Lesbian, gay, bisexual and transgender investors are upbeat about their economic future, but many same-sex couples still seem to have a lack of understanding when it comes to their financial rights, according to recent research from Wells Fargo Advisors.
As a result, many LGBT couples in the United States have a false sense of security about the issue of gay marriage and don’t appreciate its effect on their own finances, the survey suggests.
Truth is, even though the climate is clearly much more hospitable to same-sex relationships on this side of the border, the same probably goes for Canadian LGBT couples.
LGBT Market Continues to Grow
In case you missed it, TD Bank recently mounted a major ad campaign featuring homosexual and lesbian couples in both the Toronto Star and the Globe and Mail.
But it will take more than images of a male couple cuddling on a couch to satisfy this cohort.
Couples Look to Maintain Financial Independence
There’s a much greater tendency for gay couples to think of their money as separate rather than combined, suggests lawyer Fred Hertz, who specializes in same-sex couples’ legal issues. He also thinks same-sex couples generally have a more fluid notion of relationships than do heterosexuals.
“For one thing, far fewer same-sex couples have kids,” he recently told Investment Executive. “And for many, it’s their third or fourth serious relationship. So, they’re more interested in maintaining their financial independence.”
I’m not sure that’s as true as it once was but it may explain why, despite the fact that the can legally marry, many gay couples still opt for common-law arrangements.
Marriage and Common Law Relationships Differ
Because common-law couples aren’t treated differently from those that are legally married for tax purposes, people often believe that both groups enjoy the same rights across the board. But that’s not always the case.
In fact, when it comes to family and estate law, the rules can vary from one province to the next. Generally speaking, most provinces view marriage as an economic partnership. When that relationship ends, each partner is usually entitled to an equal share of assets accumulated during the marriage.
However, in some provinces, the definition of spouse doesn’t include a common-law partner for the purposes of property division. You’ll be on more solid ground if your partner names you in a will.
Estate Planning Remains Essential
Whether you’re formally married or not, you’re also probably better off to name your partner as the beneficiary of any insurance or retirement accounts. This way, your RRSP assets can be rolled over tax free to his or her plan at your death.
Keep in mind that while married couples may have equal right to the matrimonial home, it’s not the case for common-law couples in certain provinces.
That’s why you might want to think twice about contributing to renovations of your partner’s home, for example, since there’s no guarantee that you’ll see your share of the proceeds if your relationship goes sour.
At the very least, have a lawyer draw up a cohabitation agreement between the two of you.
More and more couples, straight or otherwise, are using this process to stimulate important conversations about how to define and safeguard their partnership in terms of both lifestyle and financial responsibility.