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Financial Planning Is A Challenge for LGBTQ Couples: What They Can Do

ICICI Securities 6 Mins 08 Jul 2022
  • Since LGBTQ+ marriages are not legally recognised, succession planning can be a challenge
  • Making combined accounts and investments may not be possible for them
  • They should be careful about nominations while investing
  • Nominations should be clearly mentioned in the Will or Trust, wherever applicable
  • Individual health insurance covers can provide basic financial protection

The financial industry is not geared towards catering the needs of LGBTQ+ (lesbian, gay, bisexual, and transgender, questioning and others) couples. This is largely because their relations are not legally recognised by the Indian government. All this makes financial planning a huge challenge for these couples.

No Place For The Community

The biggest roadblock they face is succession planning. It is not simple for LGBTQ+ couples to provide protection to their partners by bequeathing their assets.

In India, different religions are governed by different succession laws, and most of them have provisions that benefit relationships recognised by law.

For example, the Hindu Succession Act is applicable to the Hindu community. Similarly, there is a separate law for the Muslim community in India.

None of these laws cover the LGBTQ+ community or any individual with a different sexual orientation other than heterosexual individuals. Moreover, even inheriting property may be an issue for the community as most laws cover males and females for the purpose.

On the financial planning front, most banks of institutions do not allow LGBTQ+ couples to open joint accounts or investments. This means they are unable to make a wholesome plan to achieve goals.

While certain taxation benefits are available to heterosexual couples, LGBTQ+ couples don’t enjoy that either. For instance, tax-free gifts can be exchanged between heterosexual couples, but not between LGBTQ+ couples.

What’s The Way Out? Legally speaking, there’s not much that can be done. However, LGBTQ+ couples should ensure they have a proper Will or a Trust that assigns the assets to their surviving partner, wherever possible.

Smart Solutions

It is important to create individual safety nets because of the challenges.

Since LGBTQ+ couples cannot open joint accounts or make combined investments in most instruments, they need to be financially independent individually. Investments should be equally distributed to support one partner in the event of the other partner’s demise. Even then, it should be ensured that nominations are done carefully and are also mentioned specifically in the individual’s Will.  

It is also important to have a robust health insurance cover. There are several cases, where individuals opt for surgeries that can cost a lot and throw finances out of gear. Take individual policies with adequate cover, keeping in mind the future expenses. While doing so, it is important to look at the exclusions in the policy and check what all is covered.

Also, check with your employer about life and health insurance covers for partners. There are many companies that specify a partner and not necessarily husband or wife. Ensure you maximize the benefits that your employer provides in terms of financial security for your partner.

It is important for LGBTQ+ couples to consult legal as well as financial advisors to put their financial matters in order.

Disclaimer: ICICI Securities Ltd.( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400025, India, Tel No:- 022 - 2288 2460, 022 - 2288 2470. I-Sec is a Member of National Stock Exchange of India Ltd (Member Code:-07730) and BSE Ltd (Member Code :103) and having SEBI registration no. INZ000183631. Name of the Compliance officer (broking): Mr. Anoop Goyal, Contact number: 022-40701000, E-mail address: complianceofficer@icicisecurities.com. Investment in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein above shall not be considered as an invitation or persuasion to trade or invest.  I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon.

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