Financial plan

Keeping your financial plan on track

Oith recent stock market volatility and uncertainties in the economy, tensions are running high in a number of areas, especially as the rights of women and LGBTQ citizens are also under threat.

The impact of nullifying marriage equality as a constitutional right would not only impact our personal lives, but would also have a detrimental effect on our current and future financial security. With this in mind, certain strategies can be put in place in order to protect you and your spouse or partner against possible financial difficulties.

Protect assets in any environment

The LGBTQ community has a lot to celebrate during Pride Month, considering how far we’ve come over the years. But, like everything else in life, there’s no guarantee that civil rights laws will stay the same forever.

Given the potential threat to marriage equality, there are certain legal and financial strategies you should consider putting in place as soon as possible, in order to build a protective wall around key elements such as possession and transferring assets, planning for death or disability, and making medical decisions if you or your partner becomes disabled.

Key areas to focus on should include proper title to property and assets, creating and implementing medical and financial powers of attorney, and establishing various types of trusts, if necessary.

Account title – When a legally married person dies, their assets are generally transferred directly to their surviving spouse, without income or estate tax. But the same is not true for beneficiaries and non-spouse beneficiaries.

In anticipation of the possibility of the end of marriage equality, it is essential to take precautions to protect what you have worked so hard to accumulate. One strategy is asset ownership.

How you have title deeds and assets can make a big difference in terms of what happens to them when you die. The most common forms of asset ownership are Individual, Joint rentaland Joint ownership with right of survivorship.

In the case of Individual ownership means a person or entity owns the asset or account. On your death, these will generally pass according to the terms of your will or trust, provided you have established one or the other or both.

Without a will or beneficiary designation, your individual assets may pass to your next of kin – parents, siblings or other “blood relatives” – if you and your partner are not considered a legally married couple. married. Therefore, having assets titled in your name alone could leave your partner in a difficult financial situation, and vice versa.

It’s important to note that accounts that have beneficiary designations, such as IRAs, pension plans, and life insurance policies, will typically go directly to the intended recipient. This is the case even if you have a will in place, as beneficiary designations can replace a will and can also bypass the costly and time-consuming probate process.

In the case of Joint rental, as long as the account holders are alive, assets are held in proportion to what each person has contributed to the total. Upon your death, your interest will pass to the person you named in your will (if any) or to your heirs, as required by law. So this is another case where you should have a good understanding of what will happen when you die, as it may not be what you had planned.

This is why many people use instead Joint ownership with right of survivorship for the titling of assets if they wish the property and/or funds to pass directly to another person (or persons) upon their death.

With this form of titling, when one of the account holders dies, the assets are transferred directly to the surviving account holder(s), regardless of what is stated in their will, as well as whether whether or not they are legally married spouses.

Proxies – Another important area of ​​concern (particularly if your marriage may not be legally recognized in the future) is having powers of attorney in place for finances and health care.

A financial power of attorney is a legal document that allows you to appoint someone to manage your finances and property on your behalf. These tasks may include paying bills, making bank account deposits and withdrawals, and overseeing transactions in your investment account(s).

A medical power of attorney is also a legal document that designates a person as your health care “agent”, which means the person has the ability to make health care decisions for you if you are not in able to do it yourself. He is also responsible for ensuring that doctors and other medical personnel provide the necessary and appropriate care according to your wishes.

The use of trust(s) – In some cases, simply having a will or beneficiary designation is not enough to protect assets and money from taxes, as well as from creditors or financial predators such as friends and relatives other than spouses who generally do not benefit from special considerations in matters of succession. – planning issues.

An example of this is taxes that may be due when assets are transferred to someone who is not your spouse. Depending on the situation, what the beneficiary actually receives after paying taxes may be considerably less.

Trusts can give you more control over what happens with various assets. They allow you to communicate where you want the assets to go, as well as how they will be managed in the future and the circumstances regarding when and how funds and property are distributed.

It’s never too early

Even if you’re not currently married or in a domestic partnership, knowing that your wishes are in place—along with an appropriate plan to achieve them—is an essential part of crafting a solid financial and retirement plan. .

If you and your spouse or partner don’t yet have these protections in place, it’s never “too early” to act. Likewise, various financial, legal, and tax decisions may have changed, which could render your current financial or retirement strategies obsolete and ineffective. Therefore, it is recommended that you discuss your wishes with a financial professional who is also familiar with the planning needs of the LGBTQ community.

This article appears in the June 2022 issue of OutSmart magazine.