Beyond Ozzie and Harriet

Clearing some of the financial hurdles facing nontraditional families

By Chris Farrell

A few clicks of a television remote reveal a lot about the American family in 2009. In place of the images portrayed in the 1950s shows Father Knows Best and The Adventures of Ozzie and Harriet, we now have The New Adventures of Old Christine, which follows the travails of a single mother, and Modern Family, which includes a male couple who adopt a baby girl from Vietnam.

America is a more diverse country, and financial planning is evolving to meet the needs of a more disparate group of clients. Many basic concerns, such as the need to start saving early for retirement, are the same for traditional and less conventional couples. Other problems are quite different, including the treatment of Social Security payments. Here's how some couples are addressing crucial financial issues.

GAY PARTNERS

Gay couples across the country face financial planning challenges, especially since state laws treat gay marriage so differently. For instance, like any married couple, David Hamilton and Bernie Erickson want to protect each other financially in case of one of them dies or gets seriously ill. Hamilton, a music professor at Concordia College in Moorhead, Minn., and artistic director of the Fargo-Moorhead Opera, lives in Fargo, N.D. His partner is a vice-president for Macy's (M) in Fargo. They married in Canada in 2006, but North Dakota doesn't recognize gay marriage. The two own a home together. They also carry life insurance on each other and for children they have from previous marriages, whom they want to protect as well.

To deal with situations like this, gay couples typically rely on trusts more than conventional couples do. There aren't real tax advantages, but it's a legal device that protects the partners and is hard for family members to contest. Hamilton and Erickson have hired an attorney to draw up a trust for each of them, which will include their home, vehicle, and other assets. "It's a more secure way of making sure our wishes will be followed," says Hamilton.

Another major financial and emotional issue in the gay community involves income and asset inequality within marriage. A partner with little income and assets is highly vulnerable. For instance, Social Security doesn't recognize gay marriage. Neither does federal law. So in a gay marriage, if the surviving spouse is the low earner, he or she doesn't benefit from the high earner's Social Security payments. If a high-earning woman and a low-earning man divorce after being married for more than 10 years, the divorced man (if he doesn't remarry) will benefit from his former spouse's higher Social Security payments.

A common solution is for the wealthier partner to gift the maximum every year to the spouse. (For 2010, that's $13,000.) Over time these irrevocable gifts can allow the less-well-off partner to build substantial assets. "I really push clients to think through sharing risk equally," says Ann Viitala, a Minneapolis attorney who specializes in working with nontraditional families.

SINGLE MOM

Many single moms struggle financially, even if they get child support and alimony. "Finances are so far down the list of things to do," says Julie Schatz, a certified financial planner (CFP) in Menlo Park, Calif. "It's always an 11th-hour scramble with money."

Rachel Swardson-Wenham couldn't agree more. She had her third child and soon after launched a business with $17,000 in 2008—just as her husband left her. She lost her home to foreclosure and moved into a much smaller place. Money is tight. She sold her wedding ring to meet expenses for her business, Go Home Gorgeous, which offers a spa-type experience for women in the hospital after giving birth.

For single parents, life insurance is the big priority. A term policy that lasts 15 to 20 years or until the children are grown is more than adequate.

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