Finances, health care and child custody still fraught with difficulty for same-sex couples
Although same-sex marriages are now legal in more than a dozen states -- New York most recently began allowing them -- Pennsylvania does not allow same-sex marriage and will not recognize the marriages that occur in other states. The federal government, too, doesn't recognize such unions.
And that means financial planning for same-sex couples is fraught with gray areas and legal hurdles.
"The complexity is exacerbated by the federal government not recognizing their marriages," said Anna Pfaehler, a certified financial planner at Palisades Hudson Financial Group in Scarsdale, N.Y., who expects to start working with more same-sex newlyweds soon.
"When it comes to taxes, they must file separate federal returns, while some states allow them to file joint taxes," she said. "They will have to prepare a mock federal return with joint status to base their New York return on.
"That's four tax returns they have to do. That's a lot of paperwork."
With New York opening the door for same-sex couples to get married, Ms. Pfaehler said she and her colleagues anticipate seeing more clients whose financial planning will require specialized knowledge and attention.
Meanwhile, same-sex couples in Pennsylvania and other states that do not recognize their marriages can re-create many of the legal aspects of marriage through the court system, but it's impossible to do them all.
Certain advantages can be granted to married couples only by the government, such as the ability to transfer assets from one to the other without taxation or immunity from having to testify against a spouse in a court of law.
No Social Security benefits exist for same-sex partners and, if an employer grants health insurance benefits to the partner of an employee, the cost of that insurance could be considered additional income, which is not the case for heterosexuals.
Even in states where same-sex marriage is legal, couples can't count on those laws to protect them when traveling out of state, for example, because the marriage is not portable.
Marital rights recognized by one state may not apply if one partner owns property outside that state, or if one becomes ill or gets injured in another state.
For instance, if a person is injured in a car crash while traveling through Georgia, his or her partner could be turned away at the hospital because the law there doesn't recognize the partner as family.
Interstate laws also complicate divorces for same-sex couples.
"You can get married while on vacation in Massachusetts, but you can't go back and get divorced while you're vacationing on Cape Cod," Ms. Pfaehler said. States that recognize same-sex partnership typically have residency requirements for divorce.
"In states where the same-sex relationships are not recognized, the split is more like dividing a business than a family," she said. "A stay-at-home partner's contributions to the family unit might not receive the same weight when dividing assets."
Without access to marriage and only limited recognition under city registries, Pennsylvania same-sex couples must take other steps to formalize their relationships, said Anthony Infanti, a tax law professor at the University of Pittsburgh School of Law.
"Many [heterosexual] couples don't get prenuptial agreements," Mr. Infanti said. "But same-sex couples have to consider all of this, including the breakup, even when they are not planning to break up, and that can create a lot of stress.
"Different-sex couples don't have to think about these things because there are divorce laws in place for equitable distribution of assets and support for the children.
"There are a set of default laws for dying without a will [in a heterosexual marriage]," Mr. Infanti said. "If a same-sex partner wants a partner to get assets, they must have a will. There are no default laws to protect them here."
As a precaution, same-sex couples should review their beneficiary designations on retirement accounts, stock options, profit-sharing benefits and life insurance. Other important aspects of financial planning for same-sex couples can get expensive because of the many legal documents they are likely to need.
At a bare minimum, same-sex couples need a will, a revocable trust, an advanced health care directive, durable power of attorney and a domestic partnership agreement, which is a private contract that forms the centerpiece of a same-sex couple's legal rights and obligations to each other.
A domestic partnership agreement would address topics such as the pooling of income during the relationship, the division of responsibilities for household chores, payment of debts, expenses, inheritance and the division of property and child support payments upon separation.
No court decision in Pennsylvania specifically addresses the enforceability of a domestic partnership agreement between same-sex partners. But regardless of its enforceability, Mr. Infanti said, the domestic partnership agreement serves as evidence of the familial nature of the relationship between partners, and it may also provide evidence of their intent regarding the sharing and titling of property.
When children are involved, financial planning can become especially complicated, said Lisa Marie Vari, a Pittsburgh family law attorney who has represented a number of same-sex couples in family issues, many of which involved children.
"My belief is that families come in all shapes and sizes," she said. "Cohabitation agreements can be pretty comprehensive as far as legal rights and obligations. But they can't be enforced in family court, only in civil court."
She noted "the doors of family court are largely shut to same-sex couples unless the case involves child custody or child support issues ... The legal issues I deal with most in family court are child custody actions when one partner gets pregnant, they decide to raise the child together, they split and battle over custody."
Ms. Vari said Pennsylvania courts have ruled in same-sex child support cases that since a same-sex parent has the right to sue for custody, he or she also has an obligation to pay child support.
States permitting same-sex unions usually permit non-biological parents to sign a child's birth certificate as a parent. But this will not necessarily provide full parental rights, especially in other states where the marital relationship is not recognized.
The non-biological parent might still be denied the right to make medical decisions for his or her child or to visit the child in the hospital.
One solution is for the non-biological parent to adopt the couple's children, Ms. Pfaehler advised.
"An adoption really seals the deal," she said. "It gives the non-biological parent rights they would not have otherwise." But, "adoption cannot be undone even if the relationship unravels, so it's a very serious step.
"Whether you adopt or not, always have a will that specifies who will get custody of a child or children if one or both of you die."
First Published August 8, 2011 12:00 am