Partners Plan For Financial Security Non-Traditional Families Don’t Get Same Legal Protections
They met at a birthday party eight years ago, became instant friends, and six months later, inseparable companions who today are committed to spending the rest of their lives together.
Yet while Paul Albergo and John Edwards share goals common to most long-term partners - with financial security high on their list - getting there will be tougher for the gay Washington, D.C., couple since laws favor traditional husband-wife households.
Neither Albergo, a 35-year-old newsletter editor, nor Edwards, a 32-year-old architect, has the right to inherit each other’s property, to speak for one another in a crisis, and in some cases, visit the other in the hospital - unless they do some careful financial and legal planning.
“The … laws are horrendously unfair and biased toward the married couple,” said Martin M. Shenkman, a Teaneck, N.J., attorney specializing in estate planning.
His advice to all domestic partners, especially same-sex couples who, unlike heterosexuals, can’t qualify as common-law spouses in states recognizing such marriages: Leave nothing to chance by putting it all in writing.
The only way unmarried couples can get the same legal safeguards as their married counterparts is to file partnership protection documents such as wills, living trusts, joint tenancy agreements and powers of attorney for health care and finances.
Medical, burial and child custody decisions may also be called into question if the couple hasn’t left specific instructions.
“It’s rather ironic,” said Shelley Biermann, a financial planner with American Express Financial Advisors in Sacramento, Calif. “There are actually more non-traditional families now.”
In 1970, 40 percent of the nation’s households fit the Ozzie and Harriet television family mode. Today, it’s down to roughly one in four families.
Biermann said about a quarter of her clients are from what are considered unconventional households, which include everyone from single mothers to blended step-families, to elderly couples who don’t marry out of fear of losing survivorship benefits. About 5 percent are gay or lesbian.
Others in the normally staid financial services industry have been eager to adapt to the changing American demographics by offering financial services to woo clients of all lifestyles.
“They’re the same products that everyone needs - life insurance, annuities, mutual funds, savings certificates … The goals are the same as with traditional families,” said Biermann. “It’s not a moral issue. It’s a practical issue.”
About three years ago, American Express revamped its financial planning software to remove the assumptions that all clients were married couples.
To be sure, more companies have been providing benefits to domestic partners. Entertainment companies like Walt Disney, Metro-Goldwyn-Mayer, Universal, Paramount Pictures, Sony and Warner Bros. have extended health care coverage to live-in partners of homosexual employees.
By contrast, a battle is growing nationwide between conservative and liberal lawmakers. Legislation barring recognition of same-sex marriage has been enacted or introduced in about three dozen states.
President Clinton recently signed such a bill.
The movement was touched off by indications that Hawaii’s highest court might legalize same-sex marriages within the next two years.
While no state recognizes gay or lesbian unions, at least a dozen cities, including Boulder, Colo., allow same-sex couples to register as domestic partners.
Albergo and Edwards - who co-own a two-bedroom brick row house in the nation’s capital and combine most of their finances - intend to live as if they were married regardless what happens in Congress.
Although they’ve yet to draw up a will, the couple has taken steps to ensure the other is protected. For instance, each has given the other power of attorney to handle financial matters in the event of a disability or emergency. They hold their home as joint tenants, which means the remaining half of the property transfers to the surviving title holder upon death, not the estate of the deceased.
Each also names the other as beneficiary on his retirement savings plans, though they cannot lay claim to a defined pension plan or Social Security benefits. That’s a right reserved only for surviving spouses or children.
Health care benefits are separate in their household even though Albergo’s company actually extends them to domestic partners. The IRS views benefits bestowed on an unmarried partner as taxable income, making it prohibitively expensive for Edwards to take advantage of the plan.
Evelyn Delaney and her lifetime partner of 22 years, Nina Murray - both middle-age accountants - have been putting together a joint investment portfolio with an eye toward retirement.
Each is named as a beneficiary of the other’s 401(k) plan and Individual Retirement Account. They jointly own a car and four-bedroom house in Sacramento, and share all expenses. They soon plan to draft a health care proxy, which allows partners to speak for each other regarding medical care.
“Because we’re non-traditional … we really need to take care of these things,” said Delaney, who has two grown children from a prior marriage.
For those unwilling or unable to officially tie the knot, a will is perhaps the most essential tool for passing on property to designated beneficiaries, including people outside your biological or legally defined family. It’s also essential for assigning guardianship of minor children.
To make a will more difficult to challenge by disgruntled relatives, the document should be revised periodically, reflecting any changes in asset accumulations without impacting overall distribution, experts say.
However, there’s little escape from taxes that can eat up an inheritance. Unmarried couples are not entitled to the unlimited marital deduction, which means an estate valued at more than $600,000 is subject to federal taxes.
As a safeguard, Shenkman says, individuals can purchase life insurance policies on themselves that will pay the estate taxes upon their deaths. The insurance proceeds probably won’t be taxed if the policy is bought through an irrevocable life insurance trust, he said.
xxxx UNWED FACE PILE OF PAPER Some documents unmarried couples should consider: Will - Allows you to pass on property to designated beneficiaries after death, including those outside a legally defined family. Also essential for assigning guardianship of minor children. Living trust - Similar to a will, except it allows property to pass to named heirs without going through probate. A trust holds and ultimately distributes your assets to named beneficiaries. Living will - A directive that says if death is imminent, doctors can withhold treatment if the only way to sustain live is through artificial means. Health care proxy - Lets your partner speak on your behalf and make decisions during medical emergencies. Durable power of attorney - Allows your partner to handle financial matters in the event of a disability or emergency. Joint tenancy agreement - Means you and your partner take title to property jointly and equally, and upon death, the survivor inherits the other half. With tenants-in-common, a deceased party’s portion goes to whoever was named in the will or estate plan. With no will or trust, the share goes to the nearest relative. Irrevocable life insurance trust - If your estate is larger than $600,000, you may need to purchase life insurance to handle the estate taxes upon death. Insurance policies - Some carriers let unmarried couples buy life insurance on each other if they can prove an “insurable interest.” Many car insurers will insure a non-marital partner as a secondary driver. With homeowner and renter’s insurance, marital status often doesn’t matter.