Financial planning in post-DOMA world

  • by Peter Waterloo
  • Wednesday November 12, 2014
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Peter Waterloo
Peter Waterloo

More than a year after the United States Supreme Court repealed a key provision of the Defense of Marriage Act, LGBT families are still trying to understand what federal and California marriage recognition means to them. There are a complicated web of laws and regulations that influence the financial lives and well-being of same-sex couples. Changes in these laws have a direct impact on LGBT families and how they are managing assets and their estate planning.


Plan for retirement

Same-sex spouses should approach retirement planning just as opposite-sex spouses should, regardless of marriage laws. Several steps are essential, including estimating retirement assets, income required, and sources of income to provide for realistic risk analysis. It is also essential to understand the financial impact of each spouse dying unexpectedly, becoming disabled, or experiencing a long-term or extended illness. Along with investment risk, understanding and managing these risks should be considered.


Estate planning

If an investor does not have a personalized estate plan at the time of death, then the estate plan is determined by the state of residence. The default plan provided by the state could be in direct conflict to the wishes of the same-sex couple. In California, marriage recognition laws simplify estate planning for LGBT families. However, it is imperative for same-sex spouses, and particularly those living in non-marriage recognition states, to have proper estate planning documents including wills, revocable living trusts, powers of attorney for health care drafted and executed to reflect their intent in passing wealth at death.


Moving to a non-marriage state

Same-sex couples considering leaving California should understand which states' rights, privileges and benefits you lose if moving to a non-marriage recognition state. Some of the most important are state-based property and inheritance rights. Check with your attorney to make sure your health care proxy and other legal documents are current and accessible in the event of an emergency. Some federally based but state administered benefits are still unavailable to same-sex spouses in non-marriage recognition states, including Social Security spousal benefits. For many couples, a spousal benefit from Social Security can be a useful source of retirement income.


The benefits of marriage

While I always recommend consulting an accountant when considering tax rules and regulations, it's important for same-sex couples to note that the Internal Revenue Service now recognizes same-sex marriage regardless of which state you live in, and this means lesser-known tax benefits of marriage are available to same-sex couples. If you're married or considering marriage, check with your tax adviser about how these changes in the law may affect your tax deductions, transfers of assets or medical expenses.


Find a financial adviser who understands your family

A recent UBS Investor Watch survey found that LGBT investors are confident in their financial futures in this post-DOMA world, however there are still concerns about the basics " affording health care or finding an LGBT-friendly retirement community. We also know LGBT investors are generally not satisfied with how well their current financial advisers know LGBT-specific issues, particularly as marriage equality translates to complicated financial planning. In fact, the report found a significant drop-off in adviser satisfaction in terms of understanding the financial challenges of same-sex couples. While most LGBT investors don't feel they need to have an adviser who identifies as LGBT, there are certainly advantages to having a financial adviser who can help you plan for your financial future as our rights and benefits as a community further expand.


Peter Waterloo is a senior vice president of wealth management with UBS Financial Services Inc. located at 555 California Street, San Francisco, CA 94104. With over 30 years of experience in holistic wealth management planning experience for LGBT families.


UBS is proud of the diverse workforce of individuals who help make our firm a dynamic and innovative place to work. For six consecutive years, UBS has earned top marks from the Human Rights Campaign's Corporate Equality Index, which measures corporate policies and practices related to LGBT employees. As a firm providing wealth management services to clients, we offer both investment advisory and brokerage services. These services are separate and distinct, differ in material ways and are governed by different laws and separate contracts. Neither UBS Financial Services Inc. nor any of its employees provide tax or legal advice. You should consult with your personal tax or legal advisor regarding your personal circumstances. UBS Financial Services Inc. is a subsidiary of UBS AG. Member FINRA/SIPC.