Get With The Plan: March 1, 2009

Valerie and Ellen are a same-sex couple, and they know that means unique financial challenges. Still, their goals are like any other couple’s.

‘‘In the next three to five years, we may be looking to move to the Midwest to take care of Ellen’s aging parents,’’ says Valerie, 45. ‘‘What do we need to do now to be prepared for our future?’’

The couple, whose names have been changed, have not yet taken any ‘‘official action,’’ such as a domestic partnership or a civil union because they fear it could have a negative effect on Ellen’s benefits. Disabled, Ellen receives Social Security and Medicare.

Valerie has saved $62,475 in 401(k) plans, $13,047 in IRAs, $97,482 in a brokerage account, $27,331 in mutual funds, $46,000 in an annuity, $52,387 in money markets and $2,636 in checking. Ellen has set aside $4,763 in IRAs, $4,110 in mutual funds, $58,139 in an annuity, $159,987 in money markets and $15,724 in checking. Jointly, they have $31,064 in CDs and $9,333 in checking, and their only debt is the mortgage on the home they own together. If Valerie works two more years, she’ll receive a $20,000 annual pension and keep full medical benefits.

The Star-Ledger asked Jody D’Agostini, a certified financial planner with AXA Advisors in Morristown, to help Valerie and Ellen prepare for the future.

‘‘It is even more imperative to do adequate financial planning if you are a lesbian or gay couple, as the laws of most states, as well as most financial services products, do not provide for this unique relationship,’’ she says.

D’Agostini says it’s essential for couples to plan in advance, share in each other’s assets during their lifetimes and arrange for the proper transfer of assets upon death.

New Jersey doesn’t extend full legal rights to gay couples: they are not given the unlimited marital deduction at death, so the transfer of assets, including retirement accounts, requires more planning to avoid the taxes that would be due upon the passing of one of the partners.

D’Agostini says Valerie and Ellen have lived well within their means, but there are still steps they can take to improve their situation. Valerie has a will naming Ellen as beneficiary, but Ellen doesn’t have one. If Ellen dies without a valid will, state law would determine the disposition of her property.

‘‘Even if family members would be willing to transfer property to your partner, there could be significant gift tax consequences,’’ D’Agostini says.

She says the best plan would be to own property as ‘‘a joint tenant with a right of survivorship,’’ as they’ve done with their home. This will keep the property out of probate. To make sure they cover it all, they should visit an estate attorney. It’s also important they both have Medical Directives or Medical Powers of Attorney to ensure they will be able to make medical decisions on each oth- er’s behalf.

‘‘Without this, they might not even be allowed admittance in the hospital room in the event of an accident or disability,’’ D’Agostini says, adding they also need Durable Powers of Attorney so they can make legal and financial decisions on each other’s behalf.

Both Valerie and Ellen have many investment accounts in multiple places. D’Agostini suggests they consolidate accounts and reposition over time to create a portfolio that considers their timeline and risk tolerance. Today, they’re not well-diversified or in line with their moderate risk tolerance profiles.

They want to accumulate eight months of an emergency fund — more than the recommended three to six months. D’Agostini says that move will further enable them to transition themselves into their new life in the Midwest should it take some time for Valerie to find a new job.

‘‘They already have accomplished this goal, so I would look to invest any future savings according to their risk tolerance to achieve a higher rate of return and help them enjoy a more comfortable retirement,’’ she says.

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