Same-sex couples need to be aware of differences in financial plans

TORONTO - Over the past decade, major inroads have been made into broadening the rights of same-sex couples in Canada, but when it comes down to financial planning some advisers say important differences remain.

Often it comes down to how same-sex couples manage their long-term financial goals and whether they have really addressed what would happen if one partner was to die without the proper estate documents in place.

Those potential pitfalls can usually be avoided if they're anticipated and a financial plan is etched out, but sometimes that's the hardest part, said Julia Chung, a branch manager at the Bank of Montreal in downtown Toronto.

Some lesbian, gay, transgendered or bisexual individuals - and even long-term couples - don't like to discuss their personal lives with outsiders, or they omit crucial details that could impact their financial futures. Examples range from children borne from a previous relationship to the hopes of having children in their current one.

"You find out afterwards, and then the (financial) plan that you thought was for one goal doesn't make sense any more," Chung said.

"It tends to be more of an issue outside of Toronto and in smaller towns. You have to create that environment where they're willing to open up."

Creating that open dialogue has been one of the greatest challenges for many same-sex couples and their financial and legal advisers.

Catherine Watson, an estate planning lawyer at Boyne Clarke Barristers in Halifax, said that Canadian couples typically review their finances around the time they tie the knot. Those triggers are relatively new in same-sex relationships, since the Canadian government only passed the Civil Marriage Act in 2005.

Watson said many same-sex couples choose to stay in long-term relationships, but not marry their partner, which sometimes means that those in-depth financial conversations are set aside.

"It's very important to have your documentation in place," Watson said.

"As soon as you decide that person is the one you care about, and you want to make sure they're protected... that's when you do it."

Watson said one of the biggest misconceptions same-sex couples make is assuming that common law relationships fall in line with marriages in every legal respect.

From a tax perspective, the government treats benefits the same for marriages and common law relationships, but will and estate planning is an entirely different thing.

And some provinces treat common-law relationships differently, such as in Nova Scotia, where the relationship won't be recognized if the partner who dies never established a will or power of attorney, which means the survivor can't claim their partner's assets.

Watson said that's why it's important to have wills in place because unless the common-law couple lists their partners are beneficiaries, the government will defer the estate to a blood relative. Similar laws stand in other provinces like P.E.I. and Quebec.

TD Waterhouse vice-president Patricia Lovett-Reid said preparing a will and keeping it updated is one of the most important aspects of a financial plan, no matter which province you live in.

"I've seen it where family members may be unwilling to accept the partner as a beneficiary," she said.

"Family members who are excluded from a will... may challenge the validity. Make sure your wills are... updated, because marriage commonly invalidates a will made prior to the marriage."

Lovett-Reid said that in general, same-sex and opposite-sex couples in common law relationships share similar footing when it comes to the government, but that a dialogue still needs to be struck.

"The obvious move is sitting down and developing a plan to reflect your family's situation," she said.

"Really, it's more about the emotional side."