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Same-sex marriage and its impact on financial fitness

February 23rd, 2013 by

Understanding the unique financial challenges faced by gay and lesbian couples


On July 20, 2005, Canada became the fourth country in the world to legalize same-sex marriage. Today, more than 64,757 couples identify themselves as same-sex, according to 2011 Census data from Statistics Canada. Of these, 21,015 couples are legally married and some 43,560 are recognized as same-sex common-law partners.

While traditional marriages between a man and a woman are on the decline, same-sex unions have skyrocketed, increasing a staggering 181.5% since 2006. As a result, the demand for specialized financial services that cater to this growing demographic has also increased.

As more gay and lesbian couples strive to plan their financial futures together, advisors and financial institutions from coast-to-coast are taking a more open and diversified approach to financial planning, in an attempt to bring more so-called "pink dollars" in the door.

The changing face of financial planning in Canada

A recent report from the Financial Planning Association shows that, while advisors are anxious to serve the growing LGBT population, traditional financial planning software isn't designed to account for many of the factors that impact the financial fitness of same-sex couples.

According to the report:

  • 55% of advisors want software that will give them accurate calculation of benefits for non-spouse beneficiaries for pension entitlements.
  • 52% of advisors want software to allow for different drawdown percentages on a couple’s aggregated portfolio. 
  • 50% of advisors want software that models the tax impact in estate planning for unmarried and same-sex couples.

The push for better same-sex financial planning comes at a crucial time. When it comes to wealth management, LGBT couples are now emerging as a key demographic given their relatively high levels of disposable income. Statistically, LGBT couples have higher education, higher income levels, and greater disposable income.

With that said, many lesbian, gay, bisexual or transgendered couples still shy away from discussing their personal and financial lives with people outside of their community. More concerning, some LGBT individuals will purposefully omit information that could impact their financial future when speaking with their advisor or filing their annual tax claim.  

At the end of the day, same-sex couples need to approach their financial future openly and honestly, much like the approach all couples should adopt. Many of the pitfalls encountered by same-sex couples can be avoided with proper estate planning and diligent long-term financial management.

Understanding the law

It's worth noting that changes in both federal and provincial laws now give people in same-sex relationships the same status as people in traditional male/female relationships. Furthermore, the Modernization of Benefits and Obligations Act changed 68 federal laws, including the Income Tax Act, the Canada Pension Plan and the Old Age Security Act in order to ensure that:

  • Same-sex married spouses have the same benefits and obligations as opposite-sex married spouses. 
  • Same-sex common-law spouses have the same benefits and obligations as opposite-sex common-law spouses
  • Same-sex spouses and partners have the same access as other Canadian couples to social benefits programs they contribute to. 
  • Federal laws use the term “common-law partner” to describe common-law spouses, and generally require that you must have lived together in a marriage-like relationship for at least one year to qualify. Only couples that are married are considered “spouses” under these federal laws.

From spousal and child support to adoption and pension benefits, same-sex couples are entitled to the same rights as male/female couples.

From a tax perspective, same-sex couples are on equal footing with their heterosexual counterparts. This means that partners – married or common-law, same-sex or opposite-sex – are entitled to the same benefits and subject to the same obligations. Indeed, you and your partner have the ability to:

  • Claim a tax credit for a financially dependent partner.
  • Transfer credits and amounts to a partner.
  • Maximize tax returns by combining credits.
  • Take advantage of several income splitting strategies.

Don't put off planning

Whether you're legally married to your partner or living in a common-law relationship, don't put off planning for your financial future. Firstly, make sure you have a legal will. A valid will is designed to help the surviving partner, same-sex or opposite-sex, avoid costly probate and legal battles. Ensure that it addresses all of your financial obligations, including the ownership of assets, like deposit accounts, private pensions, insurance benefits, and the guardianship of any children.

A durable power of attorney will also help to protect your rights down the road. If ever you or your partner falls ill, a power of attorney will grant you the legal right to make decisions on his or her behalf.

Finally, it pays to hire a money manager who understands your unique situation. A number of financial institutions in Canada have developed arms dedicated to servicing the LGBT community. The Bank of Montreal and TD Waterhouse are two of the larger providers, while Hamilton-based Reeves Financial Services has long catered to the specific wealth management and estate planning needs of same-sex couples. Assiniboine Credit Union in Winnipeg is similarly recognized for their LGBT services.

A long life together

Marriage, whether it's between a man and a woman, a woman and a woman, or a man and a man, can be a wonderful experience. Ensure that you're ready for a long life together by reviewing applicable tax, family, and estate law implications before you tie the knot. Taking the time to plan today will go a long way toward creating a sound financial base for you and your partner as you embark on your life together.


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