SAME-SEX COUPLES AND THEIR
is a Financial Advisor with Ameriprise Financial Services based in San
Francisco, California and can be reached at firstname.lastname@example.org
One of his specialties is
comprehensive financial planning for gay and lesbian individuals and couples.
Brandon Miller has a website that can
be found at http://gayfinancialadvisors.com/California.htm
headlines have been filled recently with the ongoing debate over the legality
and recognition of same-sex marriages. The battle for the courts and local,
state and federal governments over same-sex marriage rights is likely to
continue for some time. But another question has existed within the gay and
lesbian community for many years and continues to be a focus for the financial
services industry - “How Do Same-Sex Couples Handle Money?” It’s a
question that comes up often as same-sex partners discuss their personal
economic situation with their financial advisors. Unlike legally married
couples, same-sex partners don’t inherit a default set of assumptions about
their financial affairs when they enter into a committed relationship.
Understandably, the issue is often difficult for gay and lesbian couples to
finances – In the late 90’s, American Express Financial Advisors
conducted research on this very issue, and learned that, in fact, about 80
percent of same-sex couples do pattern their financial relationship on the
traditional marriage model. Predictably, this means that in such relationships
assets are owned jointly, income is pooled, and expenses are treated as joint
obligations. The advantage to this structure is that it has a very comfortable
feel to it – for most people, it’s the model they were familiar with growing
up, so it seems the natural way for a household to manage its finances. The
drawback of this approach is that, just as the relationship does not enjoy any
of the legal benefits that come from marriage, it does not enjoy any of the
protections inherent to a legal divorce. Without a domestic partnership
agreement in place to spell out how joint finances should be unwound;
challenging issues must be addressed under extremely draining circumstances.
Similarly, without a solid estate plan and supporting legal documents such as
wills in place, the marriage model can pose drastic and sometimes unexpected
hardships for the survivor if one partner dies.
A combined approach - More and more, gay/lesbian couples want to understand
the approaches available to them in handling their personal economies, and in
making intelligent and informed choices about what’s best for them. So what
are the alternatives to the traditional marriage model?
couples take a proportional approach to structuring their personal economy.
Under this model, joint assets and joint expenses are managed in proportion to
each partner’s relative contribution. Thus, for example, if one partner has an
income of $100,000 and the other earns $50,000, they would divide things
two-thirds/one-third. Or, perhaps partners have contributed unequally to the
down-payment or monthly payments on a house; they might agree that ownership
interests in the property should reflect these proportional contributions.
Again, arrangements like these always should be spelled out in a properly
drafted domestic partnership agreement and acknowledged in the terms of a will
solo - Finally, some couples prefer to
maintain an independent approach to their money. Finances are closely linked
with a sense of personal autonomy for many people, and sometimes the
non-financial implications of co-mingled funds create more difficulties for a
couple than the traditional approach. Under this model, of course, each couple
pays for his or her own expenses, and all assets are owned separately. Joint
expenses can be shared either evenly or proportionally to income. Often, people
who adopt this approach maintain separate bank accounts, and either contribute
to a joint account for joint expenses, or simply send two checks, for example,
to the mortgage company each month. The advantage of this approach is clear:
each party retains complete control over his or her own financial affairs, and
there are fewer opportunities for messy entanglements in the event the
relationship ends. Nevertheless, even couples who opt for the independent
approach to joint finances should have domestic partnership agreements and wills
or trusts to confirm their intentions with respect to any assets they own
Write your own rules. It’s important to remember in all of this that the
approach you and your partner choose doesn’t necessarily lock you in forever.
Your personal economy will likely change over time and the two of you are
perfectly free to re-write the rules whenever you both agree it’s necessary.
Here again the domestic partnership agreement has its advantages; it can give
you a framework for making these changes. Sometimes, it’s possible to build
the change mechanism right into the document itself. For example, a couple may
contribute unevenly to the purchase of their residence. The couple agrees that,
initially the ownership should reflect each party’s proportional contribution,
but that, over time, things should balance out to 50/50. This can be
accomplished up-front simply by drafting a sliding scale into the partnership
agreement. Note that there can be adverse tax and other consequences if these
types of provisions aren’t drafted carefully, so don’t hesitate to consult
with an attorney or tax advisor as well as your financial advisor.
fact, regardless of the complexity of your situation, oftentimes a qualified
financial advisor is an invaluable resource. Deciding how to structure your
personal economy is a difficult issue for many couples. Sometimes, emotions get
in the way of clear, objective thinking. If you and your partner are grappling
with these issues, consider seeking some dispassionate advice from a
Ameriprise Financial Services Member FINRA.
Brandon Miller has a
website that can be found at http://gayfinancialadvisors.com/California.htm