Legalizing same-sex marriage may simplify planning

(August 18, 2003) Amid headlines of disease, trade disputes, diplomatic strain and now power outages, Canada also made international headlines for its weddings.

On June 10, the Ontario Court of Appeal released its decision in Halpern et al v. Attorney General of Canada, effectively legalizing same-sex marriages. Since then couples from across the country and even the U.S. have been flocking to the province’s registry offices, anxious to gain spousal recognition before the government moves to close the door.

So far it looks like there was no need to rush. Ottawa announced one week later that it would not challenge the decision and the government of Ontario declined as well. Even if the government changes its mind, it is unclear whether marriages that had already been registered would be annuled.

For the most part, advisors agree that financial planning for same-sex couples is the same as for any other couple, since people’s hopes and goals for the future are pretty much the same regardless of sexual orientation. A secure retirement and providing for one’s children are hardly dreams reserved for heterosexuals.

“The most significant points have to do with transition of assets,” says Dennis Morrison of Cartier Partners Financial Services in Vancouver. “When one partner in a married couple passes away, most assets can be transferred to the surviving spouse without a deemed disposition. This is not automatic with same-sex couples.”

In the event of a partner’s death, the survivor may not be able to rely solely on the will to carry out the wishes of their partner. For this reason, it is important to assign a beneficiary for assets whenever it is applicable.

“In some cases the family may contest the will,” Morrison says. “If the property in question was jointly held or had a named beneficiary, such as RRSPs or life insurance, this could avoid assets getting tied up in litigation, and ensure they go to the intended recipient.”

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“You have to tighten up wording on everything very carefully,” says Michael R. Conrad of Balanced Financial Services in Vancouver. “In the event of death, nothing automatically rolls over to the spouse, although that’s changing gradually, whereas with a heterosexual couple, if there wasn’t a will the property would go to the spouse.

“If they do want things to go to the other partner, they should make sure the will reflects this,” he says. “To avoid any family problems I recommend putting as much as possible into joint ownership.”

If these assets are explicitly designated before death, there is little that disapproving relatives can do. It is easier to contest a will than to challenge the name of the beneficiary on a life insurance policy.

Same-sex couples have been able to claim common-law status since the passing of Bill C-23 in 2001, but the rights of a legal spouse are broader, encompassing claims under property rights and survivor rights for government benefits.

“For a legally married couple, there was certainty of what government benefits they would qualify for,” says Brett Simpson of Rogers Financial Group in Vancouver. “But if there was uncertainty about what the status of the relationship was, then it leaves it up to chance if someone was going to deny the claim if something happened to an individual. You’d have to prove whether they were common law.

“The definitions of ‘common-law spouse’ are different in different places. What the new court case has done is it has brought some certainty. It’s removed the uncertainty of the timeline for common-law relationships.”

Because the highest classification for same-sex couples was previously common law, they are now more secure in their property and inheritance rights. Simpson cites the example of the B.C. law that allows only children and spouses to contest a will. With legal recognition, a same-sex spouse will now have this right.

The 2001 bill also allowed same-sex couples to roll over their RRSPs and collect government benefits through their partners, including survivor benefits on pensions, but the key is that they elect to be recognized as at least a common-law couple.

“A lot of the issues around benefits have now been resolved in Ontario. Most people can now be the beneficiary of a pension,” says Rudi Carter of Assante Capital Management in Toronto. “The key from my point of view is to make sure all of that registration is done, make sure that all of those beneficiary designations are in place and not just assume they are there.”

Carter says it is important to make sure the couple has gone through the process of registering as beneficiaries for each other’s pensions, for example. Should one of the partners die without the other being registered, the survivor would face an uphill battle proving that they qualified for benefits.

Carter says gay and lesbian couples are often well-versed in the intricacies of benefits packages, which heterosexual couples may take for granted, but their advisor must ensure that they have not missed any applicable registration.

“Most of them are very, very aware of these issues, but the key is to go through that checklist and make sure that it is on the [benefits] document, make sure they are going to get 60% of that pension in the event of an untimely death.

“I think in both the federal and provincial jurisdictions there have been enormous changes,” says Carter. “The question ultimately is property rights and family law rights. That’s going to be the big battle.”

But there is another important element to serving the gay and lesbian community, aside from the actual planning.

For Fred Smith, CFP, RFP at Raymond James in Saskatoon, the most important aspect is building the relationship.

“Every client is looking for an advisor they can trust, and part of that trust is an empathy or understanding of their situation. That’s what same-sex couples look for: ‘Do they understand what we have to put up with in the world?’ I think there is that additional element that is more important on the same-sex side.”

For advisors in more cosmopolitan areas, such as Toronto, Vancouver or Montreal, it may be easy to forget the stigma that many gays and lesbians feel. In many smaller communities the matter of trust may take on a deeper meaning for this segment of society.

“With me it’s pretty easy. My daughter is gay, so most of my same-sex clients come from her stable of friends. I understand some of the challenges they face and the discrimination they face, so it’s pretty easy for me to demonstrate an understanding.”

Smith is a believer in word-of-mouth referral as one of the best ways to win clients. “That’s the demonstration that the clients trust you — they send you their friends.”

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Will legal recognition of same-sex couples make the rules simpler? How will this change affect your practice? Share your thoughts about this topic in the Talvest Town Hall.

Filed by Steven Lamb, Advisor.ca, slamb@advisor.ca

(08/18/03)

Steven Lamb