How LGBTQ clients should think about estate planning

The U.S. Supreme Court’s landmark decision in 2015 to legalize same-sex marriage nationwide extended all of the benefits of marriage to the LGBTQ community. Prior to marriage equality, couples in legal domestic partnerships under their state’s law did not have most of the important rights of married couples under federal law. The historic ruling extended inheritance rights, survivor social security, tax credits, second-parent adoption rights and other benefits to all same-sex couples — a major milestone for the LGBTQ community. As an active member of the community for the past 35 years, I know this ruling was impactful to countless individuals in the United States and across the world.

But years after this legal victory, the LGBT+ community still faces prejudice. According to the Center for American Progress, more than one in three LGBTQ Americans faced discrimination in 2020. This number increases dramatically among transgender Americans in particular, with 62% reporting discrimination in the past year. LGBTQ individuals have unique life experiences that shape who they are and planning for their financial goals requires an understanding of their distinct challenges.

Thinking about one’s overall financial picture can be overwhelming — and estate planning can be even more difficult. Most people do not like facing the thought of their own mortality. However, preparing for the future can help your loved ones avoid unnecessary hardships. Here are a few considerations for LGBTQ individuals to consider as they plan for their future and the legacy they leave their loved ones.

The importance of planning ahead
Estate planning can impact not only children but other family members. Some same-sex couples leave assets to relatives if they do not have children. It’s important to periodically review individual beneficiaries, including non-profit organizations, in case they want to make any changes. Single individuals often name their parents as beneficiaries, which requires more diligence as parents frequently predecease their children. As a good practice in these circumstances, clients should have contingent beneficiaries listed, and also remember to seek out legal and tax advice.

Regardless of a client's situation, they should always plan ahead. Surviving spouses and children often inherit an array of complicated financial issues and obligations but are left without a roadmap to guide them. This is especially difficult to navigate while grieving the loss of a loved one. However, these situations could be mitigated with proper planning. At the very least, every individual should have a will and a durable power of attorney for finances and healthcare. The client should sure to discuss and receive approval from anyone they want to have as their power of attorney, be an executor or be a successor trustee if they create a living trust.

Diversity and equality

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June 21, 2021 4:58 PM

Build a team the client trusts
It is crucial to work with established professionals who understand your unique needs and objectives. Many members of the LGBTQ community feel underrepresented and may be hesitant turning to a financial institution to ask for help. Fear of discrimination also holds back some LGBTQ individuals from meeting with a professional. Just like selecting a primary care physician, it’s important to work with a financial advisor and an attorney with whom they are comfortable discussing personal information.

Build a team of professionals the client can trust and utilize them every step of the way. As the advisor, you are already scheduling routine check-ins with your client to stay on track with their financial goals. The client should also have a discussion with their attorney to ensure they understand the client's wishes in advance, in the event the lawyer has to handle their affairs. Take consistent steps toward the client's long-term vision with the support of the team.

With equality comes responsibility
If the client is married or plans to marry, they should familiarize themselves with the community property laws of their state. Don’t assume that because they are married, their assets will go where they intend. If they are not legally married but are in a committed partnership, whether as a same-sex couple or heterosexual couple, they should have a shared understanding of both individual and joint financial objectives as well as appropriate legal planning arrangements. Clients should ask questions, lean on their professional team for guidance and be sure to contact their attorney when there are life events that necessitate a review of their estate plan.

Don’t forget to celebrate
Despite the challenges, gay marriage is on the upswing. According to the U.S. Census Bureau, gay marriage has risen 70% in the U.S. since 2014 with nearly one million same-sex couple households in the United States. The 2015 Supreme Court ruling no doubt played a pivotal role in this trajectory. The LGBTQ community has seen so much progress in the past decade, and this Pride month, there is so much to celebrate!