Whether single or in a relationship, lesbians have similar investing goals, yet different challenges. As a financial advisor with experience in domestic partner planning, I am often reminded that the portfolios of my gay clients look no different than the portfolios of my straight clients. The underlying investment vehicles of stocks, bonds, mutual funds, alternative investments and more are basically the same. The differences lay in the personalized planning that is required to “create” our families so that they best reflect our lives.
As many of us are looking to close out our financial books for the end of this fiscal year, I wanted to give a quick tip on tax planning for domestic partners. The requirement to file as two single taxpayers can create tax-reduction opportunities when partners are in different federal income-tax brackets. Ideally, the lower-bracket partner should report investment income and capital gains while the higher-bracket partner should claim deductions.
There are restrictions with this income- and deduction-shifting strategy, however. Taxpayers cannot separate an asset from its income; in other words, the taxpayer who owns the asset is responsible for the tax on its income. Likewise, domestic partners can’t arbitrarily decide which person will claim a particular deduction. Only the taxpayer who incurred the deductible expense can take it.
As a result, the higher-bracket partner must transfer ownership of the asset to the lower-bracket partner in order to transfer an asset’s income, which means the gift-tax regulations come in to play. Current law allows a donor (i.e., the gift giver) to give
another person (who is not his or her spouse) a maximum of $12,000 per calendar year without incurring gift taxes. An amount in excess of $12,000 is considered a taxable gift that reduces the donor’s lifetime estate-tax exclusion.
It is unique scenarios such as these that remind me what a privilege it is to work for a global leader in wealth management that takes gay and lesbian issues so seriously. UBS Financial Services continues to receive the highest rankings from the Human Rights Campaign Corporate Equality Index, provides domestic partner benefits to all employees, and has a very active organization of out employees and our allies called UBS Pride. It is because of this dedication to our issues that I chose to become an advisor with UBS.
I bought my first stock when I was 18 years old, which I still hold to this day. As a finance/economics major and student government president at the University of Alabama, I learned about this stock during a haircut my first year on campus. Throughout the years, my investing research (and haircuts) became more refined. I first moved to Austin in 1991 to get my master’s degree in business at the University of Texas and was one of only 15 students accepted to this top-ranked MBA program without prior work experience. After graduation, I returned to my hometown of New Orleans knowing that I would one day be back in Austin. Well, it took me 13 years and a hurricane, but I am very happy to be back.
In the coming months, this Gain column will cover financial matters while always keeping an eye on the issues and angles that are unique to the lesbian community. Expect articles on the fundamentals of investing, such as asset allocation and goal planning, to more advanced topics like estate planning, tax strategies, real estate investments and medical concerns.
My goal is to provide our readers with valuable and practical information. I look forward to hearing from the community and would very much like to get feedback on the issues the public would most like to see covered. I have heard the following analogy about domestic partner planning: Marriage is like the freeway and domestic partnership is like the toll road. Partners must realize that our country’s structure does not recognize domestic partners as one unit and must plan each step we take.