In recent years, there has been a notable expansion in the financial landscape for LGBTQ couples following the legalization of same-sex marriage. However, despite this progress, there are still evident gaps in financial education and wealth disparities when compared to non-LGBTQ couples. The challenges faced by LGBTQ individuals and couples include obstacles in saving, investing, applying for loans, and experiencing discrimination from financial institutions and advisors. A 2019 Morning Consult poll revealed that one in four LGBTQ Americans have encountered financial challenges due to their gender identity or sexual orientation.
According to a 2017 Prudential report, LGBTQ individuals are less likely to possess a savings account and own stocks or mutual funds compared to the general population. Additionally, home ownership rates are lower among LGBTQ couples, with discriminatory practices among financial institutions contributing to these disparities. Same-sex couples are rejected from mortgages 73% more often, receive higher interest rates, and overpay an estimated $86 million each year on home mortgages.
Retirement savings also present a gap, with same-sex and LGBTQ couples being 5% and 12% less likely to have a 401(k) or IRA, respectively. It is crucial for LGBTQ individuals to be conscious of these wealth gaps and take proactive measures to safeguard their finances.
Safeguarding Against Financial Discrimination
LGBTQ individuals and couples are entitled to rights and protections aimed at shielding them from discrimination due to their sexual orientation or gender identity. The federal Fair Housing Act and the HUD Equal Access Rule protect against discrimination when renting or applying for a mortgage. Title IX offers protection from discrimination on the basis of sexual orientation or gender identity for students, while the Equal Credit Opportunity Act ensures protection against refusal of credit or higher interest rates based on sexual orientation or gender identity.
Financial Guidance for LGBTQ Couples
For married same-sex couples, there are numerous financial benefits to take advantage of. This includes the ability to file taxes jointly, gift unlimited cash to one another without incurring gift tax, and exemption from inheritance and estate taxes. In addition, married couples can compare and choose the best employer-sponsored health insurance plans, both using the same health insurance.
Unmarried same-sex couples can make smart financial decisions by designating each other as beneficiaries on investment accounts and life insurance policies. Creating a living trust and medical power of attorney are also important considerations for estate planning. These strategies help avoid the probate process and grant your partner access to finances and decision-making in the event of medical needs.
LGBTQ individuals and couples encounter unique financial challenges, and it is important to be mindful of these differences and the available protections. Organizing and managing personal finances is essential to ensuring a stable financial future. Whether married or unmarried, LGBTQ individuals can benefit from proactive measures to protect their financial well-being.
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