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Retirement Tips for Same Sex Couples

While America’s attitudes towards same-sex couples have changed significantly in recent years, there are still some potential retirement hurdles that many LGBT Americans need think about. On the federal level, the Defense of Marriage Act effectively prevents same-sex couples from benefiting from the same retirement benefits that heterosexual couples share. However, you can take steps now to ensure your retirement is free from as many potential hurdles as possible.

Non-Spouse 401(k) Beneficiaries

Starting in 2010, non-spouse beneficiaries are able to legally roll inherited retirement benefits into individual retirement accounts or annuities. This means that anyone who started with an employer prior to 2010 should review your beneficiary designations. However, even though the pension protection act of 2006 allows for this action, not all employers have complied with the law, and it may take some additional effort to change the designation.

Estate Tax

For same-sex couples, the issue of how much you can leave to your spouse or partner after you die is a significant one. Beginning in 2013, you will be able to leave $1 million as a tax-free inheritance to your spouse. Anything over that amount will be taxed at 55%. If you’re worried about the potential tax implications you can, for example, consider a life insurance policy which would cover the federal estate tax bill.

Medical Incapacity

LBGT couples facing incapacity because of a medical situation, such as Alzheimer’s disease, can ensure their partners are allowed to make medical decisions by taking steps well in advance. You will want to consider transferring decision-making rights through a power of attorney to your partner or caregiver. You will also want to review the Medicaid requirements involved for long-term care costs, as these differ between states.

Same sex and LGBT couples can learn more about these and other estate planning issues at one of our free seminars in September. We’ll be holding them on September 10 and 13th in Greensboro. Contact our office for more information or register here.

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