By Michelle Petrowski Buonincontri, CFP®
Marriage is difficult enough for a heterosexual couple. As human beings, we tend to shy away from those conversations around money habits, values and even the knowledge and or implication of our state’s laws governing property (equitable property vs. community property), family law as well as the impact of credit law. Should we marry or live together? What are the pros/cons of each? What are we giving up in each scenario?
We are “in love” of course and don’t want to ruin the good feeling by going down those paths. Right?
Wrong! Not knowing or being proactive, can set up a couple for failure on so many levels later on, and that can become even more complicated for LGBTQ couples, whether they are married or not.
A few areas of impact for LGBTQ couples:
Health insurance & healthcare spending accounts such as HSA, MSA, or FSA
The rising costs of health insurance premiums, out of pocket costs or costs incurred due to an unexpected event can devastate a family. Having access to an employer-offered family healthcare plan (even contributing to healthcare spending accounts) can reduce taxes paid, and help to defray these costs and minimize the financial risks – all equating to more money in your pocket.
Emergency fund requirements
Unfortunately, not every state explicitly protects folks from discrimination based on sexual orientation or gender which can lead to a higher level of job loss, income insecurity, or pay inequities. Consequently, an emergency fund consisting of 10-12 months of household income becomes even more important than the three to six months of household income many typically suggest for an emergency fund.
Potential housing, healthcare, and survivor pension benefits for same-sex spouses of military service members. Additional information may be found at Military OneSource.
Potential spousal beneficiary protections in employer retirement accounts, the ability to make IRA contributions for the non-working spouse (spousal IRA), and preferential inherited IRA rules for spouses that can help prolong asset growth and allow assets to potentially last longer in retirement. Also, see Three Ways that LGBTQ Couples Can Minimize and Optimize Their Retirement
Social Security & Medicare benefits
These are benefits afforded to married same-sex couples in retirement as well as a spousal death benefit – even potentially if divorced. This can be important if you haven’t worked or have a low-wage earning record, and every bit helps when we are talking about retirement income planning. Understand what you may be giving up. See Social Security Benefits for Spouses & the SSA.gov fact sheet for spouses.
· Who will make decisions for me? “Next of kin” status can be afforded in financial, medical treatment, end of life and financial decisions. Do you have a power of attorney and healthcare directives – especially if you are not married?
· Is there a will? How is guardianship outlined for your children to ensure your wishes are followed?
· Ensuring assets and decisions are not inadvertently placed in the hands of the probate court - which may make property decisions not in alignment with what you wanted for your partner and family.
· Your estate at death may be large, is the utilization of the unlimited marital deduction for federal estate taxes important for your family?
As I review my own estate planning at year-end, I share these general thoughts with you for consideration. To consult a Certified Financial Planner for comprehensive advice on strategies that address your specific retirement planning needs; see www.CFP.net or www.oneconnect.net
About the author: Michelle Petrowski Buonincontri, CFP®, CDFA®
Michelle Petrowski Buonincontri, CFP®, CDFA®, is a divorce financial strategist, personal finance coach and mediator. She is the founder of Being Mindful in Divorce and New Direction Financial Strategies LLC, as well as an avid volunteer at Savvy Ladies in NY and Fresh Start Women's Foundation in Phoenix, and she works closely with the AZ National Guard. You can email her at Michelle@BeingMindulinDivorce.com.
Upcoming live webinar
How to Make a Retirement Income Plan
Thursday <> Jan 21, 2021 <> 7:00 PM - 8:30 PM EST
How much will you need to retire, and where will it come from? In this live webinar, Dana Anspach of Sensible Money will show you how to make a detailed retirement income plan by creating a series of timelines that chart out your future income and expense. You will learn how to create a crystal-clear picture of your future retirement income.
Topics to be covered:
• How to make a retirement budget and the most commonly overlooked expenses
• What a future income timeline looks like
• How to calculate how much you will need to withdraw each year during retirement
• Mistakes people make with their assumptions about inflation and rates of return
• How to see if your retirement money will last