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YOUR MONEY | MONEY 101

Partners Need to Designate Beneficiaries

August 04, 1996|VIVIAN MARINO | Vivian Marino is a business writer for Associated Press

They met at a birthday party eight years ago, became instant friends and, six months later, inseparable companions who today are committed to spending the rest of their lives together.

Yet even though Paul Albergo and John Edwards share goals common to most long-term partners, with financial security high on their list, getting there will be tougher for the gay Washington couple because laws favor traditional husband-wife households.

Neither Albergo, a 35-year-old newsletter editor, nor Edwards, a 32-year-old architect, has the right to inherit each other's property, to speak for the other in a crisis or, in some cases, visit the other in the hospital--unless they do some careful financial and legal planning.

Indeed, the only way unmarried couples can get legal safeguards at least similar to those of married couples is to file a series of partnership protection documents such as wills, living trusts, joint tenancy agreements and powers of attorney for health care and finances. A lawyer is generally needed to set these up.

Without such documents, their only options are joint bank accounts and naming each other as beneficiaries of insurance policies or 401(k) plans.

Other government benefits of marriage--which include dozens of things from a free second fishing license to Social Security survivor benefits--are simply unavailable without legal marriage.

"Laws are horrendously unfair and biased toward the married couple," said Martin M. Shenkman, a Teaneck, N.J., attorney specializing in estate planning.

His advice to all domestic partners, especially same-sex couples, who unlike heterosexuals, can't qualify as common-law spouses in states recognizing such marriages: Leave nothing to chance and put it all in writing.

"Someone might say, 'Oh, my family likes my partner.' But the family might have just pretended to like or tolerate the partner," Shenkman said. "When the partner is gone, the family basically goes on the warpath because of all the pent-up disappointment, anger over their lifestyle."

Medical, burial and child custody decisions may also be called into question if the couple haven't left specific instructions.

Some of these considerations apply equally to unmarried heterosexual couples as well as other kinds of living arrangements. "It's rather ironic," said Shelley Biermann, a financial planner with American Express Financial Advisors in Sacramento. "There are actually more nontraditional families now."

In 1970, 40% of the nation's households fit the Ozzie and Harriet television family mode. Today, that's down to roughly one in four families.

Biermann said about a quarter of her clients are from what may be considered unconventional households, which include everyone from single mothers to blended stepfamilies to elderly couples who don't marry because of tax or Social Security consequences. About 5% are gays or lesbians.

Many in the financial services industry try to woo new clients regardless of their living arrangements.

"They're the same products that everyone needs--life insurance, annuities, mutual funds, savings certificates. . . . The goals are the same as with traditional families," Biermann said. "It's not a moral issue, it's a practical issue."

About three years ago, American Express revamped its financial planning software to remove the assumptions that all clients were married couples.

"For years and years, I had to back into it. I had to essentially charge the client twice or . . . do two separate analyses on my own time and 'marry' them. It was absurd," Biermann said.

Peter M. Berkery Jr., author of "Personal Financial Planning for Gays & Lesbians," said the "business and the financial community have come out ahead of government on this matter."

"It's kind of a flip-flop from civil rights," he said. Instead of federal government leadership on the issue, a few hundred businesses and a handful of city governments have pioneered by offering some kinds of domestic partnership benefits.

In particular, entertainment companies like Walt Disney, Metro-Goldwyn-Mayer, Universal, Paramount Pictures, Sony and Warner Bros. have extended health-care coverage to live-in partners of homosexual employees, as long as they fit certain criteria. Still, the IRS treats those benefits as taxable income.

Indeed, government appears to be moving in the opposite direction. Legislation barring recognition of same-sex marriage has been enacted or introduced in about three dozen states and in both houses of Congress. President Clinton recently said he would sign such a bill. These moves were touched off by indications that Hawaii's highest court might legalize same-sex marriages within the next two years.

Although no state yet recognizes gay or lesbian unions, at least a dozen cities, including several in California, allow same-sex couples to register as domestic partners. (Fourteen states and the District of Columbia recognize common-law marriage for heterosexual couples. California is not among them.)

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