He and Robert Patlan, 44, are planning to build their dream home by the coast in Delaware. The pair was married two years ago in the National Cathedral in Washington, D.C., which, along with six states, recognizes gay marriage. But in spite of that, they face unique challenges to ensure that the surviving partner inherits the real property they own separately in Alabama and the District of Columbia, and that they own jointly in Delaware. "That creates all sorts of problems relating to estate administration," Tanner says. "If one of us were to pass away, which states would recognize us as married for purposes of estate administration? That's one of the issues in connection with our estate planning. It's complicated."
If not handled properly, it is entirely possible for the surviving spouse to lose a home at the death of the other spouse. What's more, under current law, Patlan cannot inherit Tanner's federal pension or Social Security benefits. (If Patlan were a woman, there would be no difficulty.) Tanner adds that he and Patlan, a senior contract manager for AT&T who has his own 401(k), want to ensure also that Tanner's adult children are all cared for. "We're working on it," Tanner says. "It's a process, and we believe we are making good progress," he says, adding that the goal is "no duplicate taxes that may arise by virtue of the fact that the state may or may not recognize our marriage."
Tanner and Patlan are, in fact, lucky. They know there are land mines, and are working with a specialist advisor to defuse all of them. Their advisor, Joshua T. Hatfield Charles, of Rockville, Maryland-based SPC Financial, manages $500 million in assets, of which $100 million is from lesbian, gay, bisexual or transgender clients. SPC Financial is an RIA that offers securities through Raymond James Financial.
A frequently quoted expert in the field, Charles is vigilant about working with estate attorneys with expertise in the many legal pitfalls that same-sex couples have to navigate. Every financial advisor working with same-sex couples has horror stories of long-time partners left out in the cold in favor of distant family members as a result of careless or non-existent estate planning. Surviving partners can end up losing their home, as well as any assets from the relationship.
U.S. Census data puts the number of same-sex couples living together in 2010 at approximately 620,000. That trend is expected to grow, according to a survey conducted earlier this year by the Financial Planning Association. The survey of 5,500 FPA members found that planning software doesn't exist to deal with the needs of this demographic group and that advisors who have same-sex couples as clients have to do a tremendous amount of manual data entry. One survey respondent wrote: "I must run programs separately for same-sex couples, so it doubles the data entry effort. I also need to analyze tax issues separately."
Planning for same-sex couples-whether married or not-also requires navigating a patchwork of laws. Charles, who worked on the executive summary of the FPA survey, says that one of the primary problems is that the federal government does not recognize same-sex marriage, following the 1996 Defense of Marriage Act (DOMA). "There, we're no more than legal strangers," says Charles, who is himself gay, and married to his partner of seven years.
Moreover, on the state level, there are varying degrees of recognition-not to mention different levels of rights and protections-for same-sex couples. Each state decides if and how it recognizes same-sex couples, so advisors must plan on the state level for each of 17 states that offer the privileges of civil unions, domestic partnerships or gay marriage. And each category requires different types of planning. And even within the same category, there are details advisors must be aware of: a civil union in New Jersey is not the same as a civil union in Illinois. If clients own property in different states, that means a different plan for each state.