Sign Up for email alerts



7 Days to a Better Financial You Webchat Transcript

On April 10, 2008, HRC held a webchat answering questions on a wide range of financial issues affecting GLBT individuals and couples with experts Joe Kapp, Advocate contributor and co-owner of a Washington, D.C. financial planning practice that caters largely to the GLBT community; Brenda Jackson-Cooper, an associate at the Washington, DC law firm Arnold & Porter in the tax and estates practice group; and HRC’s state legislative director Chris Edelson and legal director Lara Schwartz. The transcript of the chat is below.

 

Chris Johnson: Welcome to HRC's 7 Days to a Better Financial You webchat. The chat will begin at 3:00pm Eastern time.

Chris Johnson: Welcome to the Human Rights Campaign online discussion on the 2006 Pension Protection Act! I'm Chris Johnson, Director of Public Affairs and Interactive Communications and lead writer for HRC's Back Story blog, and I will be moderating today's discussion.

Chris Johnson: Before we get started, I want to thank you all for participating. The response to this discussion has been terrific and many questions in advance. You can submit questions at any time, but please note that we many not be able to cover all of your questions today. We'll be posting the responses to some unanswered questions on the HRC Back Story blog (http://www.hrcbackstory.org/) during the remainder of the campaign through April 15.

Chris Johnson: I also need to provide a legal disclaimer for this discussion which is: The information provided in this chat is for educational and informational purposes only. The information provided does not constitute financial, tax, or legal advice by the Human Rights Campaign or the presenters for any individual or couple. Neither HRC nor the presenters assume any responsibility for the accuracy of the information provided. Each individual and couple should seek the advice of his or her own attorney, accountant, or financial advisor regarding the advisability of any action for their particular situation.

Chris Johnson: Ok, now let's get started. Our first participant today is Brenda Jackson-Cooper.

Chris Johnson: Brenda Jackson-Cooper is an associate at the Washington, DC law firm Arnold & Porter LLP in the tax and estates practice group. She specializes in domestic and international estate planning, estate and trust administration, and related areas of federal and state tax law including estate and gift tax, generation-skipping tax and fiduciary income tax. Brenda' firm scored 100% on our annual report card, the Corporate Equality Index (www.hrc.org/cei), which measures corporate America's treatment of gay, lesbian, bisexual and transgender Americans. You can find more information about Arnold & Porter at http://www.arnoldporter.com/.

Chris Johnson: Welcome Brenda!

Chris Johnson: Our next participant is Joseph Kapp. Joe Kapp is a nationally recognized thought-leader in the area of gay, lesbian, same-sex couple financial and estate planning. Joe and his colleague Nicholas Burkholder are co-owners of a Washington, DC financial planning practice that caters largely to the GLBT community and are the featured Money columnists in The Advocate magazine and The Washington Blade. Joe and Nick co-authored an article in the March 2008 edition of the Journal of Financial Planning that you can view or download at http://www.hrcbackstory.org/2008/04/your-money-your.html.

Chris Johnson: Joe is a frequent guest lecturer, having spoken at diverse forums including Bar Associations, the World Bank, the Department of Commerce, the Department of State, the Environmental Protection Agency, as well as to various corporate groups and Fortune 500 companies.

Chris Johnson: Welcome Joe!

Chris Johnson: We are also joined by HRC's legal director, Lara Schwartz, and our state legislative director, Christopher Edelson.

Chris Johnson: Here's our first question.

Jodi in Missouri: My partner, Amy, and I live in Missouri. We are starting the foster-adopt program due to new laws passed. We are both going to be on the license so there is no concern there, but if I were to die how can I ensure that my 401K benefits go directly to my wife? I have a large amount of money invested in this and I'm not sure if there is certain paperwork that I need to complete to make sure my wishes are carried out.

Joe Kapp: Certain assets like retirement accounts, 401ks, IRA, and life insurances (to name a few) have beneficiary designations. This means that the assets will automatically pass to the person designated on the forms. Speak with your human resources department. Beneficiary information should be reviewed on an annual basis. One of the biggest mistakes we see is people who come to us with old beneficiaries (i.e., old partners) to whom they do not want to leave their assets. In addition, speak with your financial advisor and bank about adding a Payable on Death or Transfer on Death designations to checking and regular investment accounts. This will allow you to add a beneficiary designation to these accounts.

Jose L: California has domestic partnership. We can file state taxes jointly if registered. Is this a good financial approach? What are some of the financial pros & cons of domestic partnership?

Joe Kapp: Hi Jose, There are number of benefits and disadvantages with regards to Calif. and domestic partnership. CA is a community property state and as a result creates an additional layer of complexity. Registering as DPs is similar to marriage, with all the benefits and responsibilities. There are instances where you may be required to pay higher taxes as a result of filing jointly. And while you are not required to file jointly, you are required to account jointly for all income generated as part of a DP and then split it if you choose to file separately. In California, because of the complexity, it is really important to contact tax, financial and legal advisors to help assist with your situation.

Chris Edelson: (in further response to Jose )In terms of the pros and cons of domestic partnership in CA, financial and otherwise, let me give you the legal basics (some of which may overlap with what Joe said). Under California law, a same-sex couple (or a different-sex couple in which one partner is 62 or older) may enter into a domestic partnership and receive the rights, benefits, and responsibilities afforded to married couples under state law. This covers financial as well as other matters e.g. inheritance when a partner dies without a will, hospital visitation, the right to file joint state tax returns, as Joe mentioned. I should also note that there is a pending court case (or actually consolidated cases) in California called in re Marriage cases which is scheduled to be decided by the California Supreme Court by early June. This case will determine whether same-sex couples have the equal right to marry under state law.

George: Is there anything similar to the unlimited marital deduction for a gay couple when one partner dies and the other inherits? Are there any states that differ from IRS on this?

Joe Kapp: No. Thanks to the Defense of Marriage act, at the Federal level gay and lesbian couples are precluded from taking advantage of the unlimited marital deduction, whereby a married person can pass an unlimited amount to a spouse. Gay and lesbian couples are considered strangers in the eyes of Federal law, as such, we have to be very careful about passing assets back and forth, as this has the potential to create unintended gifts. We have written several articles concerning this in the Advocate magazine.

Brenda Jackson-Cooper: That is an excellent question, and most unfortunately, there is no unlimited marital deduction from the federal estate tax (or the federal gift tax) for same-sex couples. There are a few states that provide an unlimited marital deduction with respect to state estate taxes for same-sex couples who are either married or have entered into civil unions in those states, but this does not change the situation with respect to the federal estate tax. The unavailability of the unlimited federal estate and gift tax marital deduction presents one of the estate planner's biggest challenges when planning for same-sex couples. There are, however, some techniques that can be used to reduce the impact of these taxes, and an experienced estate planner should be able to explain your options.

Linda: is there a number we can call for audio?

Chris Johnson: Unfortunately, there's not an audio recording of this chat. However, we will post a full transcript of this chat at www.hrc.org/chat on Friday.

Brian Wilbur: Are there indeed significant benefits if we register as domestic partners in DC? How would it really benefit us?

Chris Edelson: (response to Brian Wilbur) There are indeed significant benefits to registering as a domestic partner in DC. Domestic partners receive many of the same rights, benefits and responsibilities as married couples under D.C. law, including employee health benefits, hospital visitation, and certain tax exemptions. Joe will likely be writing a forthcoming article in the Blade about the benefits and disadvantages of registering as a domestic partner in D.C.

Sara: If you're using a joint checking account to pay out bills, would you run into issues with the gift tax?

Sara: Should you use a joint savings or individual savings to save for a house?

Brenda Jackson-Cooper: Sara, from a tax perspective, the answer to your second question also depends on the amount of money involved. From a property law perspective, if you use a joint account, you should be aware that transfers you make to the joint account will be completed transfers, i.e., the money will no longer belong to you. It will belong to both you and your partner. In the unfortunate event of a break-up, this could obviously pose problems.

Brenda Jackson-Cooper: Sara, depending on the amount of money involved, it is possible that you will run into gift tax issues. For example, if you contribute much more money to the account than does your partner, you may be deemed to be making a gift to your partner. However, under most states' laws, the gift does not occur until such time as your partner actually withdraws the funds. If the amount of money involved is substantial, I would recommend that you consult a financial or legal advisor to discuss your particular situation and how to avoid or minimize gift tax exposure.

Chris Johnson: While we're waiting on our next question, this is just a reminder that the information provided in this chat is for educational and informational purposes only. The information provided does not constitute financial, tax, or legal advice by the Human Rights Campaign or the presenters for any individual or couple. Neither HRC nor the presenters assume any responsibility for the accuracy of the information provided. Each individual and couple should seek the advice of his or her own attorney, accountant, or financial advisor regarding the advisability of any action for their particular situation.

Ricky: I'm a young professional gay man with a partner. We don't own our own house but are at the point in our careers where we would like to buy a home, instead of being perpetual renters. What should we do to make sure we proceed with this in a financially sound way?

Joe Kapp: Hi Ricky, Congratulations. 1. Put together a budget of your income and spending. 2. Determine how much you can afford and learn your credit score. 3. Search for a home that falls within your budget and don't be temped to "stretch" yourself. Also, have a frank discussion about how you would handle the home if you and your partner split. Consider meeting with an attorney about drafting a domestic partnership agreement which would dictate how the property would be handled in the event of a split. Being frugally fierce and fabulous... leads to financial independence.

leo walters: should a domestic partner agreement be executed by an attorney?

Brenda Jackson-Cooper: Leo, I would recommend that an attorney prepare your domestic partnership agreement. The laws relating to the enforceability of such agreements are always changing and vary from state to state, so I would not rely on pre-fabricated forms that you might find on the web or in other places.

Pedro Salgado: Does any or all of the information you are providing apply to committed long term heterosexual couples who for legal, personal or political reasons are not legally married? Do you you see these people as your constituents as well as same sex couples? If I designate my partner as the person who will get any money that I have how can I stop any member of my family from challenging that decision in court in case I die?

Joe Kapp: Much of what affects same-sex couples also affects straight non-married couples. An important point of note it that there are circumstances where the laws strictly affect gay and lesbian couples only. This may vary by jurisdiction.

Brenda Jackson-Cooper: The best way to avoid a challenge to your Last Will and Testament is to be sure that it is signed with all the formalities required under state law, i.e., that it is witnessed and notarized (if notarization is required under state law). It is also important to think broadly about your assets and to be sure you have named your partner as the beneficiary of your 401(k) accounts and IRAs, as well as the beneficiary of any life insurance policies you might own.

Andre in Wisconsin: I would like information on what are the laws and legal options regarding Same Sex Marriage, Immigrations and Citizenship?

Lara Schwartz: U.S. Immigration law currently excludes same-sex couples. While different-sex married couples can sponsor one another for immigration purposes, same-sex couples cannot, even if they are legally married in their home state. The Uniting American Families Act would remedy this problem. HRC supports this important legislation. Visit our site at http://www.hrc.org/laws_and_elections/6985.htm

Robert in Ohio: Your communication is much appreciated by me and my partner of over thirty years. However, how can we get more specific info about individual details that need our immediate attention? We are both approaching the final years, and what we don't know is more frightening than anything else. Any help will be most welcome.

Joe Kapp: Robert, you need to get your arms around your current and future spending. Next, determine how much you have in the way of assets to cover your spending. If there is a shortfall, then you need to look at ways of cutting your spending or increasing your income. Given your age, it may behoove you to speak with a financial advisor in your community who will put together some financial models of your situation to help determine how you stand financially. Also HRC has begun collaborating with AARP, in a campaign called Divided We Fail (http://www.dividedwefail.org/), which is about getting leaders to help with common-sense solutions to the problems and issues facing health care and financial security for America's seniors. Bringing the voices and concerns of the gay, lesbian, bisexual and transgender community to this mainstream dialogue about affordable health care and financial security is enormously important. Gay, lesbian, bisexual and transgender seniors face unique barriers in gaining access to housing, healthcare, long-term care and other needed services.

Debbie: Can you answer a question which seems to puzzle my attorney and lighten my mind? I am a M2F transgendered female living in Virginia. I am post-op, my birth certificate and drivers license say female. I was legally married prior to transition and we are now still together living as a same sex couple. Has our marriage disappeared for tax and inheritance purposes or will the fact we were legally married under the laws of the land prevail? I'm not sure what rights and benefits I am entitled to.

Lara Schwartz: Debbie-- There is no reason to believe your marriage has "disappeared" for any purposes, but the law remains unsettled from state to state regarding the validity of marriages involving a transgender spouse. In order to provide yourself with the most robust possible protections with regard to inheritance and taxation, I suggest you talk to your attorney about the documents discussed in this article (http://www.transgenderlaw.org/resources/transmarriage.pdf).

Lara Schwartz: Additionally, I suggest that you apply for a passport, because a passport carries at least as much weight as a birth certificate in terms of proving identification. You can find an application here: http://travel.state.gov/passport/passport_1738.html.

Guest: What is the best way to write my will so that my partner pays the least amount of taxes? Should I set up a trust?

Brenda Jackson-Cooper: Whether your partner will pay any taxes at all depends on the overall size of your estate and the state in which you reside at the time of your death. If your circumstances are such that taxes will be due, there are situations in which creating a trust will be beneficial. You should explore your options with an experienced estate planning attorney.

Guest: How do I title my home and vehicle so that my partner inherits them but pays the least amount of taxes?

Brenda Jackson-Cooper: There are two considerations to this question: the manner in which the property will pass and the tax ramifications of the transfer. For most people, holding the property as Joint Tenants with Rights of Survivorship is likely to be the best manner in which to hold the property, because it will pass automatically to your partner at the time of your death. However, if your estate is large (in excess of $2 million in 2008 or $3.5 million in 2009) it might be better to hold the property as tenants in common. Therefore, it is really important that you speak with financial, tax and/or legal advisors in your jurisdiction to ensure that ownership of the property is properly structured. IF YOU AND YOUR PARTNER OWN YOUR HOME AS TENANTS IN COMMON, YOU MUST PREPARE A WILL THAT BEQUEATHS YOUR INTEREST IN THE HOME TO YOUR PARTNER (AND YOUR PARTNER MUST DO THE SAME FOR YOU). OTHERWISE, YOUR PARTNER WILL NOT INHERIT YOUR INTEREST IN THE HOUSE UPON YOUR DEATH. Depending on the state in which you reside at the time of your death, your partner may also have to pay a state inheritance tax. If the size of your estate is likely to be worth several million dollars, you should contact a financial and legal advisor to discuss more sophisticated gifting strategies that can be used during your lifetime to reduce the amount of tax payable upon your death. You can certainly title your vehicles in joint names if you wish, but you can also ensure that your partner inherits your vehicle by preparing a Last Will and Testament that bequeaths the vehicle to her.

Guest: If my partner is my beneficiary on life insurance policies, etc., will she have to pay taxes on that as income?

Brenda Jackson-Cooper: You partner will not have to pay income taxes on the life insurance proceeds she receives at the time of your death. HOWEVER, the life insurance proceeds will be included in your estate for estate tax purposes, which means that your partner might (depending on the overall size of your estate) have to pay estate tax on the life insurance proceeds. You can avoid the estate tax on the life insurance proceeds by creating an irrevocable life insurance trust to hold the life insurance policy. If you are concerned about estate taxes, you should consult an estate planning attorney to discuss this option.

Guest: I have written my will stating that my partner makes all decisions and arrangements for my body and the memorial service; is there something else that I need to do?

Brenda Jackson-Cooper: You should also have a healthcare power of attorney that gives your partner the ability to make decisions with respect to arrangements for your body and the memorial service. The healthcare power of attorney primarily will serve the purpose of authorizing your partner to make medical decisions while you are still alive, but it also will give her the authority to instruct hospital personnel and other third parties as to the disposition of your bodily remains.

Jose L: Thank you to HRC and California Equality for All in their efforts to fight the current state-wide petition to have an amendment in the Novemeber ballot banning same-sex marriage in the state's constitution . Hopefully, as Chris Edelson mentioned, the case in front of the CA court right now will be favorable to the GLBT community. I encourage others to get involved as this is happening (and has happened) in many other states!

Chris Johnson: That's all the time that we have for today. I'd like to thank Brenda Jackson-Cooper and Joe Kapp for taking the time to be with us today. You've been incredibly helpful! Thanks also to Lara Schwartz and Chris Edelson for joining us!

Chris Johnson: You will be able to find a full transcript of this discussion on Friday at www.hrc.org/chat. We'll also be posting responses to most of the unanswered questions during the remainder of the "7 Days to a Better Financial You" campaign on our blog at http://www.hrcbackstory.org/. If you have any other questions or feedback about the chat, please e-mail us at webchat@hrc.org.

Chris Johnson: Also, thanks to all of you for participating! As I mentioned before, the information provided in this chat is for educational and informational purposes only. The information provided does not constitute financial, tax, or legal advice by the Human Rights Campaign or the presenters for any individual or couple. Neither HRC nor the presenters assume any responsibility for the accuracy of the information provided. Each individual and couple should seek the advice of his or her own attorney, accountant, or financial advisor regarding the advisability of any action for their particular situation.

Chris Johnson: Thanks again and have a great day!

 

Related Links

  • 7 Days to a Better Financial You