Wealth Management Firm Meets Needs of LGBT Clients

By Liz Gold

Christopher Street Financial has come a long way in its thirty-one years. The New York–based wealth management firm was founded in 1981 when Bob Casaletto, a gay man who worked at Merrill Lynch, realized that the financial needs of people in his community weren't being met.
 
For many years, the company served the gay community, offering multiple resources in a variety of capacities, just to fill a void. In 1996, Casaletto died and left his company (along with a house on Fire Island) to the American Civil Liberties Union Lesbian, Gay, Bisexual, and Transgender (LGBT) Project. Jen Hatch, CFP®, and her partners at the time bought the company – and the rest is history.
 
"We have many clients who go back to the early days and it's really quite amazing," said Hatch, the owner and president of the firm. "There's a lot of loyalty. It's changed over the years. Today it's more wealth planning than everyday IRAs, and that's simply because that's where the issues get really difficult in terms of doing tax, estate, marriage, and divorce planning." 
 
Serving those who have an average of $1 million in assets, Christopher Street Financial works with clients all over the country, but more than half of their client base is in the New York metro area. 
 
Hatch talked more with AccountingWEB:
 
Was the office originally on Christopher Street? 
There's no evidence in any of the files that it was ever on Christopher Street. I think it was purely symbolic. In fact, it was on Wall Street until 9/11 and we just moved up here. We're on Union Square now, so it's convenient yet still cool. It's truly figurative.
 
When you took over the company, what sort of changes did you make? 
We became more focused on long-term financial planning. All our practitioners are Certified Financial Planners – it's a holistic approach to people's higher financial life. It's focused on their entire family, whether they're single or whether they're a same-sex couple with kids. And interestingly enough, that demographic has become hugely important for us because it's people who are raising children that recognize their need for specialized services. They have to get all their ducks in a row to protect each other and their children. 
 
What have been the benefits of working specifically with the LGBT community, and what have been some challenges?
I think the LGBT community is incredibly grateful that practitioners specialize in taking care of their needs. They're very grateful for education on these issues. That's why we do a lot of webinars and seminars. The biggest questions from people are: Does it make sense for us to get married? What are the differences? How does this change our situation? And for each couple it's really different. It has to do with everything from how you title your assets to how you plan your taxes and what your future obligations are for each other's health care and debt. 
 
We see ourselves as a community resource. It's also very fulfilling for me. I feel very passionately about working in my community, and I've worked on the other side of Wall Street for a long time. This is just much more satisfying – to be able to help individuals. 
 
There's a tremendous advantage to having a niche. The referral business is really strong; if you're the person who can make sense out of this, everybody is going to tell their friends. There are very few practitioners available who have this expertise, so there's a great deal of opportunity, particularly as people are getting married in a state like New York. In the states that offer marriage, there are very different tax reporting requirements. Somebody might end up doing a joint tax return for the state, and because the federal government doesn't recognize marriage, they'll do two individual tax returns. They'll [practitioners] have to figure out whether they should be filing jointly or separately. It's probably more cumbersome from an accounting perspective; there's less guidance and the technology isn't perfect in terms of the tax preparation.
 

Top Issues Facing Same-Sex Couples

Hatch firmly believes in partnering with accountants and CPAs when it comes to providing financial services to same-sex couples. "It's important for partners to work together and communicate," she said. "I very much appreciate other professionals who are interested in reaching out regarding mutual clients."

So what are the top three issues facing same-sex couples? Here's Hatch's take:
 
1. Deciding whether to marry or not to marry. For many people, even if they do marry, it's meaningless at the moment because of the state they live in.
 
2. Creating a solid plan for inheritance and transfer for estate planning. For same-sex couples, it takes on much greater importance. For example, if you don't have a will, the state has one for you. If you die right now and you don't have a will and your parents are still alive, they're your beneficiaries and they can become your executors. Because of this structure, we have a lot of opportunity for relatives to be involved in ways they aren't welcome. This happens all the time, whether they have the right to or not. Same-sex couples have much bigger tax burdens when people die, which is why marriage is so important. 
 
3. Learning more about income tax planning. There are opportunities for unmarried couples to do things like income shifting and deduction shifting that can be to their benefit on a federal basis, at least as long as the Defense of Marriage Act (DOMA) is the law of the land.
 
Can you say a little bit more about that? 
There are different work-arounds that I understand preparers have to go through in order to accommodate the different filing status for a federal return versus a state return. Many people who are recently married are of the belief that they don't have to file married, or they have a choice about filing married, but they don't. If you're married in the state of New York, you have to file as married. To not do that, you're denying that you're married, and perhaps deny the benefits that would accrue. Instead, your only real choice is married filing jointly or married filing separately.
 
I've had clients who were misinformed that they didn't need to file together, and it was because the practitioner didn't have experience. Even in a state like New Jersey where they have civil unions, you're still required to go through the same process and go through the state married forms.
 
In terms of wealth management, how do the needs of same-sex couples differ from those of straight couples? 
One basic concept that I think underlies everything when it comes to these issues is marriage legally creates a single economic unit. When somebody dies, everything just transfers to the other as if there's no difference. You can give money back and forth, you can change who actually owns what, and it doesn't create a taxable event. But you and your unmarried partner are business partners according to the law. So when you do business, in other words, when money changes hands, there are tax implications.
 
Think about gift taxes. If you give somebody more than $13,000 in a year you're supposed to report that as a taxable gift. A typical example is somebody will say, "Oh, we've been living in this apartment together and we want to put my partner's name on the deed, too." Well if I just do that, I've made more than a $13,000 taxable gift and those things get really tricky. What we end up doing is helping people create structures to manage accounts or to find mechanisms to track contribution. You have to become a smart business as a couple. For example, if my straight spouse died and had an IRA, I can just roll that IRA into my IRA, no questions asked, because we're one economic unit. And the problem is if we're not married – it could be a daughter or anybody – it means that I'm going to have to take minimum distributions every year and pay taxes on that. There are different logistics.
 
What are the reactions of your clients and prospects when they learn the disparities of what their straight counterparts are receiving in rights and benefits by getting married? 
For most people, it gives them a confirmation that they should go ahead and get married and they do. Or in many cases, they've already gotten married and it's confirmation that they've done the right thing. And the biggest issue and the biggest reason is – in New York and many states, the estate tax starts at assets that you pass over $1 million, and that means there's not an estate tax between spousal transfers. If you're in New Jersey, they have an inheritance tax that starts at $16,000, so if you're not a spouse, you could inherit $50,000 and pay 15 percent tax on it. There's a huge protection benefit.
 
What should married, same-sex couples think about if they want to grow their wealth? 
In terms of wealth planning, the lesson is actually similar for most people. They have to take an active role in their financial life process – they can't just expect to accumulate wealth without considering how things are titled and transferred and taxed because their family structure isn't recognized. 
 
How do you describe your approach in working with clients?
Every client is different. Some clients only need somebody to help them be accountable and to reflect and confirm decisions that they're making. Some people need to delegate some of the research involved in their life decisions. It's a matter of helping people make better decisions day to day, having a plan for the big picture, and treating their lives more like a business where we track progress with some sort of vision. The vision might change, the obstacles in front of us might change, but we have a long-term plan.
 
What are the financial differences between a civil union and a marriage? 
It becomes really apparent in divorce. If one person is a big earner and the other is a stay-at-home caretaker, that's probably the most extreme example; under marriage, you might be responsible. As a single economic unit, you're going to be responsible for this person. That's an obligation that comes with marriage you don't have otherwise. Also, if you're married you're responsible for each other's health care. A problem I see becoming more prevalent is if you get married and then divorced and you have to divide a retirement account that's based on federal laws. There will be income taxes, gift taxes, you can't even get a decree, a QDRO [qualified domestic relations order], which allows you to divide up somebody's IRA or 401(k) because of a divorce. This is all because the federal government doesn't recognize marriage. So what are you supposed to do? You can pay a lot of taxes or penalties. I think about these things all the time and have a couple of creative strategies.
 
Do you work with straight clients?
Great question. Because of the way things go, 25 percent of our clients are straight. And they're everybody's mother. I can't tell you how many people say can you take care of my mother, or my neighbor, or my coworker. I love those clients because they didn't come to Christopher Street because they saw an ad someplace. Somebody said, "You have to go see them, they're great." 
 
About the author:
Liz Gold owns Rhino Girl Media, offering writing and editing services to companies of all sizes. A published journalist for sixteen years, Liz writes about business and culture. She can be reached at rhinogirlmedia@gmail.com.
 

You may like these other stories...

Event Date: August 21, 2014, 2 pm ETMeet budgets and client expectations using project management skills geared toward the unique challenges faced by CPAs.  Kristen Rampe will share how knowing the keys to structuring...
Event Date: August 20, 2014, 2:30 pm ETIn this session we'll review best practices for how to generate interest in your firm’s services. Topics include:Web Based Marketing StrategiesAppointment SettingNetworking...
Recently, there has been a lot of buzz about the future of continuing professional education (CPE). The American Institute of CPAs (AICPA) created a task force on the Future of Learning with an accompanying fancy website. In...

Upcoming CPE Webinars

Aug 5
This webcast will focus on accounting and disclosure policies for various types of consolidations and business combinations.
Aug 20
In this session we'll review best practices for how to generate interest in your firm’s services.
Aug 21
Meet budgets and client expectations using project management skills geared toward the unique challenges faced by CPAs. Kristen Rampe will share how knowing the keys to structuring and executing a successful project can make the difference between success and repeated failures.