Financial Planning for Same Sex Couples & Domestic Partnerships

There are financial planning issues facing all couples at various points in time. Same sex couples and those in a domestic partnership may face some unique financial planning issues in addition to the normal issues facing a couple.

What is the Accredited Domestic Partnership Advisor Designation?

The Accredited Domestic Partnership Advisor (ADPA) designation provides training to advisors working with couples in a domestic partnership, including LGBTQ couples, regarding their unique financial planning issues. These issues include how to protect the interests of both parties in the event their relationship ends in death or divorce.

These issues can include taxes, issues surrounding retirement and the transfer of wealth.

The ADPA designation was started in 2010 by the College for Financial Planning, the issuing body for the CFP designation.

Who benefits from using an ADPA advisor?

Couples in a non-traditional relationship can benefit from the knowledge and advice of a financial advisor who has the specialized training that goes with earning the ADPA designation. These couples have unique planning issues that many advisors who focus on couples in a traditional heterosexual married relationship may not have.

Why you might need a financial advisor who specializes in these issues

Domestic partnerships are treated differently than a traditional marriage when it comes to many financial planning issues. Issues such as taxes, retirement plans and wealth transfer are governed by federal laws for married couples in these more traditional relationships.

The rules governing couples in domestic partnerships are not as clear cut in many cases. The rules covering couples in these non-traditional unions vary widely by state in many cases. Financial advisors who are not specifically trained in understanding these rules may not be in a good position to provide the type of specialized advice those in a domestic partnership need. Especially for those with a higher level of net worth.

Common Financial Issues in Domestic Partnerships

Couples in domestic partnerships, including LGTBQ couples, face a number of common financial issues, including:

  • Federal taxes. Domestic partners cannot file a joint federal tax return, married same-sex couples can file jointly at the federal level. In the case of unmarried domestic partners, this can complicate their yearly tax planning including how to allocate deductions and other issues. Beyond federal taxes, state rules vary widely.
  • Retirement planning can also be complicated. It’s important to consider the retirement assets of both partners. In the case of a pension, it’s not always clear if a domestic partner can be considered when taking the benefit in the form of an annuity. Domestic partnerships can also play a role in developing a Social Security claiming strategy and in devising a retirement withdrawal strategy that takes their unique status into account.
  • Estate planning can be complex for domestic partners. A will or domestic partnership agreement is critical to ensure that assets are divided in the fashion that both partners intend in the event of the death of one of them. In the case of retirement plans, it’s important to ensure that all beneficiary designations are up-to-date to facilitate an orderly transfer of these assets in the event of the death of one partner. Social Security does recognize both same-sex marriages and some domestic partnerships in the case of survivor benefits, the expertise of a planner who is knowledgeable about these issues can help ensure a comfortable retirement for both partners.
  • Medical coverage can also be a tricky issue. Medical and dental benefits are regulated at the state level and each state has different rules regarding the ability of a partner to cover the other partner, or in some cases, in the ability of same sex married couples to obtain coverage for both partners under the same policy.

Breaking up, should this occur, can be complex for domestic partners. If there are debts that were incurred together during the relationship, who is responsible? Some states hold a domestic partner responsible for the other partner’s debts, others do not. Titling of assets is important in dividing things up in the case of a breakup. If there are children involved a split can become especially complex.

While nobody wants to think about breaking up or the death or a partner, working with a financial advisor who understands the unique issues facing domestic partners and same sex married couples can make you financial life easier and help you build wealth together.

Contact your Wedbush financial advisor for help and guidance navigating these complex issues.

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These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. The information in these materials may change at any time and without notice.