Working with an Accredited Domestic Partnership Advisor℠

Couples in domestic partnerships often experience a more challenging financial landscape than their married counterparts. Though many same-sex couples cope with similar problems, those who do not benefit from Federal marriage protections may encounter unique barriers when it comes to safeguarding their partners and wealth.

To assist LBGT couples through common hurdles, there are financial professionals who have earned the Accredited Domestic Partnership Advisor℠ designation. These designees can offer specialized guidance on topics such as Federal taxation, wealth transfers, and retirement preparation.

Common Financial Issues in Domestic Partnerships

When the Supreme Court ruled that the Defense of Marriage Act (DOMA) was unconstitutional on June 26, 2015, it opened the door for LGBT couples across the United States to legally marry. With legalization on the Federal level comes many protections – protections that couples who choose not to marry do not get to enjoy.

Domestic partnerships are solely recognized at the state level. This means that one state may give partners the same rights as spouses, while a neighboring state may not grant them any spousal rights at all. With no protections, financial issues can quickly arise and turn into serious problems.

Those within domestic partnerships may need to evaluate:

• Federal Taxes – At this time, Domestic partners cannot file jointly on their Federal income taxes. Because of this, deductions must be carefully allocated between partners – or, in some cases, utilized by both. Even if a couple doesn’t file Federal taxes jointly, they may have to file them jointly at the state level. Certain states require this, and it could potentially push the couple into a higher tax bracket for the state.
• Retirement Planning – Domestic partners now have the ability to cash out retirement benefits or roll them over into another Individual Retirement Account (IRA). One partner may also take a hardship distribution to help pay for unplanned expenses, if, for example, the other partner falls ill. While these capabilities aid the planning process considerably, domestic partners are still not entitled to survivor benefits when it comes to Social Security.
• Estate Planning – As far as the Federal government is concerned, domestic partners have no inheritance rights. To safeguard both partners, consider obtaining a Will or Domestic Partnership Agreement to help delineate shared property and lay out how assets should be divided upon death. Some states may also enforce extra inheritance taxes if an individual passes his or her estate onto a non-relative, so these additional expenses may need to be accounted for during the planning process.
• Medical Coverage – Health, dental, and other medical benefits for domestic partners and their dependents are regulated at the state level – unless an employer decides to offer the coverage. If a partner must pay for insurance out-of-pocket, or his or her benefits are considered as regular income, there may be major tax implications. Healthcare is typically paid on a pre-tax basis, reducing a household’s overall income; losing this income reduction could place a couple into a higher tax bracket.
• Debts – Couples should know the specific laws of their state before entering into an official domestic partnership together. While most states do not hold domestic partners responsible for each other’s debts, some states do. On the Federal level, domestic partners cannot file for joint bankruptcy – which can help couples discard or repay debts.
• Breakups – Emotionally and logistically, ending a domestic partnership can be similar to getting a divorce; however, there are some significant financial differences. Spousal benefits, child custody (especially if you haven’t done second-parent adoptions), and child support regulations are irregular and vary by state. Even if a couple begins their partnership in a state with survivor or spousal rights, those rights can be lost if they end their relationship in a state that does not honor them.

How is an Accredited Domestic Partnership Advisor℠ Different?

Financial professionals with an Accredited Domestic Partnership Advisor℠ – or ADPA® – designation have successfully completed a course of study that includes topics such as taxation, retirement planning, transferring wealth, and end-of-life preparation.

ADPA® professionals must:

• Pass an exam at the end of the course, showing that they understand complex concepts and can apply them to theoretical, real-life situations.
• Agree to comply with the Standards of Professional Conduct, which require the individual to provide objective, fair advice.
• Meet self-disclosure requirements in regards to their professional conduct.
• Complete 16 hours of continuing education every two years to maintain the designation.

The Benefits of Utilizing an ADPA®

While the ADPA® designation is specific to domestic partnerships, the education these advisors receive can help LGBT couples with a wide variety of financial-planning issues. These professionals understand the unique needs of same-sex couples – especially when it comes to navigating ever-changing sea of state laws and Federal guidelines.

Preparing for the future can be a tough and confusing process for anyone. ADPA® professionals, like Woody Derricks at Partnership Wealth Management, can simplify the process, providing guidance on topics that impact financial, estate, and legacy planning. With the right assistance, same-sex couples can approach the financial-planning process with confidence, certainty, and peace of mind.

The opinions voiced in this material are for informational purposes only and are not intended to provide specific advice to any individual. This information is not intended to be a substitute for individualized tax, legal, or investment advice. We suggest that you discuss your particular situation with a qualified tax, legal, or financial advisor.

As a Registered Investment Advisor (RIA), Partnership Wealth Management is committed to providing our clients with financial planning and wealth management services to help them make the most of their investments. At Partnership Wealth Management, we have a long history of working with the LGBT community. Among the many services we offer are financial planning and estate planning strategies for gay and lesbian couples. Financial planning is an important part of preparing for the future; contact us today to get started: www.partnershipwm.com.