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Retirement planning tips for LGBT couples.

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. Even though the Supreme Court struck down the provision in the Defense of Marriage Act that denied federal benefits to lawfully married same-sex couples, LGBT couples still face a number of financial challenges.

No matter in which state you live, there are steps LGBT couples can take to prepare for retirement.


If you have a pension plan at work, whether it’s a defined plan or a 401(k), you’ll need to investigate if and how you can name your spouse or partner as a beneficiary. Some employers recognize same-sex marriage or other partnership arrangement for various purposes, and some don’t. 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 when permissible under applicable law.

Social Security.

Now that the federal government recognizes same-sex marriages, LGBT couples can claim spousal-related Social Security 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. Normally, the employee must accept a lower monthly pension payment in return for spousal protection.

A 2012 study by the Human Rights Campaign Fund found that about three-quarters of corporations offer a survivor option for same-sex spouses or domestic partners. If you participate in a defined benefit pension plan, you should check with your employer to determine whether and to what extent the plan offers survivor benefit options in your situation.


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.

Same-sex couples are no longer subject to a maximum 40% federal estate tax rate on inheritances over $5.25 million (in 2013). Now like heterosexual couples, they can bequeath unlimited sums to surviving spouses. Check the laws in your home state to see how they apply to your situation.

The application of state and local estate and inheritance tax laws to same-sex couples varies depending on the particular jurisdiction. Talk to your tax and legal advisor about your specific situation.

One potential solution for minimizing the impact of estate and inheritance tax costs is to purchase a life insurance policy that provides a benefit to fund such costs. Another is to start a gifting program that slowly shifts assets over a period of years from one spouse to the other. Federal law permits tax-free gifts up to $14,000 (in 2013). Again, check with your tax and legal advisors about your specific situation and what solutions may be best for you.

Health care.

LGBT couples who 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 of less means 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 don’t apply to same-sex couples. However, because Medicaid is a joint federal and state program, those states that recognize same-sex marriage, are extending the protections. Check with your state’s Medicaid office to clarify your particular situation.

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.