Financial planning starts now

  • by Bruce S. Stuart
  • Wednesday April 3, 2013
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Bruce S. Stuart
Bruce S. Stuart

The recent Supreme Court hearings on the Defense of Marriage Act and Proposition 8 highlighted the financial inequities that same-sex couples in the United States face on a daily basis due to existing state and federal laws. As a financial adviser who is not only a member of the LGBT community, but also someone specifically trained to help LGBT individuals and couples navigate the financial planning process, I must deal with these inequities and obstacles in order to work toward helping my clients to achieve their financial planning goals and dreams.


LGBT retirement planning

Retirement planning is primarily about creating streams of income to replace the income you had while you were in the workforce. Examples of these streams of income are rental income from real estate, and investment income such as dividends from a stock portfolio or income from bonds, as well as potential income from annuities. Some of you may have a pension from a company or municipality that will pay you a percentage of your former salary while you are in retirement. For others, Social Security is the bedrock of your retirement stream of income.

As a result of DOMA, which does not recognize same-sex couples for purposes of spousal Social Security benefits, special steps should be taken to compensate for the fact that surviving partners of same-sex relationships are not entitled to their partners' Social Security benefits. This basically translates into having to plan for a potential loss of a stream of income that opposite-sex married couples may take for granted.


LGBT families

Same-sex couples with (or planning to have) children should be aware that currently they may not be entitled to many of the financial benefits heterosexual parents enjoy under federal law. While heterosexual couples can automatically jointly file for a child tax credit, each partner in a same-sex couple must either be a biological or adoptive parent of a child in order to file for a joint child tax credit. This must be taken into consideration when financial planning for LGBT families.


LGBT real estate and estate planning

Real estate is an important part of financial planning. In the Bay Area, many of us aspire to own real estate for our primary residence and for investment purposes. While a heterosexual married couple is eligible to exempt up to $500,000 in profits from the sale of a home, LGBT couples often get to exclude much less. It is also important for LGBT couples to realize that due to the complexity of current and evolving laws regarding same-sex couples and real estate, it is critical for California LGBT couples to make sure that their real estate holdings are titled correctly. I would strongly advise any LGBT couples considering buying real estate together to consult with an attorney who is well versed in LGBT real estate matters.


If Prop 8 and DOMA are struck down – what next?

If DOMA and Prop 8, California's same-sex marriage ban, are struck down, the pathway would open for both state and federal recognition same-sex marriage in the state. What would this mean to you? Financial planning is a constantly evolving process. If you have previously created a financial plan, you may need to update it to take into consideration rights and benefits that were not previously available to you. If you haven't yet made a plan, it could well be the time to do so. Even if the obstacles to financial planning for members of the LGBT community are lessened, it is still critical that you regularly update your plan as you encounter major life events such as getting a new job, planning for retirement, changing geographic location, planning for children, and hopefully very soon, getting legally married in California.


Bruce S. Stuart is a certified financial planner and an accredited domestic partnership adviser in the global wealth management division of Morgan Stanley in San Francisco.

Disclaimer: The information contained in this article is not a solicitation to purchase or sell investments. Any information presented is general in nature and not intended to provide individually tailored investment advice. The strategies and/or investments referenced may not be suitable for all investors as the appropriateness of a particular investment or strategy will depend on an investor's individual circumstances and objectives. Investing involves risks and there is always the potential of losing money when you invest. The views expressed herein are those of the author and may not necessarily reflect the views of Morgan Stanley Wealth Management, or its affiliates. Morgan Stanley Smith Barney LLC ("Morgan Stanley"), its affiliates and Morgan Stanley Financial Advisers do not provide tax or legal advice. Morgan Stanley Smith Barney, LLC, member SIPC.