Money Talks
Financial Advice by Melissa Myers and Michael Tucker
Money is likely to be an issue for couples who live together
Melissa Myers: Let’s talk about that exciting juncture in gay and lesbian relationships — moving in together — and the issues that challenge the happy couple.
Tucker: The issues range from how to split the dinner check to how to share living expenses or how to make a large purchase together, such as a car or a home.
Myers: If a long-term relationship ensues, discussions may move even toward joint retirement planning.
Tucker: Because lesbian and gay relationships do not typically have an automatic legal framework, like marriage, a couple may have no system for commingling income and assets.
Myers: That’s right. When heterosexual couples marry, an entire infrastructure and set of rules arises simply by tying the knot. Likewise, an infrastructure for untying the knot exists if the relationship should end.
Tucker: Emotionally, when gay or lesbian couples get together, one or both may view the integration of finances as a sort of test of each other’s commitment to the relationship.
Myers: It can be a major trust and intimacy issue. I often find in financial planning with same-sex couples that the partners have differing attitudes about money.
Tucker: This can make for bumpy waters in the relationship, but it’s quite normal and often tied to lessons about money we learned at our mothers’ knee.
Myers: One way of working through the financial issues is to look at the income and expenses as one category of planning and the asset ownership as another. I find couples tend to think in one of a few distinct ways.
Tucker: Yes, some handle money much the same way a married couple would. They pool income and view expenses as joint obligations. They tend to use joint checking accounts to pay the bills.
Myers: Others handle joint expenses in proportion to each partner’s income. For example, if one partner earns $100,000 and the other earns $50,000, the higher earning partner would pay two-thirds of the expenses and the other partner would pay one-third.
Tucker: A third approach is for each partner to maintain entirely separate finances. These couples tend to keep separate bank accounts and may contribute to a joint account for paying bills or simply send two separate checks to the mortgage company each month.
Myers: Moving on to asset ownership, there are a few more twists.
Tucker: This is where I dwell. Some couples treat assets they already owned coming into the relationship as separate property. They may also treat inheritances of family gifts as separate. But how they handle an asset they acquire together is interesting. Sometimes they will want to use a different set of rules.
Myers: Let’s say two women are in a committed relationship and want to buy a house together. One earns twice as much as the other and uses her savings for the down payment. What decisions will they have to make in dealing with their new joint expenses and what choices make sense?
Tucker: They could agree to split the mortgage, utilities, taxes and insurance equally or proportionally. They could choose to own the house jointly in any number of methods, which means there is effectively a gift of half the down payment, or they could come to an agreement that, if the house is sold, the woman who made the down payment is entitled to return of her initial investment, with some adjustment for appreciation.
Myers: They could also decide that after so many years, the ownership proportions will equalize. Of course, it will be important to consult with their tax and legal professionals to make sure their agreement is legally binding and to be aware of gift tax consequences.
Tucker: Let’s remember that, no matter what the verbal agreement is, the sticky issue of what happens if the relationship ends is left unanswered for unmarried couples by current laws. Here, Domestic Partnership Agreements become important.
Myers: Yes, for unmarried couples, a written agreement is essential to adopt the more creative approaches we mentioned.
Tucker: Right. And these issues are best discussed and negotiated when everyone is happy in the relationship, not at a stressful time in the relationship.
Myers: Amen! In my daily working with same-sex couples, the exercise of sorting out the finances can clarify issues for them and can even be a huge relief to them by the end of the process.
Melissa Myers is a certified financial planner with Camelback Retirement Planners, 2720 E. Camelback Road, Phoenix (602-424-7503) and a registered representative of Commonwealth Financial Network, member FINRA/SIPC.
Michael Tucker is an attorney with Michael Tucker, P.C. (602-280-1500), and is a certified specialist in estate planning.
