A guide to pink finance

A number of my good friends are gay. And I love them.

They are the life of the party, the fiercest and most loyal friends, and some of the smartest and most creative people. They help family members, often providing for the needs of their aging parents, or even contributing to the education of their siblings and other relatives.

In our society at large, they leave a lasting impact at every level.

They do, however, have unique needs, goals, and aspirations. Given these, the pink sector deserves special financial planning of their own: one that is relevant and reflective of their circumstances and choices. (READ: The untapped power of the ‘pink peso’)

In the US, there is a space in the financial planning practice for homosexuals and even same-sex couples, as these are realities that should be considered as well. With their recent passage of same-sex marriage, it has significantly altered the legal landscape in terms of insurance, taxation, and estate planning, among others.

Here in the Philippines, the legal terrain is different and as such, the landscape should be traversed in a different manner. Nonetheless, this should not be the end of the game, as their unique needs still can be addressed.

As one of my good friends, Fitz Villafuerte, puts it, financial planning, after all, is a profession. And just like medicine and law, it does, and should, tailor towards one’s sexual orientation, gender preference or identity. It should cater to the pink sector as they too have their own needs, dreams, and aspirations.

What then are the financial planning concerns of ‘pink finance?’

Insurance

One recurring theme that comes out whenever I talk to some of my gay friends is insurance – who can be the beneficiary when it comes to their insurance policies?

In our country, there is no hard-fast rule yet as regards insurance among same-sex couples. But foremost, the concept of “Insurable Interest” should be heavily considered in this regard. Industry practice is that insurance beneficiaries are those that have an “insurable interest” in a person—those that stand to lose something (primarily financially) over that person’s death.

Normally, it is the family members or closest of kin that are made the beneficiaries of insurance policies. Naming the partner as a beneficiary of the insurance policy, in this regard, is not common practice, though there have been cases where this has been approved.

In light of this, trusts can be explored as a device to manage assets according to one’s will. It is recommended to have a team approach on this one: a lawyer, an insurance expert and a financial planner so you can leverage on their combined expertise in managing these concerns.

Long-term health care

Some may grow old with their family members, some may have a partner at hand, while some may have adopted kids who can take care of them; but some may end up living alone. Whatever the set-up is, long-term healthcare—most especially in the twilight years—should be prepared for.

Owning hospital stocks will prove very useful, most especially in getting discounts and health benefits at the later stages on life when insurance policies can expire and will not cover a person due to age restrictions.

It can also be a source of benefits and savings for the beneficiaries of the stockholder’s family members as they, too, can enjoy it.

Supplemental Health Insurance and Health Plans are also recommended to ensure proper health support during retirement years.

Retirement

Retirement pay as well as SSS pension, when computed in today’s value, would not be enough to cover for retirement expenses, not to mention the increases in health care, among others. 

In contrast to married couples who can supplement each other’s retirement expenses, some people in the pink sector may have to live alone and fend for themselves during such a stage.

That does not change whether they live with their relatives—in fact, this can also add to their expenses, supporting others as well.

Having your own Supplemental Retirement Fund will greatly ease the fear and anxiety that you will not have enough money to cover for your needs—or be a an added cost to others, in turn.

Preparing a Special and Durable Powers of Attorney would be recommended as well, so that the assigned persons can act on their behalf in the event of incapacitation, whether physically or mentally.

It is also recommended that critical personal documents like insurance policies, wills, contracts, land titles, etc. be safekept in one box or envelope and its location entrusted to one person so that in the event of emergencies, these documents can be easily retrieved

Cash flow

Those who belong to the pink sector potentially may have less expenses, having less obligations in life (no tuition payments, no need for large insurances, no need for a large family home).

Though they may support some relatives or persons as they generously choose, having less obligations means having more opportunities to save, invest, and secure their future goals. Yes, pampering oneself is ok, but not at the expense of your future.

Tax and estate planning

This is one sensitive issue affecting the sector, but suffice it is to say that this should be done with experts at hand.

For one, personal tax exemptions are available for dependents of married couples, but this is not applicable for persons that some members of the pink sector support.

A more sensitive matter is the management of the Estate, in case that the person dies—how much can s/he leave to his/her partner and to what extent, considering that family members are the primary beneficiaries of the Estate?

A will, trusts, and other legal devices can be used in this regard but then again, it is best to seek legal advice.

These concerns are just the tip of the iceberg and are by no means exhaustive. It is not definitive manual on the topic.

It still does not include the other members of the LGBT spectrum, as I have yet to familiarize myself to their needs and circumstances. But it is sufficient to say that they have their own unique needs as well, and these should be recognized by the financial planning industry.

It is not a manual, but it’s a start. – Rappler.com

 

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Rienzie P. Biolena is a registered financial planner of RFP Philippines, a professional group of financial planners in the country. To learn more about RFP, you may email info@rfp.ph.

Rienzie is also an accredited investment fiduciary of Pennsylvania-based fi360 and an international member of the Financial Planning Association, the largest association of financial planners in the US. You may reach Rienzie at rienzie.biolena@gmail.com, his Facebook account or Twitter @rbiolena.

Man holding piggy bank image via Shutterstock