Busting Myths: Same-Sex Financial Planning

The following paid commercial program is brought to you by TD Wealth. Tonight, it's been more than 15 years since LGBT couples won the right to enjoy the same benefits as their common-law counterparts regarding pensions and income tax. But are there still differences when it comes to managing their finances? And do obstacles remain when it comes to planning? Our expert panel will provide some insight-- Jeffrey Kroeker, partner at Civis Law, and Heather Richardson, Vice President at TD Wealth-- weigh in. That's coming up, on Money Talk. Hello, and welcome to a special edition of Money Talk. I'm Kim Parlee. Tonight's show is called "Busting Myths, Same-Sex Financial Planning and What You Need to Know." And at the very core of this show is the idea that even though Canada was one of the first countries in the world to legalize same sex marriage, some say there are still differences in how same sex couples, especially common law same-sex couples, need to plan as compared to heterosexual couples. We're going to dig into that, see what is true and what isn't. And to help us do that, we have some great guests. We have Jeffrey Kroeker. He's a lawyer at Civis Law, and Heather Richardson, Vice President at TD Wealth. Included with them, we also have a fabulous live studio audience. Let's give a round of applause for everybody in the room, guests and audience alike. Thank you for joining us. And let's get into this. I want to start off with the caveat that when we say same-sex couple, I mean, that's a broad classification. I mean, young, old, kids, no kids. I mean, it's a spectrum. But there are some core issues we're going to try and zoom in on for everybody that are relevant. I did lots of research. And I'm sure going to poke holes in a lot of what I've said. So I want to start with something that I found. And I want to tell you if this lays out the foundation for our conversation. Here's a statement. There's a much greater tendency for same-sex couples to think of their money as separate, rather than combined. Would you say that is true or false, Heather? Well, in my experience, I've certainly come across those situations where individuals want to deal with their assets separately. But I would also say that those situations aren't any more prevalent than they are in the heterosexual space from the clients that I've dealt with. She's being polite. She's saying false. OK, got it. All right, Jeffrey, true or false? What do you think? I see it a bit differently. I do believe that same-sex couples have a tendency to separate their own pile of money, if you will. And I think part of it comes from the fact that a lot of same-sex couples get together later in life, after they've dealt with the process of coming out and so forth. But the big issue for those couples will be whether or not they figure out what they have to do to bring those things together to protect themselves as a couple. All right. Well, let's talk about bringing those things together and actually, how we do it. And again, these are core issues. So the first thing we're going to talk about are taxes. Inevitable, death and taxes, they're coming for everybody. So the question is, are there unique issues-- tax issues-- for same-sex couples? Well, I'll say this. When the government wants to take money away from you, you're treated pretty equal. When you want to give money away to somebody else other than the government, there are some specific rules that are a bit different. But for same-sex couples, in particular, if they're not married-- But married is married is married. Married is married, fair enough. But if they are not married and they're in a common law relationship, meaning one year together in the same place, in a conjugal relationship, the CRA requires you to file your taxes together. And there are both pros and cons to that. But there are a lot of couple tax benefits that you get with that. What are some of those benefits? The ability to share basic deductions, sharing tuition credits. And also, the big thing is helping one another top up your RRSP amounts. And also, income splitting. Right, income splitting, and Jeffrey mentioned topping up one another's RSP amounts, so looking at a spousal RSP as an example. Let me ask you. Is there an issue where let's say somebody doesn't want-- maybe they're not out. And they're living together. They don't want the government or anyone to know, for that matter. And they don't get the benefits. But then one partner passes away. For example, with CPP, you would not be eligible down for that survivor benefit. It is a major challenge. And I think as society in Canada has grown to accept same-sex couples more so, I think it is becoming easier for people to come out of the closet and to share their love publicly with the person that they love. But there is a challenge there in the sense that with insurance policies or taxation, you do have to name your partner. And that is a critical issue. And with respect to your wills and estates, if you haven't taken the proper planning steps and you're not married, you could leave your partner in a really tough bind where they could potentially lose everything. I think there's going to be a theme to a lot of this is just being very, very clear and explicit in your instructions and what you want to do. Let's move on to the next topic then, insurance. You highlighted that. Are there any specific issues unique to same-sex sex couples around insurance? Well, with any life insurance policy, in particular, or health and benefits, life insurance, you have to name your beneficiary. So whoever that beneficiary is, whether it's your best friend or your same-sex sex partner, what I would say to you is take the necessary steps to do your research, get the best insurance policies in place, and make sure that you protect one another, should, god forbid, the worst thing happen and one of you die that you are looking after the person that you love. And I guess the issue too is if you are in a relationship, common law, and it's not named in the insurance and a partner dies-- Then it's paid to the estate and subject to family law, which differs from province to province in terms of dealing with common law relationships. Right. And this goes back to what you were saying, I think. From a tax law perspective, common law equals married. From a family law perspective, common law does not equal married. Correct. Marriage has its privileges that common law does not. And some other stuff too. Fair enough. Fair enough. See, they're laughing at that. It's an exclusive club. It's an exclusive club. Let me ask you about-- and again, if everybody gets a little bit of something from this conversation, we'll be thrilled because we're going to cover a lot of ground here. Traveling, if you're traveling as a same-sex couple outside of Canada, there are jurisdictional issues, other areas or parts of world that may not recognize. I'm going to start with you because you and I have chatted. And people think, oh, that happens to someone else. It doesn't happen here. What happened to you? Well, as we were talking about earlier, my partner and I, who were married, were traveling to the States, to Charlotte for a work function. And typically, we go through customs together. And when we were going through customs at the Toronto airport, we dealt with a particular customs officer who did not want to let us pass through together and made a little bit of a scene about it and suggested-- And this is, again, in Canada. In Canada, clearing US Customs at the Toronto airport. So he indicated that one of us could go through on the card that we provided, but the other one would need to go to the back of the line. And made it clear that-- Yes. It was not-- how do you handle that? It was embarrassing more than anything. And I just put my head down. And I didn't want to fight it. I felt he had created a scene already. And there wasn't anything that I really needed to do. Yeah, it's pretty hard that's happening in this day and age. Let me ask you, as well, from your traveling-- I mean to ask traveling, first off and also medical decisions if you're traveling because that's a big one. For sure. Look, the situation that Heather went through was awful. And I think the United States is going to deal with that this year at the Supreme Court when that comes up. But wherever you're traveling, I think one of the major issues that you have to do if you're traveling as a same-sex couple is to understand that you need to do your research. There are parts of the world that are not as open and accepting as Canada. You have to accept that. You don't necessarily get the rights and privileges. And if you are showing public displays of affection, you're going off a resort, or you're in places of the world where homosexuality is illegal, you could be arrested and detained in perpetuity. And it becomes a major issue for the government, who then has to advocate on your behalf for doing something that you would find perfectly acceptable here. The other issue, as you mentioned, is the issue around medical decisions. You may not be recognized as someone who can make decisions for someone. Absolutely. It would just be like in a foreign country, where they don't recognize same-sex marriage, you're just a friend. So what friend has the right to make medical decisions for you? So how do you prepare for that? One of the things you can do when you're traveling-- this is one of the things you never like to discuss-- is to travel with a power of attorney, some type of legal document that indicates that this person, as your friend, is allowed to make those medical decisions for you should, god forbid, the worst thing happen. And a good document to have for home, as well, if you're not married, to have somebody to make financial and health decisions on your behalf if you're not capable. Just get rid of the ambiguity. Absolutely. So there's no questions. All right, more ambiguity we're going to kill off right after this break. When we come back, we've got some big questions about pensions, a wills. We're even going to be talking about retirement homes. Stay with us. We'll get to those right after this. You're watching Money Talk. Welcome back to a special edition of Money Talk. Our focus tonight is myth-busting around same-sex financial planning. And we are digging into all sorts of questions. And the next big one is one little question, pensions, wills, estate planning. Explain it all in three minutes or less. Not really fair. But let's talk about-- I guess the importance, first off, is to be clear. No ambiguity, right? This is correct. It goes back to structuring a will and naming the people you want to receive money in your will. A little known secret in the wills and estates community is that gay and lesbian wills are often challenged far more than is the heterosexual community. Really? And that is primarily because, of course, family members that may not have known or family members that see dollar signs, see that this is an opportunity that that person should not get the money. And it is challenged. So making sure that you take those extra steps to be explicitly clear, either in cohabitation agreements, if you're living with somebody, in your powers of attorney, for both property as well as health, and in your will, making it very clear that this is my spouse, this is the person I love, and this is why I am leaving them this money. Heather, what have you seen in terms of-- he says they get challenged more often than not. But what are the key things to remember that are important, just to build on what he said? Well, I think the key things are, if you have intentions, you need to take the necessary steps to formalize them from a will perspective, from a power of attorney perspective. Make decisions on who you want making decisions on your behalf in the event you're not capable of doing so, and who you want to receive your estate and your assets at the time of your death, including pensions. I was going to ask on pensions-- sorry to interrupt. But privacy, again, I am curious, how much of this-- if you name someone as a beneficiary, is that private? Absolutely. For example, I can provide personal experience. I work for an organization. I work for TD. And I have approximately 40 people on my team. I am not privy to any of their personal benefit information. Right. And nor should I be. But if I go back to naming beneficiary for your pension, if you choose not to name a beneficiary for your pension and you live in a common law relationship, you could be missing out on the opportunity for them to then continue to receive spousal benefits at the time of your death. I think there's something important to jump in there on too. And I say this sort of tongue in cheek. But after you die, you may not care so much. And you might actually be more concerned while you're alive of making sure you look after your loved one and your partner. And of course, when a will is read in public after, or if it does get challenged by somebody else in your family, those things happen in open court, or those things do happen with an open will. And it can become public after the fact. But it's also one of those things, as a couple, you can help mitigate some of those challenges up front by if you buy a house together or a condo or a car, having it in your names together so that it just passes to that person. It's what's called joint tenancy. And making sure the bank accounts and so forth like that have both your names on them. Going back to that issue of same-sex couples wanting to keep money separate, there are positives and negatives to that. But having it together allows it just to transfer to the person without necessarily going through the estate and not having to pay tax. Right, which is important. Now, what about keeping it up to date? That's my elegant way of trying to say, what if one relationship ends, another one starts, and things don't get updated? Absolutely, we talked about insurance earlier. And so when it comes to selecting beneficiaries for your registered plans, your pensions, or insurance, ensuring that if your life changes and you have named a beneficiary that you may no longer want to receive those assets upon your death, you absolutely need to update them to reflect your intentions. And on the will side of things, it's a thing called a codicil. And basically, if you need to take somebody off your will and put somebody else in, or just take somebody out altogether, it's a very simple process. You contact your lawyer. And it can be done pretty quickly. I think this one's going to be simpler, health benefits. Is there a difference between same-sex couples and a hetero couple in the health benefit side? No. No? No, I think it's a matter of naming your partner. Just being clear. That's it. I love simple answers. OK, next one, retirement homes. This has been in the media quite a bit. And so you've been living your life and suddenly, let's say that you're going into retirement by yourself. What are the issues? What happens? What have you been hearing? Right now, as the Baby Boom generation goes through its aging process, et cetera-- and that generation has become, if you will, more accepting to same-sex relationships. There are places that would be predominantly straight that would welcome gay couples. However, we all know that there are some generational issues where that remains a struggle. Going forward, there are business entrepreneurs out there who are prepared to open up gay and lesbian retirement homes. We were discussing on the break. Spell out the problem though. What's the problem? Well, I think as we progress through life, any time we go from one school to another or one career to another, we have to come out all over again. And moving from individual home to a retirement home and surrounded by people that you don't know, now, all of a sudden, you have to come out all over again to the individuals that work there, the individuals that you're living with. And regardless of the age that you come out or come out all over again, there's always trepidation and uncertainty with that in terms of how people are going to respond. I think, to a certain extent too, this goes back to the concerns that were originally raised when same-sex marriage and so forth was going to be legalized. The sky was going to fall. The sun wasn't going to rise. And things have not happened that way. People begin to see that there are loving relationships, that gay and lesbian couples can have children and raise them well and raise them nicely as young, polite kids. And I think within a generation, this won't even be a matter of discussion. But there's a bit of a transition time, I think. We're still there. All right. Stay with us. We're going to transition to a break here. But when we come back, we're talking divorce and finding and advisor. Stay with us. More Money Talk right after this. Most people, when choosing a financial advisor, look for someone who is really competent, who they can trust, and they're comfortable with. This is no different for the LGBT community. Of course, some people would prefer to work with an LGBT advisor. However, for the vast majority, this is a non-issue. Well, that was Al Ramsay. He works at TD with a group of people working with LGBT community. And the topic, of course, was finding an advisor that understands you. So I'm back with Jeffrey Kroeker and of course, Heather Richardson. And let's tackle that one. How important is it, if you are in the LGBT community, to find a lesbian or gay advisor to understand your needs? Well, Kim, I think the most important thing is to find someone that you like, that you trust, and that's going to take the time to get to know you, to put together a plan to help you achieve what you want. And for some individuals, it might be important that the advisor that they work with is from the LGBT community. But it's not a necessity. Most importantly, it's finding somebody who's going to take the time to get to know you and understand your unique needs, whatever they may be. Agree or disagree? I agree. I would add to that the one thing that I look for is I look for organizations, whether they be financial planning organizations or law firms, that support causes that are near and dear to my heart, and ensuring that those folks, that they're maybe allies or GLBT advisors in there that also support those causes are critical for me to make that decision to give them my business. I always thought, too, one of the more important things I've heard from people too is that when you work with-- it doesn't matter, lawyer, accountant, advisor, that you need to disclose what's actually going on with you. Because if you don't, it's bad information in, bad advice coming out. I mean, you need to tell people what's going on with your life and what's important to you so then they can help you get what you want. I would agree with that wholeheartedly. I'm right about one thing. In order to receive the best advice possible for your own personal situation and unique needs, the individual qualified to provide that advice needs to know as much about you as possible. So you've got to tell. Yeah. You want fearless advice and loyal implementation of your wishes. And with that comes a relationship that you have to have with your financial planner or with your lawyer that is very clear on that. With lawyers in particular, it's sacrosanct. The solicitor-client privilege that goes on with that is sacrosanct. It's very well protected. And your lawyers, whether you know them as a personal friend, et cetera, they are trained diligently to keep that wall between that friendship that may exist, how they know you, and their legal work for you. And it is very well-protected. OK, I don't want to end on a bad core issue. But I guess the word "end" goes with divorce. So let's talk a bit about divorce. Of course, we spent a long time, of course, the LGBT community, fighting for the right to marry. It has happened in Canada. It's happening around the world. When those marriages don't go the way they plan, as they do in every other situation, you get a divorce. Are there specific issues to a same-sex divorce that are unique that you need to watch out for? This was an area of law that has just evolved to the point of being equal now on the issue of divorce. But this could be different a week from now? It's still evolving? No, no, no. In fact, now, I would say it's equal within the context of Canada. But those who are Americans that came up here, for instance, when it was legalized here to get married here couldn't get divorced here because they didn't have the residency requirements. It's a great way to encourage immigration policy-- Absolutely. Those things have been dealt with now. I think the big issue now, as more and more same sex couples begin the process of adopting and growing their relationships, they have to recognize that there are three times when folks get really nasty. One is in death, in fighting a will. One is in child custody. And the other is in divorce. And when you're separating a couple and you're breaking down a relationship, it goes back to making sure that you find trusted counsel, both financial advice, but also your legal advice. There are tax implications. And there are huge equalization issues, like around paying spousal support. And part of the victory for the gay and lesbian community of getting marriage comes with it is also the other side of it, which is the costs that come with a relationship breaking down. Let me ask you, from a financial perspective-- and again, a marriage is a marriage. A divorce is a divorce. What are the kinds of things people need to keep in mind, then, on the divorce side of things from a financial perspective? Well, from a financial perspective-- and Jeffrey touched on this a little bit-- equalization of marital assets, and that extends beyond their investment account and goes as far as the marital home or any other assets that were acquired during the time that they were married or living together in a common law relationship. So it all still applies, regardless of gay or heterosexual. What about adoption? That's another area that we should touch on quickly, too. I'm not sure from a financial standpoint. Or you're not OK. Jump in here. Yeah, no, my partner and I are actually in the process of trying to adopt. Congratulations. And I would give kudos to our system that we're treated equally within Canada. However, our options from an international perspective are very, very limited. Are there financial implications of that? Because, again, if you don't have as large a pool to choose from, for the reason you're just saying, are there financial implications to that? Is it more costly, do you think, for same-sex couples to adopt than it would be? With the limitations on international adoption, then looking at private adoption within North America, that could potentially raise the costs of adoption. Or we still have the same ability to go through the public sector adoption in the same way as a heterosexual couple could. Adoption? It goes back to the issue of travel too because there is a clear distinction between domestic adoption issues and international adoption issues. And if you're going abroad to a nation where homosexuality is illegal, and you're going there as a married couple to adopt, be forewarned, caveat emptor, that you may come up on some walls very quickly. And you need to do your due diligence and research. And be very cautious of some of these agencies that are operating international adoption services because they may not factor that in. Or they may tell you, yeah, yeah, it's fine. And then you get there and then recognize that you've got some uniformed people walking you to a prison. Here in Canada, the other big thing, I guess I would say on it, and it goes back to the issue of wills. Because we are so open now and able to adopt children, the critical issue would be making sure that you plan financially as well as legally to provide for your child. God forbid if you die as a young parent, whether you're gay or straight is irrelevant. You want to make sure that your child is looked after. Your beneficiary. Absolutely. And making sure that your children are looked after and that you, with your partner, have come together with a sound, sage financial plan to ensure that child's success. I have to thank both of you for a great conversation. I have learned a lot, been corrected on a lot. But I do hope that you both come back. Jeffrey Kroeker, lawyer with Civis Law, joining me here in studio, and Heather Richardson, Vice President at TD Wealth. And thank you to all the studio audience. Thank you so much for coming in. And thank you for joining us tonight.