As of 2019, nearly 1 million US households consist of a same-sex couple, and 58% of these couples are married. Thanks to the Marriage Equality Act, all states must recognize same-sex marriages and the rights that come with them, including life insurance benefits. Even if you’re not married, life insurance plays a vital role in ensuring that you or your partner is protected in the event of a passing.
Here are 4 amazing benefits of life insurance for same-sex couples:
Life Insurance Can Survive an Overturned Ruling
According to Money.com, marriage equality gives same-sex couples the same financial rights that heterosexual couples enjoy, including:
- Spousal benefits from social security
- The option to file joint federal tax returns
- The transfer of property without paying federal estate taxes
- Survivorship benefits from pension and other retirement plans
- Default decision-making abilities
- Health insurance benefits
While support for same-sex marriage is at an all-time high, 2020 reminds us that anything is possible. Though unlikely, if our conversative-leaning Supreme Court ever decides to overturn their ruling, these benefits could all disappear.
Life insurance provides LGBTQ couples an added layer of protection regardless of how state or federal law views same-sex marriage in the future. To secure this protection, the primary beneficiary of an insurance policy must have an “insurable interest.” Insurable interest is a type of investment that protects you from being subject to a financial loss. Even if your marriage isn’t recognized, insurable interest is.
Life Insurance Benefits for Unmarried Couples
Insurable interest extends to unmarried couple and domestic partners as well. Since unmarried couples lack some of the rights married couples enjoy, insurance interest is a vital component to your security. Unmarried couples don’t have presumed insurable interests, so they have to “prove” it with documents like:
- A jointly owned home or business
- A lease with you and your partner’s names on it
- Loans taken in both you and your partner’s names
- A joint parental responsibility agreement
As an unmarried couple, you also need to consider extra planning in the event of the unthinkable happening. This includes creating a will.
Even if you’re in a domestic partnership, you’re not automatically given survivor rights under Social Security or other tax benefits that apply to married couples. To get these, you and your partner should create an irrevocable life insurance trust (ILIT). According to The Balance, an ILIT is “a type of living trust that’s specifically set up to own a life insurance policy.” With an ILIT, your death benefit will be given to your partner. It’s income tax-free and won’t be included in your taxable estate.
Purchasing Individual Insurance is Easier
Married same-sex couples can purchase individual life insurance on one another without having to worry about proving insurable interest. This allows same-sex married couples to enjoy the benefits of the unlimited estate tax marital deduction. This deduction lets you transfer your assets to your partner without incurring federal estate taxes in the event of your passing.
Same-sex married couples can also transfer any unused federal estate tax exemption at death, a right they didn’t have before the Marriage Equality Act.
Retirement Planning is More Secure
Some estimates suggest that the average cost of retirement is over $732,000 per person. The amount varies greatly based on your circumstances, including your lifestyle and location.
If you pass before you retire, your partner’s standard of living will likely be impacted. If you’re paying your mortgage and bills equally, your partner will have to find ways to cover your half. Even if they didn’t work, but you have kids together or are caring for an elderly parent, your partner will have to pay for help.
With term or permanent life insurance benefits, you can protect your partner by providing a death benefit to cover your income, pay off debts, and get the help they need.
Final Thoughts on Same-Sex Couple Life Insurance Benefits
Everyone has the right to financially protect their loved ones. Purchasing life insurance is one of the most effective ways to do so, and it’s easier now more than ever. Make sure your loved ones are taken care of when you’re gone. Apply for a policy today.
One last thing: Happy Pride!
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