Journal of Financial Planning: December 2014
Marriage equality initiatives are succeeding in more and more states. As a result, same-sex couples are an expanding market for estate planners and financial planning professionals. A recent poll conducted by the Insured Retirement Institute (www.irionline.org) found that 86 percent of lesbian/gay/bisexual/transgendered (LGBT) people surveyed reported that they need wealth management services. However, nearly two-thirds of them have not yet selected a financial planner. To take advantage of this lucrative market, planners need special preparation to succeed.
An Exceptional Moment in Time
Until the past decade, it was quite possible to generalize about same sex-couples’ experiences in society. Faced with discrimination of many kinds, couples were unable to fully secure their relationships, financially or legally, and many had to hide their committed relationships from public view. Barred from formal recognition of family status, the only protections available to same-sex couples were privately drafted financial plans, confidential agreements, and end-of-life directives. Families of origin were frequently successful in having these arrangements overturned, arguing that the partners lacked legal standing as next of kin. Courts regularly invalidated custody and visitation rights, wealth transfers, and medical advocacy rights. In light of these obstacles, the services of financial planners have probably been more important to same-sex couples than these professionals ever knew.
It is hard to overstate the sea change that has occurred in less than one generation’s time. Few people imagined marriage equality would be federal law by 2013. As some states’ marriage bans fall, many couples now are ready to claim the social and financial opportunities that accompany this legal transformation.
Although today is a moment of transition throughout society, differences among regions, families, religions, and ethnic communities may still greatly color a particular couple’s experience. At 10 a.m. you may advise one couple who is legally married, welcomed by both families of origin, and celebrated by their church and their neighborhood. Later that same day, you may meet with a couple with no joint legal status, at odds with the state over parental rights and ostracized by one or both of their families. Your financial planning strategies must account for possible exclusions or expulsions from family or workplace benefits that still typify some couples’ lives. For these couples, financial security must compensate for their inadequate social support. Although it is responsible practice to thoroughly assess any client’s personal situation, the variations and higher complexity factors for same-sex couples call for specialized attention.
Financial planners are increasingly recognizing that their success with clients depends not just on technical factors, but also on assessment of family dynamics, complexity factors, and communication patterns. In addition to these, there are at least three other areas a planner should discuss with same-sex couples: the couple’s legal family status; how the couple has designed their roles as partners and, if relevant, as parents; and the security of their position within their families of origin.
Legal Family Status
Although there may be many clear benefits for committed same-sex couples to marry, financially, the picture is not so clear. The rights, obligations, and benefits associated with getting married yield clear financial advantages for some couples and likely losses for others. Joint legal status can trigger increased tax rates, changes in Social Security benefits, and decreased eligibility for student financial aid, among others. Financial planners must continually educate themselves about the changing legal landscape in marriage and also family law as it pertains to same-sex couples. Scott Squillace’s presentation of the relevant financial and legal complexities in his book Whether to Wed provides excellent guidance for planners committed to taking on this challenge. Especially now, in this period of rapid legal changes, planners must offer personalized and updated analyses of the financial impacts of a particular same-sex couple’s consideration of marriage.
Differences in the Partners’ Roles
Nontraditional family patterns are not unique to same-sex couples. Only 20 percent of American families conform to a traditional family structure, a challenge many financial professionals have confronted for quite some time. Yet, while a nontraditional family structure may be a choice for some progressive heterosexual couples, it has been broadly imposed on same-sex couples throughout history.
For all its stresses, many same-sex couples cherish this complexity. Looking only to each other, many same-sex couples creatively design roles that fit their personalities and their preferences. The result is a richer diversity of ways of being a couple. Unlike heterosexual partnership roles primarily based on gender differences, same-sex partners cannot distinguish their roles based on social conventions of “male” and “female.” Roles tend to be more personalized, egalitarian, and perhaps more flexible, including couples’ financial lives. Many same-sex couples adopt their own balance of separateness and togetherness. They may demonstrate this in their holding of joint versus individual assets in their long-range financial expectations within the partnership and in their management of everyday finances. In my financial therapy practice, it is common for even married same-sex couples to each write a check for half of my fee. Fewer heterosexual couples demonstrate this level of financial compartmentalization.
Many same-sex couples also place particular importance on equalizing power within the partnership. As a result, they may have a heightened aversion to hierarchical treatment of one partner over the other by others, including the professionals they encounter. This dynamic has deep implications for how you interview and interact with the couple. You may need to actively engage both partners in meetings and in the decision-making process.
As Kathleen Burns Kingsbury points out in her book, How to Give Financial Advice to Women, gendered roles have often led financial planners to direct discussions toward the male partner, reinforcing a hierarchy that has alienated many married, female clients. Given the greater variations in roles and power-sharing in same-sex partnerships, planners need to conduct especially personalized and balanced interviews with same-sex couples. Adopting an inclusive and participatory stance with both partners in a same-sex couple (of either gender) can convey your understanding of their relationship dynamics.
Another area of the couple’s private life that will influence your planning involves their roles as parents. Many same-sex couples need alternative methods of becoming parents such as adoption, surrogacy, sperm or egg donors, and in-vitro fertilization. Your interviewing of co-parenting couples should fully explore their situation, demonstrating straight-forward and comfortable discussion of their biological and legal ties to their children. If the couple used a donor or surrogate, you will need to know what that person’s role is now. Likewise, if your clients are adoptive parents, they may or may not have identical legal status. In some instances, laws preclude same-sex partners from co-adopting children. This is particularly (but not exclusively) true for international adoptions. If the children are products of an earlier marriage of one partner, the ex-spouse’s attitude toward the same-sex union may color the degree of financial and emotional support provided. These circumstances may influence the financial expectations between the same-sex partners and the strength of any agreements made privately among the parties.
Relationships with Families of Origin
Advising same-sex couples requires planners to look closely at the couple’s relationships with each family of origin, particularly their status in relation to family wealth. Family elders’ reactions to their homosexuality may influence the couple’s likely inclusion in family wealth transfers. Gifts or inheritances can be rescinded at the gifter’s discretion, with little or no recourse available to their heir.
At one end of the spectrum are clients whose families do not even know the individual or couple is gay. Any present or future financial dependence on wealth transfer from the family of origin is therefore perched on a precarious foundation. I know of attorneys who have been ordered to remove an adult child from the parents’ estate plan when the heir’s homosexuality was discovered. Less extreme are families who offer support to their LGBT children but bristle at the idea of equating the same-sex partnership with the heterosexual marriages of their other children. These families distribute funds accordingly, often placing inheritances in trust (while siblings’ inheritances pass outright) or reducing the portion assigned to an LGBT heir.
Similar vulnerabilities may lie within a same-sex spouse’s status with his or her in-laws. In many high net worth families, even heterosexual married-in spouses may commonly be offered less than full recognition as family members. This can be especially true when the new partner joins the family by virtue of a same-sex union. Many trusts written years ago may specify conditions on who is considered bloodline for purposes of inheritance or beneficiary status; there may even be outright restrictions on distributions related to sexual orientation. Especially in states that prohibit same-sex couples from marrying, the status of an in-law may be especially vulnerable and unsecured.
LGBT partners’ relationships to their siblings also vary. In some families, siblings offer the same-sex couple full inclusion in the family. When LGBT heirs are excluded from their parents’ estate plans, adult siblings may voluntarily share their own inheritances. Supportive siblings embrace their roles as aunts and uncles to their LGBT sibling’s children, including them in family experiences and even wealth sharing via loans and gifting among siblings. Conversely, unsupportive siblings can uphold or exacerbate the same-sex couple’s financial alienation with a family of origin.
In some families, the arrival of grandchildren puts former feuds to rest. Grandchildren are powerful ambassadors of goodwill; more than a few grandparents have found their hearts for their LGBT child once a new baby becomes part of the family. In other families, parents who are struggling to accept their LGBT child cannot find their way to endorsing the same-sex couple as primary role models to a grandchild. Already fragile intergenerational bonds can then deteriorate.
What’s a Planner To Do?
Financial planning for same-sex couples needs to take into account unique factors related to both the content of the planning goals and the process of the client relationship. Exploring both of these elements will help direct your wealth management and estate planning strategies in the best possible ways for your clients. Here are some tips you can incorporate into your practice:
Adapt your interviewing and client onboarding skills to accommodate same-sex couples’ unique approaches to their relationship with each other and with you. Establish a norm of asking each partner every question, both to invite each individual’s perspective and also to equalize each partner’s participation in the interview. Listen openly for nontraditional themes and make as few untested assumptions as possible. Use open-ended and follow-up questions to allow you to observe how the partners interact and how they approach making decisions together.
Expand your discovery process. Initiate inquiry into these areas:
- Ask the partners why they have chosen this moment to approach a financial professional. Clarify the non-financial factors that are shaping their financial planning goals.
- When exploring the couple’s patterns of financial separateness and joining of resources, ask about their management of everyday finances and also about their expectations of asset sharing in later life. Many couples maintain greater separateness during their working years and plan to more fully blend their assets upon retirement.
- Evaluate the financial implications of the couple’s legal status as partners and, if relevant, as parents.
- Assess the reliability of the couple’s inclusion in family wealth transfers and other sharing of family financial resources. Distinguish families who will continue to support the couple from families whose support may waiver under pressure. Asking about the family’s responses to key life events such as the couple’s commitment ceremony or wedding, or the partners’ announcement of their plans to become parents may offer clues about future family support.
- Evaluate the couple’s overall financial vulnerability and create contingency plans that support their financial goals. Risk management and insurance strategies must reflect this analysis.
Success with your clients often rests on bringing out and assisting with the deeply personal factors in their lives. This is especially true with same-sex couples. Their financial challenges are frequently intertwined with their personal lives and social circumstances. LGBT couples will increasingly seek out financial planners who welcome this complexity and who approach the planning process accordingly. Planners who invest their effort in understanding these factors will be rewarded with a motivated and growing client base.
Suzanne Slater, LICSW, is a financial therapist and founder of Gifted Generations (www.giftedgenerations.com) in Northampton, Massachusetts. She advises wealth managers on family wealth dynamics and facilitates meetings with high net worth families.
Sidebar: Learn More
For more information on planning for same-sex couples, consider these resources:
Books
Making It Legal: A Guide to Same-Sex Marriage, Domestic Partnerships, and Civil Unions by Frederick Hertz and Emily Doskow (2014)
Money Without Matrimony: The Unmarried Couple’s Guide to Financial Security by Sheryl Garrett, CFP®, and Debra Neiman, CFP® (2005)
Whether to Wed: A Legal and Tax Guide for Gay and Lesbian Couples by Scott Squillace (2013)
Articles
“A Guide to Serving the Estate and Financial Planning Needs of Gay Men, Lesbians, and Same-Sex Couples,” by Joseph Kapp and Nicholas Burkholder, from the March 2008 issue of the Journal of Financial Planning
“Estate Planning for Unmarried Couples: What Financial Planners Need to Know,” by Richard Stolz, from the February 2012 issue of the Journal of Financial Planning
“The Huxtables or The Sopranos? How to Assess a Family’s Complexity Factor Early in the Recruitment Process,” by James Grubman and Dennis Jaffe, from the November/December 2010 issue of Private Wealth Magazine