Please note-

*Please note- Your browser preferences must be set to 'allow 3rd party cookies' in order to comment in our diaries.

Saturday, March 26, 2011

The Extra Hoops Gay Parents Must Jump Through

Amanda, right, & Kay Shelton with Maya, 3, & Myles, 8 months.
Protecting Kay's rights as a parent takes careful planning.

BEVERLY HILLS, Mich. - MOST pregnant women avoid long road trips right before their due date. But Amanda and Kay Shelton, a lesbian couple in Beverly Hills, Mich., contemplated traveling more than 600 miles to New Jersey so Amanda could give birth in a state where their baby could have two “legal” mothers.
Michigan, along with several others, doesn’t allow same-sex couples to perform second-parent adoptions, which allow one partner to adopt the other’s biological or adopted children. They never did make the long trip, which would have allowed Kay to begin adoption proceedings immediately. “It was not terribly practical, so we were kind of in a difficult spot,” said Amanda, 34.
The inability to adopt is one of many legal and financial inequalities the Sheltons face because their state and the federal government do not recognize their union, which they affirmed in a ceremony almost 11 years ago.
Though Kay, 37, is known as “mama” to their children — Maya is 3, Myles, 8 months — the state government still views her as a legal stranger. So Amanda, who works as a commercial litigator for a law firm in Detroit, must sign a notarized document every six months that gives Kay, who stays home with the children, parental consent. But they have often wondered if there was more they could do to strengthen those legal ties, or to improve their financial situation. So we asked three experts in same-sex issues — a lawyer, a financial planner and an accountant — for advice.
LEGAL DOCUMENTS The Sheltons say their top priority is their children. If Amanda were unable to care for them, Kay said, “I would not want them missing from me, even for a day.”
Michigan recognizes second-parent adoptions performed elsewhere, but that would require establishing residency in a state where Kay could adopt. That can take more than a year.
Several documents are available to create as many rights as possible for the couple, according to Mary Kator, chief counsel at the Rainbow Law Center, a firm in Southfield, Mich. Without the documents, Kay, a former auto mechanic, is vulnerable — especially if the couple ever splits up.
Instead of relying on the renewable parental authority document, she suggested a “power of attorney for parental authority,” which does not expire. It would allow Kay to act on the children’s behalf, whether it was for a trip to the doctor’s office or a visit with a teacher. “It has never been challenged and as a practical matter, it works,” Ms. Kator said.
Ms. Kator also suggested a parental appointment of guardian, which would designate Kay as the children’s guardian in the event that Amanda died or became incapacitated, giving Kay priority over any blood relatives.
They also need to update their wills: Amanda should appoint Kay as the children’s guardian, but the documents should also express that Kay be treated as a co-parent.
“Even the ring your partner has given you will belong to your birth family upon your death,” said Ms. Kator of same-sex couples in Michigan who die without a will.
Since many of the couple’s assets would pass to one of them directly because they are either jointly held, like their home and savings accounts, or, in the case of Amanda’s retirement accounts, have Kay listed as the beneficiary, Ms. Kator did not think it was necessary to use a revocable living trust.
The trust is often recommended for couples with substantial assets that may be subject to probate, the process to settle a deceased person’s estate. Assets held in the trust bypass that process. The couple do need to make sure their beneficiary designations are kept up to date.
The Sheltons already have medical powers of attorney that allow them to make medical decisions for each other. Ms. Kator suggested making them broader and more explicit, giving each partner broad visiting rights and authorizing a health provider to give them medical information. The couple already have a durable power of attorney that would allow them to handle legal and financial matters for each other.
Finally, they should set up a domestic partner agreement and a co-parenting agreement that outlines how to handle child support and parenting should the couple ever split. This is especially important for Kay, since she is not a legal parent and has no wage-earning job. “In our community, because we don’t have divorce courts we don’t have the ability to address this economic inequality, and a domestic partner agreement can substitute for that,” Ms. Kator said.
FINANCIAL CONCERNS Since Kay isn’t earning any money, she cannot use any tax-advantaged savings vehicles for retirement — these require earned income. And Amanda can’t contribute to a spousal I.R.A. on her behalf, since they cannot marry.
Kay isn’t entitled to receive Social Security benefits on Amanda’s earnings record, either. Normally, lower-earning spouses can receive up to half of their spouse’s benefits, if those are higher than their own. Surviving spouses are also entitled to collect their husband or wife’s higher benefits instead of their own. “I know I need to be saving more for her, but I’m not,” said Amanda, who puts about $6,000 a year in her 401(k). It would be difficult, if not impossible, to divide that up should they split. Married people who divorce can divide retirement plan assets without having to pay taxes or penalties on withdrawals, but the Sheltons wouldn’t have those privileges, said James Tissot, president of Prism Planning in New York.
“The biggest issue as you go forward is the disparity between the two retirement plans and coming up with something that is equitable,” he told the couple. That agreement should be included in a domestic partner agreement.
After paying down certain debts, he suggested that Amanda at least double her savings.
TAXES If the Sheltons could file their federal returns jointly, they would save several thousand dollars in taxes. Instead, Amanda files her federal tax return as “head of household,” and claims the children and Kay as dependents. Tax rates are higher for people who file as head of household compared with couples who file jointly, so they end up paying at least $3,000 more, according to Tina Salandra, an accountant and president of Numerical L.L.C.
But they could do something that would help Kay save for retirement: Amanda could hire Kay as a nanny and pay her $3,649 a year, which she could then put into a Roth I.R.A. (Kay needs to earn less than $3,650 for Amanda to continue to claim her as a dependent, Ms. Salandra said.) Kay and Amanda would both owe Social Security and Medicare taxes, and Amanda would need to pay state unemployment taxes. That’s roughly $644 in total, but Amanda could deduct her share of the payroll taxes as itemized deductions on her return. After reviewing the advice, the Sheltons said their first priority would be to put the extra parental protections into place, then update their will.
The couple said they were optimistic that, someday, their family would be able to avoid all of these extra costs and hurdles. “I would love to have another wedding because I love weddings,” Amanda said, laughing.  “And I would love to have our kids there and to be part of that. I am hopeful.”


No comments:

Post a Comment