By Kian Ng
Financial planning for the LGBT community certainly is essential with some unique considerations. Let’s look at these 5 financial planning considerations.
The term sexual diversity refers to all the diversities of sex characteristics, sexual orientations, and gender identities. They are substantially more likely to identify as lesbian, gay, bisexual and transgender (LGBT). Rights affecting LGBT people vary greatly by country or jurisdiction which includes everything from the legal recognition of same-sex marriage to the death penalty for this community.
Th presence and contribution of LGBT community is a fact that cannot be denied. Many of them work hard to align with their personal goals such as retirement planning as well as ensuring they are sufficiently protected or covered with medical benefits. Thus, financial planning with this LGBT community is equally important with some unique consideration on their planning.
An Experian survey among 500 LGBT respondents found 62% of them find that their gender identity or sexual orientation caused them to experience financial challenges.
The following are some of the personal finances challenges faced by members of the LGBT community, which may help financial planners as well as LGBT community better work together to increase success in tackling them.
What if we die tomorrow? Insurance is the mechanism that helps safeguard our loved ones in the event of our death. The following are common obstacles that the LGBT community face when it comes to insurance.
Firstly, there is a concern from some applicants when an insurance application form requests for HIV tests to be done. Hence, a detailed understanding on the insurance questionnaires is important to ensure the LGBT community understand their rights and coverages under any policy contracts.
The second issue is more profound as it revolves around rights of a life partner for those of the same biological sex. By law, legal marriage is not an option for these individuals. Any individual who passed on not married, their immediate family will be the beneficiaries under the Distribution Act 1965. Their parents will be the legal receiver of the insurance proceed under the Trust Act 2013. This situation creates a dilemma for those who want to leave a legacy to their life partner in the event of death.
Unfortunately, this also may lead to the same people ending up not getting any or enough insurance protection for a greater purpose, which was a very sad situation. For example, some don’t even take up any insurance protection to ensure their fixed assets are protected. The issue that they are dealing are the outstanding balance of the loan with banks will not be paid upon death of the property owner.
Therefore, whether the LGBT individual is currently single or attached, there should be a discussion about expecting joint financial planning once there is a committed life partner. That way, they are far more likely to see the need and take action on protecting them with proper and suitable insurance policies and better understand what options are available for their unique situation.
The next consideration is what retirement lifestyle that you would like to adopt. As members of the LGBT community, a detailed retirement planning is important to ensure the assets accumulated can either generate passive income to fund retirement, or carefully liquidate assets at certain time to ensure funding is always there.
Like for other retirees, a LGBT people need to consider their expected retirement lifestyle.
The area to pay attention will be on personal expenses, family expenses and retirement planning. As there are different methods to calculate for retirement planning, a good and prudent assets allocation to includes inflation, future price hikes as well as where they stay determine the sustainability of their retirement fund.
A LGBT people may need to consider proper assets allocation, lifestyle expenses, and potential passive income to ensure not to make financial mistakes at their retirement. The usual target for those scams is retiree which stay singled as they are easily felt the affection from people that they trust.
Medical coverage is an important element for personal finances in the LGBT community as they are likely to stay single. Thus, ensuring a proper, meaningfully sufficient protection over arising medical cost for future is another important consideration.
No one would want to have to borrow from a friend or family member to pay for cost of their medical treatment. Thus, a comprehensive medical coverage ensuring no financial difficulties which may put pressure on the other planning. The consideration is to ensure sufficient medical coverage with suitable and sufficient limit based on the financial capability.
Many LGBT people may still face hostility even within their own family over their identity. It is more likely that the surviving spouse or partner may face unwelcomed involvement from unfriendly relatives. This likely to happen during some difficult time such as hospitalization or upon passing of one partner. Some legal documents such as power of attorney, trust and will are done and available to execute the couple wishes on their property and other assets designation.
A will writing can help to designate the assets accumulated over the years and help solving the issues of the surviving partner to be turned down by the immediate families and unfriendly relatives. Thus, it provides some form of legal protection over the rights for the surviving partner to claim the estate from the deceased, which may be a joint effort over time and money on those assets for the couple.
A trust can be set up to ensure surviving partner is protected with proper instructions set up during lifetime by the deceased. However, that depend on the complicity of the total assets holding in order not to complicate the whole distribution process.
A financial planner role is extremely important to help review and access the changes for the wishes and update. This will bring peace of mind for the settlor or the testator can have a clear understanding on their legal rights to protect their surviving partner and families.
Aging & Long-term Care
There is a need for LGBT individuals to plan and consider a home for their old age to ensure long-term care-taking can be provided as needed. This is especially important for those who stay single or intend to live alone.
Having a plan to finance their old age (not just retirement) is vital to ensure they do not fall into financial constraints. Giving serious thought on how to manage aging and long-term care with the available assets is critical to ensure deployment of such benefits when needed.
As financial planner, we really welcome solutions continue to be designed for this purpose. The recent announcement by CAGARMAS, which is the National Mortgage Corporation of Malaysia to launch Reversed Mortgage Programs can be a solution in time to help not only the LGBT community, but all old folks who own properties and stay single. This is a way to secure a fixed monthly income throughout your retirement years.
Whichever plan you choose to help to take care of your old age needs, it is important to have the discussion and carefully deploy the plans to ensure the sustainability of such plans.
As human beings, it is a part of civilized behavior to look out for one another. A licensed financial planner should be unbiased and not influenced by stigma when it comes to providing professional financial planning. As such, members of the LGBT community should seek out licensed professionals who will treat them with respect and create holistic plans that suit their needs well.
What other financial considerations that is important for LGBT community?
About the Author: Kian Ng Kian Ng is a Certified Financial Planner (CFP) under the Financial Planner Association of Malaysian (FPAM). He also holds a Capital Market Services Representative License (CMSRL) and Financial Advisor Representative License (FAR) from Securities of Commission (SC) & Bank Negara Malaysia (BNM). Kian joined the financial industry back in 2007, starting with providing singular solutions in unit trust investments. Since seeking holistic solutions to craft total financial solutions to suit his clients' needs, he is now a licensed Financial Planner with Wealth Vantage Advisory (WVA).