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Retirement planning tips for LGBT couples

Retirement planning isn’t easy for most couples, but it can be particularly complicated for lesbian, gay, bisexual, and transgender (LGBT) couples. Now that the Supreme Court has struck down the Defense of Marriage Act (DOMA), which defined marriage on the federal level as a union between a man and a woman, it will likely become easier to protect your loved ones. However, as the laws continue to be rewritten, you’ll want to speak to someone who can help you navigate your retirement planning.

In the meantime, there are steps LGBT couples can take to prepare for retirement.

Beneficiaries

If you have a pension plan at work, whether it’s a defined benefit plan or a 401(k), you’ll need to check with your employer about how to name your partner as a beneficiary. Non-spouse beneficiaries, including employees’ partners that are named beneficiaries, are permitted to roll their inherited retirement benefits directly into an inherited individual retirement account or annuity. Check with your employer and tax advisor regarding these rules. As your needs require, make sure your other benefit programs and policies, including life insurance, IRAs and annuities, name your partner as beneficiary.

Social Security

Now that the Federal Government recognizes same sex marriages, LGBT couples will be able to claim spousal-related Social Security benefits. That means that married couples in states where marriage is legal will be entitled to spousal benefits during marriage and survivor benefits upon the death of one spouse. In addition, any minor dependent children may also be entitled to benefits.

Pension Survivor Benefit

Under federal law, companies with traditional defined benefit pension plans must offer employees a spousal survivor benefit option, which allows spouses to continue collecting annuity payments after the employee’s death. Since the DOMA decision, all same-sex married couples should be able to secure the spousal survivor benefit option. Normally, employees must accept a lower monthly pension payment in return for spousal protection.

Wills

If you want to leave your estate to your partner, you’ll need to be very specific about it in your will or trust, particularly if you live in a state that does not recognize same sex marriages and even in some states that have domestic partner laws. Check the estate laws in your home state to see how they apply to your situation and talk to your legal advisor about your needs.

Estate Taxes

Now, same-sex married couples will be able to inherit their spouse’s estate without tax penalty. Check the laws in your home state to see how they apply to your situation.

Health Care

LGBT couples that buy long-term care insurance together should ask the insurance company about their requirements for recognizing your marriage or partnership.

In states that don’t recognize same sex marriage or lack domestic partner laws, same sex couples need to obtain a medical power of attorney if you want your partner to make medical decisions, have access to your medical information, and, even in some cases, visit you in the hospital.

Medicaid pays for long-term care for people who meet certain requirements, including seniors with few assets. The federal qualification rules include “spousal impoverishment protections” aimed at preventing a healthy spouse from having to give up a home or retirement savings to qualify a spouse for protection.

Those rules generally haven’t applied to same sex couples until now. Because Medicaid is a joint federal and state program, you’ll need to check with your state’s Medicaid office to clarify your particular situation, but keep in mind that since the Federal Government now recognizes same-sex marriages, both incomes for same-sex married couples will be considered for eligibility purposes in states that recognize same-sex marriages. Due to that change, some people may become ineligible for certain benefit programs.

This material includes a discussion of one or more tax-related subjects and is for informational purposes only. It is not intended (and cannot be used by any taxpayer) for the purpose of avoiding any IRS penalties that may be imposed upon the taxpayer. Taxpayers should always seek and rely on the advice of their own independent legal and tax professionals. Please understand that New York Life, its subsidiaries, agents and employees may not provide legal or tax advice. Please consult your own legal and tax professionals before making any decisions. Retirement planning isn’t easy for most couples, but it’s particularly complicated for lesbian, gay, bisexual, and transgender (LGBT) couples who face a host of challenges.

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