No matter your alignment in the LGBT community - single, old, male, female, young, in a domestic partnership or married - there are several specific financial details you should take note of to make sure you maximize your benefits - and also, avoid potential pitfalls that can arise if you approach things from the wrong point of view.
This document should provide additional clarity on several personal finance topics especially pertinent to the gay and lesbian community.
- Financial aid and scholarships - There are several specific scholarships you can take advantage to lower the cost of your education.
- Housing - As it relates to domestic partnerships and marriages, correctly working out buying a new home can be a difficult affair - as such a large purchase is one you need to get right.
- Gay & Lesbian Marriages - One of the most complicated (and evolving) parts of the lesbian and gay personal finance equation, gay marriage and domestic partnerships factor in heavily to your biggest financial decisions.
- Living With HIV - HIV is an unfortunate reality of many LGBT relationships. For those infected with the disease, there are several options to secure additional coverage at limited or no cost.
- LGBT-friendly businesses - Do you want to have your money taken - and stored - by businesses that aren't gay friendly? We keep you up to date on the businesses who don't cut the mustard in their LGBT relations - and those that excel at it.
- LGBT Personal Finance Myths - Ever wondered about some of the gay and lesbian personal finance myths you frequently hear? Well, now we have data to back up the rumors - and find the facts.
When looking at potential colleges you might want to attend, you should give the institutions a call and inquire about their LGBT resource center. That center should have specific details about area LGBT scholarships. If you're tech savvy, another way to go about finding scholarships is by searching that institution's website through Google search. Insert the following in the search bar and you should return relevant scholarships:
- site:berkeley.edu LGBT scholarships
Here's an example search:
Don't assume that if your university doesn't return a solid result, that it doesn't have LGBT scholarships for you to take advantage of. Make sure you call the University and inquire further about all the financial aid and scholarships you have at your disposal.
There are also many more general LGBT scholarships you can apply for. Financial Aid.org and CollegeScholarships.org have two great scholarship lists you should utilize to find potential awards for higher education:
The economic impact of marriage on everyday life can't be understated - according to a 1997 General Account Office study, at least 1,049 U.S. Federal laws and regulations include reference to marital status. A later 2004 study by the Congressional Budget Office found 1,138 statutory provisions "in which marital status is a factor in determining or receiving 'benefits, rights, and privileges.'" Lots of these laws govern property rights, benefits, and taxations. According to Dr. M.V. Lee Badgett, research finds the resulting difference in Social Security income for same-sex couples compared to opposite-sex married couples is US $5,588 per year.
So, then, the first recommendation for a domestic-partnership is to enter one of the states in the United States where same-sex unions are legal. Hopefully, this number will grow by the year, but in the meantime, one must move to a state where it's legalized to reap the full financial benefits of wedlock.
For an up-to-date detailing of states where same-sex marriage is legal, refer to this Wikipedia entry:
Although state-recognized marriage is a benefit that will return real benefit to the married same-sex couple, some of that protection evaporates when they cross a state line. It is this reason why getting financial documents in writing can help.
In example, if a gay couple crosses the state line and one spouse gets hurt in an accident, it's very possible that partner will be made incapable of visiting you in the hospital or making medical decisions for you.
Even if you are in a same-sex marriage in one of the states where the union is allowed, or otherwise in a domestic partnership or civil union in the states where those are options, none of the benefits of marriage under federal (national) law will apply to you, because the federal government does not recognize these same-sex relationships. In example, you can't file joint federal income tax returns with your partner, even if your state allows you to file taxes jointly. Other federal benefits, such as Social Security death benefits and COBRA continuation insurance coverage, may not apply.
Often times, same-sex couples will marry primarily for the health insurance benefits, as many companies will insure a spouse, but not a domestic partner. For some couples, there will be tax benefits that come along with that. In example, couples in domestic partnership can both get covered under an employer-based health plan - but the value of those benefits to the non-employee partner is subject to income tax - but only if the state doesn't recognize the marriage. Formally married or not, federal tax will still be due on the health plan.
Another benefit of same-sex marriage comes in the form of friendlier estate taxes. Under federal and some state estate-tax rules, if a spouse dies, the remaining spouse can inherit the home tax-free. For those unmarried couples, the surviving partner will find that federal estate tax is owed on the value of the home on the exemption level. However, depending on the state's rules, many gay married couples may find they don't owe state estate tax.
Filing for Four
Normally, same-sex couples who are legally married in their state can file a married-filing-jointly state tax return, which will mean a lower overall tax bill as compared to filing as a single filer - but they'll still have to file as a single on their federal income tax returns.
This means that the couple must complete four returns - the two single flier returns for federal filing, a mock federal return as married-filing-jointly - which is only needed to complete your state tax return - and finally, a state return as the legalized married couple. Whether or not you want to file the state return jointly or as married-filing-separately will vary depending on the couple's financial situation.
Mark Luscome, principal tax analyst with CCH Inc, says that "If you have two individuals earning approximately the same thing and a progressive [state] tax system like at the federal level, then filing a joint return may actuall hurt you because of the various ways that things are combined. But if one of the partners is earning almost all the income and the other is not earning very much, filing jointly could help a lot." Luscome follows, however, noting that in states with a flat tax rate, the difference may be negligible.
If your marriage is recognized in the state, the best thing you could do is run your tax return both ways - meaning married-filing-jointly and married-filing-separately. To do this, consider hiring a tax pro, but the extra filings could mean higher fees. One way to avoid additional costs is by using tax-software programs such as TurboTax and H&R Block Inc.
HIV is an unfortunate reality of many in the LGBT community. For those infected, the normal treatments must be taken for the remainder of the individual's life. The biggest expense for these people will be the drugs they are forced to take for the rest of their lives. While effective, they are extremely expensive, and run up to $13,000 a year per patient on average.
The federally funded AIDS Drug Assistance Program is last ditch option for some. The program makes available prescription medicines to patients and may even pay for health insurance premiums in unique situations - situations where no other source of income is available. Because of budget cuts, to qualify for this program one must be within 300% of the federal poverty limit. Those that don't qualify for the requirements of the ADAP program will be kept on waiting lists.
For those individuals who are HIV positive and have no insurance, the best option is to find an employer with fifteen or more employees. The Americans with Disabilities Act gives all employees with the same benefits, such that HIV cannot be pulled out from the insurance plans. On occasion, insurance plans can exclude individuals with serious illness, but this is rarely the case.
Beyond the previous mentions of estate taxes, Gay & Lesbian couples face unique challenges as it comes to purchasing a home. One of the biggest problems is the problem with joint ownership if there is no formal union - because the law rarely protects either party in the case of a break-up.
It's never fun thinking about what may happen when the relationship ends, but as it comes to non-recognized unions, it's even more important to identify and draw the lines of ownership when it comes to getting a new home. To clarify this in the proper fashion, we recommend that you get a lawyer - he or she will be the best at truly identifying the fairest way to divide ownership of a new home.
Getting a Mortgage
There are no real benefits to getting a mortgage for legally married couples over same-sex couples, as the bank will pull credit on both parties independent of their marital status. The only time this isn't the case - and there is an advantage to being married over single -- occurs when you are pursuing a VA mortgage. If one of you qualifies for a VA loan, your spouse can be added to the mortgage. However, if you are an unmarried couple, both parties need to be veterans in order to qualify for the loan.
It is recommended that you and your partner get a mortgage in hand before looking for a home - this way, you know what you can and can't afford, what your options are, and where to go from there.
Should you jointly own a home?
If partners aren't on equal footing financially, it is generally recommended that you do not jointly own a property. If you talk it over with each other - and your financial planner - and decide that owning jointly make sense, you have two options - 1) create a joint tenancy, or 2) have tenants in common. Both mean that there are multiple people on the title of the house.
Joint Tenancy with the Right of Survivorship
In this arrangement both parties have equal ownership of the property and ability to keep or dispose of the property. The Right of Surviorship means that should either partner dies, the rights to the property go to the surviving party. If the couple breaks up, they have to sell jointly or one party must buy the other out. Should one party want to stay as the sole tenant, they must qualify for a new mortgage. The bad part of this arrangement is that both parties can't sell out their portion to anyone but the other person in the tenancy - unless, of course, they both decide to jointly sell.
Tenants in Common
This method allows the property to be owned by two or more individuals - there is no limit to the number of owners who can hold the title to a piece of real estate, and the pieces of ownership can be divided in any way. If one party dies, the interest of the deceased passes to whoever is designated on the person's will. Any of the other tenants can buy out the other tenants if it is so agreed upon.
Something to note - when married people purchase a home, they are automatically made joint owners with the right of survivorship. They can also be made tenants in common, but this must be made clear up front. So, if a same-sex couple is in a state where marriage is legal for them, they automatically qualify for this benefit.
Creating a Domestic Partnership Agreement
Before beginning your home purchasing process, you should work with a lawyer to create a Domestic Partnership Agreement. This legal document firmly defines your properly rights and is especially important if you do not have joint ownership. This document offers answers to many questions that may arise in the event of a breakup, such as whether the home has to be sold, buyout options, responsibilities if one party leaves, and etc.
Drafting up a will is also important for non-wed couples in case of sudden death - otherwise, rights to the home will pass to their heirs and their partner will be left with nothing. You should also get a transfer on death deed - that is, an affidavit that the house transfers to the other individual immediately.
Protecting Yourself - Get a Lawyer
Just because you're married doesn't mean you don't need to protect yourself. The feds do not currently recognize unions, meaning that there can be large tax consequences if the union dissolves. This can come into play frequently if you have homes in different states.
A smart home buyer will work with a real estate agent with specialty working with gay and lesbian clients. Their expertise will help protect you and make sure you have every base covered in the case of a worst case scenario - one that will hopefully never happen.
It is likely you are in support of equality in the workplace. As it comes to this, many businesses are more apt than others to have non-discrimination causes and truly support gender equality. If you are of the mind that you only want to support businesses that can be considered "LGBT-friendly," you might want to check out the Human Rights Corporate Equality Index, whose 2011 index shows ratings of 615 major businesses, including many in the Fortune 500.
The most notable of the large corporations with a poor score is the #1 company on the Fortune 500, Exxon Mobil. Exxon's policies do not protect against discrimination due to either sexual identity or gender identity. So, if you see these gas stations on the side of your street - keep on driving.
One of the pervasive - and incorrect - myths about gays is that they are rich. The reality is that gay males actually earn less than their straight counterparts and lesbians earn more than straight males. At first glance this might seem somewhat disorienting, but at further look, one can see where this confusion can go astray.
- Gay males have more education than straight males, but they do not select the same male-dominated professions as often as straight males do. In actuality, they generally select female-dominated and/or service professions a lot more often. Male dominated professions, such as construction generally have higher wages than female dominated professions like secretarial.
- Gay males tend to work fewer hours than straight males.
- Lesbians also have more education than straight females, but they work longer hours - because they are generally less likely to have children to take care of at home.
- Lesbians are overrepresented in male dominated professions that pay better than their opposite female-dominated professions.
Take this data with a grain of salt, however. This data is slightly biased because there is not enough data on single men or lesbians, as surveys make gay couples easier to identify. Also, almost all of the data from this study came from the United States - although many similar studies from other English speaking countries confirm similar findings.
Money sees no sex or sexual orientation. If you're LGBT or not, these below resources will be of great resource to you in organizing your finances and ensuring a healthy financial future.
- http://queercents.com/ - Gay Personal Finance Blog
- http://www.mint.com/ - Easy to use personal finance software.
- http://www.getrichslowly.org/blog/ - A blog aimed at sensible personal finance.
- http://www.iwillteachyoutoberich.com/ - Harsh but intelligent personal finance advice.
- http://www.schwab.com/ - One of the best personal checking accounts, Schwab charges no ATM fees and actually has a checking account that accumulates interest.