Domestic Partners

Non-married and same-sex couples should take some essential steps to manage their finances wisely. For example, retirement preparation is crucial for couples planning a future together, and the goal of amassing a sizable nest egg is especially important for non-married and same-sex couples. Currently, Social Security follows Federal law and does not provide a domestic partner with survivor benefits. However, many corporate and government pension programs recognize non-married or same-sex partners as legal beneficiaries. These benefits can cushion financial hardship in retirement when one partner dies.

Tax treatment for IRA beneficiaries is another hurdle. A surviving spouse in a heterosexual marriage can rollover the deceased partnerís IRA and delay taking taxable withdrawals until needed or required by law. But a surviving domestic partner must begin mandatory taxable withdrawals soon after the death of a partner. This can be years sooner than would be required for widows or widowers. However, exactly how soon depends on the type of account. There is one set of rules for 401(k)s and traditional IRAs, and a different set of rules for Roth IRAs. Another factor to consider is whether the death occurred before or after retirement distributions had begun. Either way, the requirement for faster withdrawals means that survivors often owe higher taxes on the retirement distributions and could face reduced assets.

Also, domestic partners should both have enough life insurance and the right type of insurance to protect each other. This is especially important if one partner depends on the other partnerís income to help cover expenses.

Have a conversation with your financial advisor about creating a plan that benefits you and your partner.

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