For the first time in American history same-sex couples, some of which just began their relationships and others who have been together for years, are able to legally and openly combine their households and finances.
Prior to marriage equality, many LGBT couples shared finances, drafted wills, and made investment decisions together. However, there are some new considerations now that the option of a legal and binding marriage is available.
Here are ten basic and crucial financial steps every legally married couple should take to protect each other:
Write a Will or Trust
Having a will or trust can be important in assuring that your wishes are carried out when you die. It’s not expensive to have a will drawn up, and it’s easy to find a local attorney who understands a gay couple’s specific needs. When drafting a will with your attorney, be clear and specific about your wishes. For example, if you own a home, specify how the asset will transfer to your spouse.
Draw Up a Health Care Proxy and Living Will
It’s important to designate your spouse as your health care agent so that he or she can make medical decisions in case you are incapacitated. A living will or durable power of attorney also allows your spouse to make decisions about property and money when you can’t.
Don’t take it for granted that hospital personnel will listen to your spouse without documentation. Plus, many hospitals, like Sentara, digitally archive your document with access across their system. You should also take notarized copies with you when you travel, even in the United States.
Make a Property Agreement
If you own a home with only one spouse’s name on the title, it could be a good idea to have a property agreement. Having both names on the title, commonly referred to as joint tenants by the entirety, creates an irrevocable gift between spouses. Also consider drafting agreements regarding personal property especially if you own items of value like art, jewelry or heirlooms. Finally, if one spouse owns a portion of family property discuss how that ownership will transfer when one spouse dies.
Make Sure Your Business Will Pass to Your Spouse
If you own a business, have your attorney draft a business succession plan that minimizes obstacles to your spouse assuming the business and benefitting from future income.
Don’t Forget the Taxes
Congratulations! You’re married now. You can jointly file your taxes with the IRS and state tax authorities. This could mean a change in how you are used to paying taxes. Take your time preparing your taxes to ensure you are taking advantage of any benefits now available to you. Some software will walk you through each step but sometimes hiring a professional (a CPA or accountant, not a walk-in strip mall tax filing service) is worth the expense.
Examine Health Benefits and HSA
If both of you are working, you might have duplicate health coverage. A marriage counts as a trigger event, which will allow you to add or remove benefits. Look at which provider has the best plan. Be aware that some insurance plans require your spouse to maintain insurance with their own employer if they have it.
You could stand to save some serious money on premiums if you can combine plans, but make sure you understand the details. Also, consider opening a spousal Health Savings Account (HSA). In 2016 a couple can put away $7,750 in their HSA tax free and keep that money forever to use on medical expenses.
What’s Yours is Mine: Joint Accounts
Combining bank accounts can be a boon or bust depending on how you manage money. Some couples maintain separate accounts, while some have their own personal account and one “house” account. Others combine everything.
Talk honestly with your spouse about how to best handle family finances. You might increase cash flow by putting both paychecks into one account as long as you both communicate openly about spending. Remember that joint accounts mean that each spouse owns 100% of the money in the account.
Give Credit Where Credit is Due
Did you know that Spouse A’s credit card debt before marriage remains separate from Spouse B’s credit card debt? The same goes for student loans and your fancy car. After you get married you have the option to apply for credit together or individually, and that spending pattern will reflect on both your credit reports. If your spouse adds you to his or her credit card, that history is reflected in your credit report, too.
Retire Together in Comfort
Same-sex couples can now make spousal contributions to their spouse’s individual retirement accounts of up to $5,500 this year. Additionally, a surviving spouse is eligible to roll over retirement accounts for themselves after signing consent if their spouse chooses someone else as a beneficiary. Of course, naming your spouse as a beneficiary is still a key step in making sure your assets are transferred according to your wishes. Not naming a beneficiary creates all kinds of trouble.
Talk to a Pro
It doesn’t matter if your new family is in the one percent or just trying to make ends meet—it’s important to talk with a financial professional about your current finances and your future wishes. Ask someone you know for a referral to a trusted financial advisor. You can also locate one through HRBOR, the Hampton Road’s LGBT Chamber of Commerce.
Take the time to interview your choices. You should be comfortable sharing your personal information and sure they will act in your best interest. Your advisor is someone you may work with for the rest of your life.
Getting married isn’t just about declaring your love for someone special. It is also a legal contract between you and your partner that combines your lives, households and finances. It also comes with responsibilities new to most single people. Taking the time to talk through these 10 steps is important to solidify your relationship and honor your vows.
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Christian Strange, MBA, is a financial professional and Vice President in the Commercial Banking division of Wells Fargo Bank in Norfolk. He was previously a registered investment advisor and insurance agent. Christian has experience advising consumers in personal finance, home ownership, investing, retirement, and business needs. He received his MBA in Finance from Capella University and an undergraduate degree in business administration from Averett University.
Christian was married to his husband, Edwin, in Salisbury, MD in December 2013. He is passionate about providing same-sex couples advice and guidance around finance and family matters.