The financial challenges gay couples face
Tess Vigeland: And now we turn to Tara Siegel Bernard, also a scribe for The Times.
She spent a day with the Sheltons of Beverly Hills, Mich., a gay couple also in their 30s. Tara, what makes their finances so different from Paul’s couple?
Tara Siegel Bernard: Gay couples face a host of financial and legal issues that heterosexual married couples don’t even need to worry about.
Tess Vigeland: Well tell us a little bit about this couple.
Siegel Bernard: Sure Amanda and Kay Shelton. Amanda is 34 and Kay is 37 and they live in the suburbs of Detroit. They are raising their 2 children, Amaya who is 3 years old and Miles who is 8 months.
Vigeland: And what do Amanda and Kay do?
Siegel Bernard: Amanda is a commercial litigator and Kay is the stay-at-home parent so she is home all day.
Vigeland: Presumably they are not married, not legal in Michigan?
Siegel Bernard: No, Michigan is one of the states that do not recognize same-sex unions in any form.
Vigeland: OK, well let’s talk about how their financial picture is different from say Natalie and Bernardo, the couple that we just heard from. What kinds of rights do they have and not have when it comes to money?
Siegel Bernard: Since Kay isn’t making any money as the stay-at-home parent, she can’t really take advantage of any tax advantage, retirement savings vehicles like a 401(k) or an IRA because you need earned income to contribute to a traditional IRA or a Roth IRA. On top of that, she isn’t entitled to receive Social Security benefits on Amanda’s record because they are not legal spouses in the eyes of the federal government so she is really in a precarious position.
Amanda: I know I need to save for her and I’m not. I know I need to save more for me than I am. But I really haven’t thought beyond that of what else needs to happen.
Vigeland: What about some of the other really big financial categories? Like taxes and insurance?
Siegel Bernard: Well they really don’t have much wiggle room on the tax front because if they were a heterosexual married couple, they’d be able to file their returns jointly. Because they can’t, they pay about $3,000 more than an identical couple with identical income that is able to marry.
Vigeland: Let’s talk about their overall financial situation. What kind of money is coming in the door and what’s going out?
Siegel Bernard: Well, Amanda earns about $130,000. Kay isn’t bringing in any money because she’s got a full-time job at home with the little ones. Their biggest expense is their mortgage.
Amanda: We’re kind of in a difficult spot. We can’t move because the market has plummeted. We bought this house in 2004, which was almost right at the height of the bubble.
Siegel Bernard: How much did you buy it for at the time?
Amanda: $340,000. And it is probably worth…
Kay: It depends — somewhere between $250,000 and $280,000 I think.
Vigeland: Oh boy. So they are underwater?
Siegel Bernard: Way underwater.
Vigeland: What are some of the other ways that their finances are changed by the fact that they are a same-sex partnership? What would happen if they split up?
Siegel Bernard: Yeah, that is another serious challenge that they face. They own their home jointly. They’re both on the mortgage. They’re both on the title. The problem there is that since they are not married, there’s no divorce court to go to to divvy up their assets.
Vigeland: So is there any legal document that they could draw up. I mean can you have a pre-nup when you don’t get married?
Siegel Bernard: Yes, both the attorney and financial planner I spoke with suggested two documents: a domestic partner agreement and a co-parenting agreement. Both which would be protecting Kay for the most part because she has no legal ties to the children and she is not earning any money, yet she is working all day long.
Vigeland: What other advice did your expert have for Amanda and Kay as they have merged their financial lives together?
Siegel Bernard: They have been together for 13 years. They have joint checking accounts. They own their homes jointly. Most of their assets are owned jointly. In this case it means that most of those assets would pass to one another directly. It would bypass the often lengthy and costly probate process to settle a deceased person’s estate. So in that case it’s a good thing in that they would have immediate access to the checking accounts since they are both on it. They do however need to update their wills. The lawyer also suggested putting language in there that Kay should be treated as a co-parent just so that there isn’t any confusion because she also did say that even the ring that your partner gives you would go to your biological family without a will in place.
Vigeland: OK, it sounds like they have a long to-do list.
Siegel Bernard: Yes, indeed.
Vigeland: All right Tara, thanks so much and we will be talking to you later in the show with a couple in their 60s.
Siegel Bernard: Thanks, Tess.
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