In the movie A Single Man, a gay man faces sudden emotional devastation after his partner is killed in an automobile accident. The film is a stark reminder for any couple that one of you will likely die first, leaving the other alone.
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Yet many are not prepared to deal with that probability — and for gay and lesbian partners, this can be especially precarious.
With a little planning and preparation, however, the emotional toll of a death or terminal illness doesn't have to be compounded by financial burdens. Avoid these potential pitfalls and take these steps so you'll have peace of mind knowing that whoever lives on will be secure.
1. Potential Pitfall: If one of you died or had a terminal illness, would there be enough assets for the survivor to maintain her or his standard of living? Even if you're married, the federal government and many pensions view same-sex couples as strangers (see "Update on DOMA"). As a result, same-sex couples have a smaller safety net than heterosexual married couples because they are not eligible to receive Social Security or pension survivorship benefits.
Smart Step: Review your finances together and separately. Develop a list of expenses that you incur as a couple. If one of you died, which expenses would go away? What income might also disappear? If you are a beneficiary of your partner's estate, consider how taxes on individual retirement accounts (IRAs) might lessen the bequest. If one of you dies, what debts would remain for the survivor to pay off? Would there be enough money? If there are not enough assets, think about buying life insurance to cover a shortfall. Doing such an analysis, just the two of you together, can feel overwhelming — so for practical guidance, consider consulting a financial adviser who has experience working with same-sex couples. Ask friends for referrals or get names of advisers from your local chamber of commerce or from the National Gay and Lesbian Chamber of Commerce.
2. Potential Pitfall: Do you have a will? When was the last time you updated it? Will your assets flow to your partner upon your death, and vice versa, exactly as you intend?
Smart Step: Review and update your estate documents. You may not think you have an estate, but you do — whether you have $1,000 or $1 million. An estate is simply the collection of all your assets minus all of your liabilities. What's left over is considered your estate, and if you want it to go to your loved one upon your death, you have to make specific decisions and plans. Items in your estate that don't have beneficiary designations or are titled as "joint tenants with rights of survivorship" will flow through your will. If there are children from a previous marriage and there is no will, your assets may not go to your spouse or partner the way you want. You should meet with an attorney to update or complete your estate documents properly.