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8 Financial Planning Tips for LGBTQ Couples

8 Financial Planning Tips for LGBTQ Couples

June 03, 2024

LGBTQ+ couples can benefit from financial planning but often have unique circumstances that require specific strategies. Knowing where federal and state laws may impact a financial plan is essential, whether the couple is married or in a recognized relationship. Here are some helpful financial planning tips for LTBTQ couples. 

Tip #1: Understand your marital status. The Supreme Court’s 2015 decision in Obergefell v. Hodges legalized same-sex marriage in the United States. However, couples who married before 2015 in a state that recognized their marriage - but then moved and broke up in a state that didn’t recognize the union - may still be legally married because they didn’t officially divorce in a state recognizing their marriage. 

Tip #2: Determine if you’re in a domestic partnership or married. Some states automatically convert domestic partnerships to legal marriage after a set period, so it’s essential to understand your status if you are not legally married. 

Tip #3: Consider beneficiary designations. Even if you’re legally married, ensure your beneficiary designations reflect your wishes. If you intend your spouse or partner as a beneficiary, you must designate them as one. Without beneficiaries on life insurance policies and some investments (such as a 401(k)), probate will apply, taking time before your heirs inherit your assets. 

Tip #4: Draft a will, POA, and medical and financial directives. Get your affairs in order with a legally witnessed and notarized will. It should include the following:

  • a Power of Attorney (POA) document listing who you intend to handle your assets and affairs, 
  • a medical directive that names who will manage your medical decisions if you can’t do so yourself,
  • and a financial directive that outlines your wishes for your finances, how to pay bills, etc.

Tip #5: Think about the end goal. 
The first step in financial planning is envisioning what you want from life, your investment and retirement goals, and the timeline for reaching them. As an individual and couple, write out your short-term and long-term goals to help track your progress as you pursue them. 

Tip #6: Understand what money comes in and what money goes out. Your net income is what’s left after your 401(k), Roth IRA (or other retirement savings), health insurance premiums, and other benefits are deducted from your paycheck. Compare your net income to your monthly living expenses, and work to ensure you have additional money to build an emergency fund and to save for special wants. 

Tip #7: Work with a financial professional who understands your situation. By working with financial professionals specializing in financial planning for LGBTQ+ couples, they will understand how state laws may impact your financial plan and can help you implement a strategy aligned with your goals. 

Tip #8: Include a plan for your children. If children are part of the equation (whether biological or not), your financial plan should include considerations for adoption. Also, your will should include a Declaration of Guardian document that names the individuals who will be the guardian of your children if you become incapacitated, disabled, or die. Otherwise, without this essential document that is part of your will, the Court will decide who will care for your child/children and their finances.

Besides these financial planning tips, it’s essential to consider insurance as part of your plan. It helps protect the people you love and the assets you’ve worked to acquire. A financial professional can conduct an insurance review during the financial planning process and draft a strategy that addresses your goals and aligns with your unique situation. 

As a firm that’s knowledgeable about the unique challenges facing LGBTQ+ couples, we work to ensure our clients have the right tools and resources to give them the best chances for long-term success. Let us know if you have questions or financial concerns. We’re here for you!  

Courtesy of Fresh Finance