years to claim those benefits. So that might not be a possibility. for older same-sex couples who married later in life after the laws changed. And so that's another inequality that we are still dealing with spousal benefits in general. 

Even if you're married, it often doesn't work for most people to claim spousal benefits. It's usually best for both members of a marriage to wait until the full retirement age or even age 70 to claim the maximum. But there are all sorts of planning strategies here to explore. 

Another one is pensions. Often, somebody may have claimed a pension based on a single life payout. I had this with somebody who retired from a major auto company, and he was receiving a nice monthly pension.

The company came to him with a buyout offer because they wanted to get this off the books, pensions are going away, even ones that are in payout. So they said, “Here, take this big lump sum, and we will take this off the books and you can try to replace your monthly income from it.” 

Well, I don't normally like to do that. But one of the issues here was, they've been together a long time, and he took that pension as a single life payout. I asked the company, is there was a way to change that. And they researched it. And this was based on the fact that the law changed in the interim, they became legally married. I said, so before they didn't have this choice. Now they would, can they go back and fix this? They researched it and they came back and they said no. 

So at that point, the decision was if you are hit by the proverbial bus tomorrow, all that money that you could have had as a lump sum is gone. Or you can take the lump sum and set up an income. And if you're hit by a bus, the whole lump sum then goes to your spouse. 

And that's what we did. And I don't always do that or normally do that. But that's one of the best reasons to do it. You just can't take the risk of all that money just disappearing. 

On the flip side, some LGBTQ+ couples have decided to not marry. Or maybe they will get married sometime in the future. And so, even though you are in a committed relationship, you don't have legal rights without being married unless you've done other documents. 

So I want people to understand the pluses and minuses, the legal benefits, and the risks of getting married. So that's a difference. Of course, you've got a lot of straight couples who don't get married. But clearly, that's a difference for LGBTQ+ people more because of marriage being newer to us — including issues of immigration and green card status for some couples. 

One thing you can do now (whether you are married or not) … ensure that beneficiaries are up to date with whom you really want to receive your assets after your death. 

Need advice on your specific relationship status? I am here to help. Schedule a time to chat here. 

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