Over the last year I've met a number of gays and lesbians who either already have or are about to take on the responsibility of children. They are approaching me with many financial concerns, which I would like to share with you. In this article I'll discuss the areas that are relevant to your family and suggest ways of meeting those financial needs.
These are a few
of the most popular questions…
What will happen to my family should my partner die? How can I fund further
education fees in the future? Should we be starting a savings plan for when
they are eighteen?
It's wise to make provision should either of you die. Many family units either rely on both partners earned income, or one working while the other becomes a full time parent. These factors make the provision of life assurance very important. The sum assured should be sufficient to replace the lost income and designed to run through to an age at which they are no longer dependent. It is also a good idea to insure that the family's commitments such as a mortgage and/or loans are paid off. It would be sensible to use an income figure of 5% for working out an appropriate level of cover. For example to produce an income of £10,000 would need a lump sum cover of £200,000. Or alternatively you could set out the maximum amount of insurance for the budget you have available. (Some cover is better than having none).
The financial effects of serious illness could be just as great as if someone had died. A critical illness could either leave one partner struggling to look after the children or the other unable to work and supporting the family. It would be wise in these circumstances to consider insurance that would pay a regular income (Permanent Health Insurance), or one which pays a lump sum to clear any liabilities (Critical Illness Cover).
PHI is aimed at providing long term accident and illness protection in the event of you not being able to do your own kind of work. This is normally designed to pay a percentage of your salary tax-free and commences payment to you after a deferred period of 2,3,6 or 12 months. Dependent on your needs this will commonly continue until retirement if need be.
CI is designed to provide a lump sum benefit should you suffer one of a long list of specified serious illnesses, such as cancer, MS, stroke and heart attack. The definitions of these illnesses can vary widely and it would be advisable to speak to a gay independent financial adviser. The lump sum is again paid tax free upon diagnosis. If you were to recover, the insuring company does not expect its money returned.
Many parents may feel inclined to save money for their offspring's future. The earlier that savings are made for education the less of a strain the costs will be in the future. Of course further education is not the only use for any savings in the future, provisions are just as likely to be used for a wedding, deposit for a first home, or assistance when starting work. There are many options for child savings with Individual Savings Accounts, Unit Trusts and Baby Bonds all being popular. Why not read our second feature in the series on "Investing For Children?"
The only way to get truly impartial advice is to approach an Independent Financial Adviser. They will be able to advise on the most appropriate level of cover and source the most competitive products from the whole market place.
Most of the gay parents that I've met have commented on how difficult it is to find friendly advice. The best way to find an adviser is by recommendation from family or friends. You should maybe speak to them over the phone or arrange an initial meeting at their office. (Most will not charge for this first meeting).
Most IFA's will have a firm grasp of your financial needs, but will not have a knowledge of product providers that discriminate against the gay community. If you specifically wish to avoid personal lifestyle questions, increased premiums due to sexuality and HIV testing (men only), you should approach a gay financial adviser. There are several firms that cater for the community and they were all set up with gays, and gay parents, in mind.
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