A financial plan for gay couples

[caption id=“attachment_457139” align=“alignleft” width=“380”] Reuters.[/caption]

Your Life: You are a same-sex couple and happy to be one. But your family may be uncomfortable with your sexual preferences. And so while both of you may want to live under one roof, and hold joint assets together like many heterosexual couples do, it’s easier said than done - at least in India today. Even if life is business-as-usually on most fronts, certain perceptions of society and legal restrictions are a constant battle for you. For instance, getting a joint home loan is nearly impossible. Plus there is the constant fear about how your partner will be treated - by family, by others - if you aren’t around.

Here are a few steps you could consider to address the issues.

First the regulars: First, build an emergency fund of six months’ normal expenses. Next, fix a few financial goals (short means upto 3 years, medium 3-5 years, long 20 years). Make a budget and plan expenses, savings and investments around those goals.

More from Investing

MSMEs are breaking the traditional convention. Look who’s funding them Scale-up your startup without an investor! Here’s how

Life Insurance: Buy a term life insurance policy with cover equal to 12-15 times your annual expenses, or 8-10 times your annual income plus debt obligations. If both partners are working, you will need two policies. If one is working, only the working partner needs the policy. Rahul Aggarwal, CEO, Optima Insurance Brokers, says, “Even if you could manage to nominate the policy to your partner. But there is a good possibility that your blood relatives will contest it in court on the ground that yours is not a legally recognised relationship.” Consulting a good lawyer will ensure that this is avoided by creating an iron-clad will in addition. In a will, you can leave anything to anybody as long as you are of sound mind.

Medical Insurance: Suresh Sadagopan, Mumbai-based, Certified Financial Planner, says: “Buy two separate medical policies.” A family floater won’t work for you, even if it’s cheaper. Instead make sure that you get an individual medical cover of at least Rs 3-5 lakh or more. Agrawal says, “If you are in the higher income bracket and around 45 years of age and an urbanite, a Rs 10 lakh medical policy should be okay.” Also, do not ignore buying a serious disease disability policy, and an accidental death-cum-disability insurance. Also keep in mind that no policy covers STDs in India today.

Investments: These should be according to your risk profile and financial goals. Have a healthy mix of debts instruments like fixed deposits, bonds, equity-oriented mutual funds, balanced funds and like. While researching this story we found that many banks were willing to let you (as same sex couples) open savings accounts, FDs and other investments on a joint basis, or at least allow nominating your partner. But, when it comes to giving a joint loan, banks say no. Your bank may cite legal reasons, but the basic idea behind putting these restrictions is that they fear in case your relationship does not last, and some dispute arises between the two, their EMIs will stop.

Harsh Roongta, CEO, Apnapaisa.com, says, “One way for same-sex couples to buy a home is by actually buying two smaller flats side by side. Take two separate loans, and you can get rid of the wall in between.” That way, even though the finances are separate, you could be able to share a roof.

Retirement: The same old, same old, strategy of Employees’ Provident Fund, the Public Provident Fund, and the National Pension Scheme works well.

Estate Planning: Sadagopan says “Estate planning is the most important bit for same-sex couples.” Your may spend you whole life together but, when you head up there, a family member takes charge of your properties and assets. Sadagopan says it is important to make a will. “Even better, make a trust.” While making a will ensure that you have two witnesses as well as a family doctor present. This will avoid further complications. By law, registering a will is not compulsory in India, but we suggest you do so. Advocate Basil Menezes of the Mumbai Hight Court says, “There is no foolproof method, both will and trust can be challenged by relatives in court.” He suggests, those with business and complex assets should make a trust.

Focusing on wealth creation in the working years, having each other as nominees for all assets and good estate planning should be your financial plan. Of course, you can’t ignore risk management with adequate insurance.

Though today the Supreme Court says that gay sex is illegal, someday we hope the laws will finally catch up with the reality of same-sex couples. But in the meanwhile, make sure you protect yourself with the right advice on financial planning.

Disclaimer: The story aims to help readers with their money related decisions and choices. Each individual has his or her own financial situation and circumstance. We recommend that you consult a Certified Financial Planner before you buy a financial product or service.