New Supreme Court Majority Poses Threat to LGBTQ Financial Security

With Brett Kavanaugh's confirmation, it's time to rethink your planning.

Even if you’ve already planned a comfortable future for yourself and your partner, it could be time to revisit everything, because financial protections for “non-traditional” couples may be about to change—again!

In fact, with the recent confirmation of Supreme Court justice Brett Kavanaugh, much of the hard-fought progress that has been made by the LGBTQ community could be in jeopardy. And that may not bode well for your financial security. 

Just a few short years ago in 2013, the Supreme Court struck down the antigay Defense of Marriage Act (DOMA), opening the door for married same-sex couples to partake in federal benefits that were long overdue.

Unfortunately, in the next few months, it is anticipated that the U.S. high court may accept a case from one of several appeals courts that could determine whether LGBTQ individuals and couples are protected under current federal civil-rights laws. 

In addition, when Kavanaugh refused under oath to say whether the DOMA case was properly decided, it sent an alarming and clear signal. For those in the LGBTQ community, the constant uphill battle that has previously taken a “two steps forward, one step back” approach may soon shift into reverse. 

With that in mind, even the most carefully crafted financial plan—and even one that is based on the most recent marriage-equality decisions—may need to be revised to ensure protections for you and your spouse or partner. 

After the 2013 DOMA decision, many LGBTQ couples were relieved that Social Security began recognizing same-sex marriages, as well as some non-marital legal relationships, for the purposes of determining entitlement to benefits. This recognition later expanded to include Medicare and SSI (Supplemental Security Income).

So after years of paying into the Social Security system, same-sex spouses have finally been allowed to share in Social Security spousal and survivor benefits—which, for many, could mean the difference between being able to pay future living expenses or enduring a much less stable financial situation. Going forward, however, these benefit entitlements are in question. 

It’s a similar situation with Individual Retirement Accounts (IRAs) and pensions, as legally married spouses can receive favorable treatment when inheriting these types of accounts.  

The same could hold true with regard to insurance contracts such as second-to-die life policies, as well as annuities with joint-income riders. 

For instance, many of these benefits may only be contractually guaranteed if the parties are a legally married couple (which could again be defined as “one man and one woman” in the future). So the ongoing retirement income and/or financial cushion that currently gives you and your partner confidence might not be so secure down the road.  

This uncertainty brings to mind other questions, too. For instance, depending on whether benefit entitlements are grandfathered, does it make sense for unmarried same-sex couples to tie the knot now to avoid uncertainty later?

While any type of change can cause uncertainty, when it comes to your and your loved ones’ financial security, the invalidation of current marriage-equality laws could literally be life-changing. 

This is one reason why getting your financial and legal affairs in order so they can survive any political climate is more important than ever. 

There are some strategies that can help you to better ensure that you’re in control of your financial plan—regardless of what happens down the road. For instance, legal documents and trusts can provide you with the opportunity to specify where and to whom your assets will pass. 

The proper titling of assets can also make a difference. For instance, if you and your partner own assets as joint tenants with right of survivorship, money or property will automatically pass to the other joint tenant(s), without having to go through probate. 

In addition, making sure that you have set up powers-of-attorney for both financial and medical situations can allow your spouse or partner to have an active role in decisions if you are unable to make them on your own. Without such documents, important decisions could instead be left to a blood relative, or even the state. 

When creating—or revising—your plans, it is advantageous to work with advisors who are well-versed in retirement, income, and asset protection planning, and who are familiar with the LGBTQ community. 

This can help ensure that the advice you receive—and the plan that results from it—will be up-to-date and on track with financial laws and provisions that could impact you the most. 

This article appears in the December 2018 edition of OutSmart magazine. 

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Grace S. Yung

Grace S. Yung, CFP, is a certified financial planner practitioner with experience in helping domestic partners plan their finances since 1994. She is a principal at Midtown Financial LLC in Houston and was recognized as a “Five-Star Wealth Manager” in the September 2017 issue of Texas Monthly.
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