Unmarried Couples, Same-Sex Partners and Financial Planning

At a recent press conference, Republican presidential candidate Rick Santorum was asked about his position on same-sex marriage. Santorum is well-known as a social conservative, and is also a devout Catholic. He opposes the federal sanctioning of same sex marriages (a position, incidentally, he shares with President Barack Obama.)

Someone in the crowd pressed him on some of the perceived injustices that flow from the denial of formal recognition of same sex marriages. Santorum countered that it is not necessary for same sex couples to be married to get these benefits – these benefits are available under contract law.

Well, to a certain extent, that’s true. Whether same-sex marriages are formally and legally recognized or not, it is still possible to appoint your same-sex partner as your sole heir in your will, for example, or to name them in a health care power of attorney document, and the like. There’s no problem naming a same sex partner as a beneficiary of a life insurance policy (subject to general insurable interest rules that apply to everyone), or as the beneficiary of your annuity or retirement account.

There’s nothing stopping same sex couples from making important medical and financial decisions on behalf of an incapacitated partner – provided you do a bit of planning ahead of time.

But there are some important aspects of legal, financial and tax planning that remain beyond the reach of contract law to address. A recent article in the Journal of Financial Planning took a look at the legal and cultural landscape surrounding same sex partners – especially as they get older and are confronted with critical end-of-life planning decisions.

It’s more than same-sex partnerships at stake

From a financial planning point of view, there’s not much difference between financial planning for an unmarried same-sex couple and an unmarried heterosexual couple. So if you’re in a long-term boy-girl life partnership situation, for which, for whatever reason, you have not sought the imprimatur of marriage, this applies to you, too. Here are some takeaways, both from the article, and from my own experience with these couples and families.

Take Nothing for Granted

This is critical. If you can’t produce a marriage license, you can’t expect anyone else to automatically defer to your judgment regarding the best interests of an incapacitated partner. If you are called on to make medical decisions, you will not have the same standing to make them, even after decades of partnership, as a long-lost sister your partner hasn’t seen or heard from in 20 years.

If you want your life partner to be the one making decisions on your behalf when you can’t make them for yourself, and if you want to be the one making decisions for the person you love more than any in this world, you really need to dot your ‘t’s and cross your i’s.

Your partner is also going to have no standing in probate court, either. For married couples, of course, the general rule is that all assets will go to the surviving spouse, bypassing probate courts, unless there’s a will or contract specifying otherwise.

This means, of course, that a legally married spouse has significant protection against, say, a creditor. If her name isn’t on the debt, and her husband who took out the loan dies, the creditor ordinarily has no recourse against her.

But if she’s not married, no such luck. All assets will go to the probate court system, and the creditor will get a chance to make its claim, before she gets a dime. (Incidentally, this is true, even with a will. The IRS, state revenue officials, probate officials themselves, and legitimate creditors of the deceased all get their money before the heirs named in the will get to see anything. Furthermore, unless you name your unmarried partner in your will, he’s not getting anything. Probate officials are going to divvy up the deceased’s assets according to the default provisions of probate law. State laws vary in their specifics. But in general, assets will go to married spouse’s first (is the divorce final?), then to children and grandchildren, brothers and sisters and parents.

Go over the basic, primary financial planning documents any good planner is going to nag you about. Your living will, your power of attorney documents, any medical care directives, and your will, and make sure you name your partner specifically in those documents.


Drawing up a few basic documents can help out a lot, but it’s not enough. You also need to pay close attention to how assets are titled. Otherwise, you and your partner can buy a home together, only to find out that when your partner dies, you don’t own the whole house. Instead, because of your state’s laws on how property is transferred, you could find out that your partner’s estranged ex-husband or brother actually owns half the house with you. Problem.

Retirement Planning

The most common issue with unmarried couples in retirement planning is they don’t get spousal benefits for Social Security. If a couple has been married for over 10 years, a surviving spouse gets half the deceased’s’ Social Security benefits. No marriage? No dice.

Estate Planning

Got more than $5 million in assets? Careful! You could have an estate tax problem on your hands. Under current law, the IRS charges a 35 percent estate tax on any assets over $5 million. If you were married, you don’t have to worry about that during either of your lifetimes – the surviving spouse gets an unlimited exemption. But since you’re not, if your partner dies with, say, $6 million in assets to his name including the home, then that estate is going to have to cough up about $350,000 in cash to pay the estate tax with.

Where’s that cash going to come from? And will it have to sell your home in order to do it?

The Legal Landscape

Legally, the landscape surrounding same sex couples who have been married in a state that does recognize same-sex unions is more complicated, because there are shades of gray. If you get married to a same sex partner in one state, as the article’s author points out, and you move, and then you want to get divorced, you won’t necessarily be able to get divorced in the state that you live in, if that state doesn’t recognize same sex unions. You’ll have to go back to the state that married you, or to another state that formally recognizes same sex unions, to have access to divorce laws.

All told, there are loads of issues with unmarried couples and same-sex couples that require a very close look, generally by experienced financial planners and legal professionals.

At Vaerdi, we certainly enjoy this kind of financial planning, and we value our clients, both same-sex and traditional, married and unmarried. The goal for all our clients is the same – to help you meet your financial goals and provide for the security of your family and loved ones.

For a detailed look at your personal situation and for help making sure you lay the foundations for success, both now and at the end of life, please give us a call and schedule an appointment.



  • By Andy Hough, March 3, 2012 @ 8:38 am

    That is good advice. I know a lot of unmarried couples don’t realize their lack of legal standing when it comes to money.

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