On June 26, the U.S. Supreme Court ruled that the Constitution guarantees a right to marriage for same-sex couples. This historic decision drastically increases the number of people who may become married in the U.S., and has some serious implications for same-sex couples who want to plan their retirement and legacies. Financial professionals should speak with gay clients about the ways this decision will affect their financial planning and how insurance products offer a way to provide for loved ones.
An important demographic
The expansion of marriage rights comes along with an increase in the wealth transfer options available to same-sex couples, and many of these couples will seek out financial guidance in the near future. Speaking with WealthManagement.com Maggie Mitchell, a sales executive with Voya Financial, noted that same-sex couples tend to buy term life insurance and are generally more affluent than their heterosexual counterparts.
These relatively affluent couples now face an entirely new world when it comes to wealth management, and the expansion in marriage rights means they will need the help insurance producers provide.
An exemption from estate taxes
One of the biggest shifts for same-sex couples who get married involves the estate tax that kicks in when one spouse dies. Heterosexual married couples have long enjoyed the ability to leave each other property that is not affected by estate taxes, according to Forbes. Now that same-sex couples can get married and enjoy the same right, financial professionals may find their gay clients want to alter existing estate-planning strategies to account for this tax planning opportunity.
In a similar vein, the Supreme Court’s decision makes it possible for married same-sex couples to benefit from each other’s IRAs if one of them dies. Spousal rollover for IRA accounts allows married individuals to benefit from their partner’s IRA for a longer period of time.
The need for insurance products
As clients in same-sex relationships get married under the new law, financial professionals should engage in policy reviews to update and adjust retirement strategies. It’s critical to review policies whenever clients undergo some sort of life change, such as having children, moving into a new home or getting a new job. All of these events could change a client’s financial plans, and getting married is no different.
Following marriage, clients may want to adjust their listed beneficiaries on an insurance policy or may want to purchase an entirely new policy. As married same-sex couples age, they may want to transition from term life policies to whole life policies, and may want to purchase annuities that will guarantee long-term income for themselves and their spouse. Since many same sex couples have dual incomes, insurance on each spouse can be an important vehicle to replace the lost income of a deceased spouse.
The shift toward marriage equality may have serious implications for same-sex couples’ plans. Financial professionals need to engage their clients who are in same-sex relationships in an open conversation about this decision and how it has affected their personal financial goals.
Latest posts by Highland Capital Brokerage (see all)
- Robert W. Finnegan, J.D., CLU®, AEP®, Published in Trust & Estates - February 1, 2018
- January 2018 LTC Newsletter - January 25, 2018
- December 2017 LTC Newsletter - December 21, 2017