Since 2015’s Supreme Court ruling (Obergefell v. Hodges) made same-sex marriage a constitutional right, the rate of marriage in the LGBTQ+ community has skyrocketed. Of the roughly one million U.S. LGBTQ+ couples surveyed by the U.S. Census Department in 2019, 58% were married (compared to just 8% in 2012) these figures are represented differently in the Prudential article referenced later in this article. “The marriage rate has more than tripled since 2012, having increased to 30 percent from just 8 percent in 2012’s survey.” And nearly one in every six of those couples have one or more children under the age of eighteen living at home.1
While the playing field isn’t totally level, recent rulings have helped to eliminate many of the financial hurdles and disadvantages that used to be associated with civil unions. From the ability to file joint tax returns and receive spousal benefits from employers and the Social Security Administration, to reduced complexity with healthcare planning and estate planning strategies, same-sex couples finally have fair and equal treatment under the law.
Moving from domestic partners to spouses
As more and more employers phase out domestic partner benefit programs, undoing some of the complex financial strategies that used to be necessary as domestic partners is a good place to start for same-sex married couples.
It’s especially important to make sure all your beneficiary designations are up-to-date on any employee benefits, insurance policies, IRAs, and annuities. Also, take time to ensure all documents use the right gender pronouns. It may seem like a trivial matter; but it can save you potential headaches down the road.
When reviewing insurance policies—especially those you or your spouse may have purchased to compensate for having no access to spousal benefits as domestic partners—consider whether the coverage amounts are still necessary and appropriate.
Financial planning for lingering inequalities
Certainly, the most glaring inequality that LGBTQ+ couples continue to face is wage and income disparity. On average, gay males make just 68% of what their heterosexual peers make. And although the discrepancy is much smaller for lesbians (who make 89% of what heterosexual women make), they’re already at a disadvantage given the persistent gender gap between the pay of men and women for the same work.2
While child-rearing by LGBTQ+ parents is by no means a new phenomenon, marriage equality eliminates many of the obstacles and paves the way for easier adoptions. But children also bring significant new financial burdens—not the least of which is a need to plan for educational expenses. According to the College Board, the cost of a 4-year undergraduate degree at a private university (including tuition, fees, room and board, and allowances for books, supplies, and transportation) currently averages $220,000.3
Specific estate planning challenges
Marriage and children bring with them other financial challenges. Who will inherit your assets when you die? Who will care for your children if something happens to you? And how will you cover costs if you become sick or disabled? You’ll likely want to give more thought to income protection and estate planning strategies.
Considering that the LGBTQ+ community skews decidedly younger than the population at large, it’s often assumed that the unprecedented $30B wealth transfer from Baby Boomer parents to their Gen-X and Millennial children expected over the next 30 years may help solve many of these financial challenges. What few people factor into the equation, however, is that a lack of lifestyle acceptance and resulting family tensions may potentially disadvantage LGBTQ+ children on the inheritance front.
Marriage and family are life events that bring new financial challenges and require careful planning. Make sure you take time to sit down with your Truist Wealth advisor to explore all the financial opportunities and options that marriage equality has presented.