The LGBTQ community is well on its way toward equality, but differences remain that have consequences for financial planning. Couples in the community must take them into account to ensure a comfortable and secure future, according to a BMO report.
It notes there’s has been a significant increase in the number of same-sex couples in Canada. In 2011 there were approximately 65,000. This accounted for almost 1% of all couples and was double the number of same-sex couples reported 10 years earlier.
Additionally, the report noted that same-sex couples tend to live in the largest cities in Canada, with almost half (45.6%) living in Toronto, Montreal and Vancouver. By comparison, only one-third of opposite-sex couples live in those cities.
The report cites several areas for LGBTQ couples to consider in their financial planning:
Changes in Old Age Security and the Canada Pension Plan: It was only in 2000 that both the benefits and obligations of these two income support programs were extended to same-sex and common-law couples. Included in these changes was the availability of survivor benefits for common-law partners of deceased individuals. These programs are important income components for retirement planning. Additionally, as long as both partners are over the age of 60 and are receiving CPP payments, it is now possible to share a portion of CPP benefits, proportional to the time spent together.
Changes in employment benefits: Many large companies have instituted policies that prohibit discrimination on the basis of sexual orientation. In fact, a majority (88%) of Fortune 500 companies, many of which operate in Canada, have such policies. However, only 62% of Fortune 500 companies provide domestic partner health insurance benefits to their employees.
Changes in taxes: With equality granted for all Canadian tax purposes in 2001, the ability to save and defer taxes as part of both a financial plan and an estate plan became available to same-sex couples. Income-splitting strategies such as the use of spousal RRSPs, prescribed-rate loans between spouses, pension income splitting, and the transfer of certain tax credits between spouses provide excellent opportunities to reduce the overall tax bill a couple faces.
Wills: Intestacy rules in several provinces do not provide for same-sex partners, or for common-law partners in general. Instead, assets go to the closest blood relationships — such as parents, children or siblings — requiring a common-law partner to fight using other provincial legislation for a share of assets or for financial support. This can be especially difficult if family members of the deceased partner did not support the same-sex relationship. Having a properly worded will can help to provide financial protection to a surviving same-sex or common-law spouse.
Powers of Attorney: When wills are drafted or updated, it is also important to set up powers of attorney (POAs) to protect both spouses. This will allow your trusted partner to take care of your finances and/or your health-care decisions should you become unable to do so yourself.
Insurance: An important aim of any financial or estate plan is to ensure that adequate financial resources are available to help meet the needs of both you and your partner. Life insurance can be updated to ensure that same-sex partners are named as beneficiaries, helping to provide sufficient funds when needed.