Take Pride In Your Money: The Benefits of Marriage Equality
Some LGBTQ+ couples are still unaware of the benefits of marriage even though it’s been legal for our community for almost ten years in the United States. Benefits like spousal IRAs, Social Security survivor benefits, and the tax benefits of marriage are often misunderstood or not claimed.
Understanding how marriage impacts financial decisions is important. On the other hand, it's also crucial to remember that marriage doesn't replace the necessity of having other legal documents in place. Not all benefits automatically include or go to your spouse.
Do's & Don'ts Before Saying "I Do"
Like any major life event, getting married brings a new perspective to financial planning decisions. Before tying the rainbow knot, it’s important to evaluate the pro and cons to same-sex marriage. Answers to financial planning issues—especially if you have been in a long-term partnership and not married—may surprise you.
For example, here is an example from my experience with a client. A gay male client who retired from a major auto company was receiving a monthly pension based on a single-life payout. The company offered him a buyout. I inquired about changing the pension to reflect the couple’s legal gay marriage. The company researched and denied the request. This meant that when my client died, the benefit would be lost for his spouse, or, he could take a lump sum and invest it in a way so it would go to their spouse.
Some LGBTQ+ couples choose not to marry, which means they lack legal rights unless they have completed additional documents. It's essential to understand the pros and cons, legal benefits, and risks of marriage—particularly for LGBTQ+ individuals who may face unique challenges like immigration and green card status issues.
Marriage Bonds Don’t Bind All Of Your Assets And Benefits
For example, if you say, "Well, we're married, so we don't need a power of attorney," you are wrong. You still need a power of attorney. Consider this scenario:
You are married, and you both have IRAs that I manage. Your wife or husband calls me, saying, "So-and-so is in the hospital; we need to withdraw some funds from their IRA." I can't process that request just because you're married; you need a valid power of attorney document.
You have no right to access your spouse's account without their knowledge and approval unless you have a power of attorney. So, I get the power of attorney, send it to the custodian, attach it to the account, and have it reviewed and approved. Then, you can proceed with transactions based on your instructions.
I don't know why people put this off. But I think most LGBTQ+ people have had many issues, other things to worry about, and maybe less familiarity with this. They may have less family support and less financial education than many same-sex couples.
For example, when we do paperwork to move money out of a retirement account, your spouse may need to sign off on it if you're married. They know about the account and must agree to move money or choose someone other than your spouse to inherit it.
If you are married and your spouse inherits your IRA, they can treat it as their own. A non-spousal transfer does not apply, as it has different rules.
Same-sex couples have also been less likely to plan around Social Security for spousal survivor benefits. Older couples may not have planned on Social Security jointly. As a result, they might not have optimized their benefits.
There are also differences for LGBTQ+ couples regarding divorced spouse benefits. You must have been married for at least ten years to claim those benefits. This might not be possible for older same-sex couples who married later in life after the laws changed.
Survivor Benefits for Unmarried LGBTQ+ Partners
If you were in a same-sex unmarried relationship with a partner who passed away, you may now qualify for survivor benefits based on your partner's Social Security record if one of the following is true:
- Either you would have been married at the time of your partner's death if unconstitutional state laws hadn't prevented you from doing so.
- Or, you would have been married longer if not for unconstitutional state laws that prevented you from marrying earlier.
If you think you may qualify based on the categories above, contact the Social Security Administration (SSA) to apply.
Even if you were previously denied survivor benefits because you didn't meet the marriage requirement due to unconstitutional laws, you can ask the SSA to reopen your claim. You may also be due retroactive benefits.
Do you need advice on how your specific relationship status affects financial benefits for your partner? Team Treece is here to help. Schedule a time to chat with us.
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For a comprehensive review of your situation, always consult with a tax or legal advisor. Neither Cetera Advisors LLC nor any of its representatives may give legal or tax advice.