5 Financial Planning Considerations for Same-Sex Couples

In 2015, the U.S. Supreme Court recognized the validity of same-sex marriage in a landmark ruling that provided considerable clarity and security to LGBTQ couples. But while it established marriage equality, the ruling did not solve every financial challenge that these couples face.

As with any marriage, simply tying the knot doesn't solve financial problems or make them disappear.

Here's a look at five areas in which same-sex couples often encounter unique situations that need to be considered in their financial plans.


Determining When a Relationship Began

When it comes to financial benefits, such as Social Security and retirement distributions, a couple's marriage date is important. But for same-sex couples who could not tie the knot legally before 2015, the actual marriage date may not reflect a relationship that has endured for decades.

Prior to the Supreme Court decision, many same-sex couples worked out cohabitation or domestic partnership agreements that addressed financial concerns and took state and local statutes into account, noted Nichole Walker, a senior wealth planner at City National Bank. Now that marriage is an option across the country, the most important date is no longer straightforward.

"It's two different relationships. It's 'before marriage' and 'after marriage,'" Walker said. She added that as with straight couples, same-sex spouses are well-advised to continually update their legal documents to preserve their separate and joint assets.

This becomes particularly crucial as couples are dividing up accumulated property in the event of a divorce, said M. V. Lee Badgett, an economics professor at the University of Massachusetts Amherst and a Williams Distinguished Scholar with the Williams Institute on Sexual Orientation Law & Public Policy at the UCLA School of Law.

How property is divided after a long-term relationship ends depends on when and where a couple has lived, if they were married or in a domestic partnership in a state that recognized their union and what individual jurisdictional policies are.


Pre-nuptial Agreements

Pre-nuptial agreements are critical for outlining what happens to assets brought into the marriage.

But even though estate planning now is pretty much identical for same-sex couples as it is for others, Walker said that marriage equality has changed the dynamic for many same-sex couples who have been in long-term relationships.

"Do you all of a sudden bring up a pre-nuptial agreement before you get married to somebody you've been with for 10 years?" she asked. "You've been happy for 10 years and now, because you can get married, you want to change the relationship and add a pre-nup. For some couples, that's what leads to a break up."


Family Planning Expenses

When it comes to starting families, studies showed that same-sex couples are four times more likely to adopt a child and six times more likely to become foster parents. Unfortunately for everyone involved, this comes at a price.

The cost of adopting a child can cost up to or more than $40,000, and for couples that go the surrogacy route, fees can run about $150,000.

On top of those large expenditures, there may be challenges from states that resist same-sex marriages and those couples looking to adopt. In those cases, couples often choose to incur the cost of going to another state, setting up temporary residency and getting matched with a birth family, agency and attorney there.


Gender Pay Gap for Female Couples

Same-sex couples are 1 percent more likely to be employed than opposite-sex couples and singles, and they are much more likely to have a college education, according to the Williams Institute.

But overall, because men continue to earn more than women, female couples are still likely to make less than their male counterparts.

“Women are still earning less than men. There are different expectations about what women's careers should look like, and so two gay men have the potential for doing better than two women in a same-sex marriage," Badgett said.

That's why it's especially important for women to create a financial plan that counteracts the wage gap and prepares them for their long-term goals, like longevity and retirement.

As women gain more financial power in the coming years and shift the demographics in what's called the longevity economy, the economic influence of women can no longer be overlooked.


Pitfalls in Healthcare Policy

Under the 2015 Supreme Court ruling, employers who offer health care and other benefits to heterosexual spouses must offer them to all spouses.

Though, there's been some resistance, including the consideration of regulatory changes that serve to prevent many lesbian, gay, bisexual and transgender (LGBT) people in the United States from receiving health care, reported Human Rights Watch.

This uncertainty may pose a costly hurdle for some same-sex couples. Creating a financial safety net that accounts for the rising cost of healthcare could be a smart move, Walker said.

As in any relationship, having those hard conversations about money is key. "Make sure you're communicating with each other, and that you're both on the same page," said Walker.

This article is for general information and education only. It is provided as a courtesy to the clients and friends of City National Bank (City National). City National does not warrant that it is accurate or complete. Opinions expressed and estimates or projections given are those of the authors or persons quoted as of the date of the article with no obligation to update or notify of inaccuracy or change.