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Covering your assets
by Andrew Davis, Windy City Times

When it comes to same-sex couples and mortgages, Steve DiMarco—president of Baird & Warner Financial Services and a member of the firm's executive committee—told Windy City Times there are two areas of concern.

"The first issue is federal taxation, specifically, how tax returns are filed," he said. "That's relevant because when you have mortgage-related interest, that's deductible, and something needs to capture that."

"However, the [ main ] issue is how a same-sex couple protects its ownership interest.

"When you have two individuals—specifically, married individuals—there's a number of ways they can own property. One is joint tenancy, which I think is one of the biggest pitfalls for same-sex couples. In a joint tenancy, a married man and a woman married each owns 100 percent of the household.

"Let's say my wife plows into an affluent doctor and maims the guy to the point where he cannot work. He sues my wife. In a joint tenancy, I'm included—but you can see where a judgment causes a forced liquidation of the assets. Ultimately, we want people to own property by tenants by the entirety, in which the assets are split 50-50 in the case of two people owning a property. Same-sex couples should consider this; what it does is establish that while the couple is alive, no more than 50 percent of the assets can be split."

Illinois, however, does allow civil unions, a situation DiMarco said "affords some protections [ to same-sex couples ] in the probate and estate process. There is now a legal structure to help couples dispose of property.

"Ultimately, however, I would recommend that a same-sex couple would purchase a home and utilize a living trust document that specifically dictates how their portions of the assets will be disposed of. This is important for anybody who might have a dicey relationship with blood relatives, because once this goes into estate, the probate officer might follow the bloodline. So a trust can dictate that a partner can continue to live in a house or that proceeds from the sale of a house can go [ to the partner ] , children or someone else.

"Same-sex couples who have children outside the relationship should also have trusts, especially if there are [ substantial assets ] involved."

However, say there's a situation where a couple has a home in one state that recognizes civil unions or marriage, and another in a state that doesn't. What do you do, then? " [ They should get ] a tenancy by the entirety in the best of senses. However, a trust is best in that kind of complicated situation. You're getting really hairy there.

"Also, if someone wanted to address ownership issues and include the assets into the relationship, they could file a quitclaim deed and record that with the county that the property is in. That would change the ownership so there's some structure around it.

"What the readers need to understand is that there are some special considerations. The minimum standard is a tenancy by the entirety. Ultimately, these other factors like wealth, offspring and relationships with blood relatives may create the need for a trust."

Regarding the aforementioned issue of taxation, DiMarco advised, "When a [ civil-union ] couple files federal taxes, they're not filing as married couples would do, so there needs to be a decision about who may claim the interest deduction—and that can be split, by the way. ... Generally, thought, the couple generally needs to decide who needs the deduction the most."

DiMarco added that he learned some things after talking with same-sex couples to see how they handle taxes. "One of the guys said he put a cover letter on his tax return explaining his household circumstances," he said. "Another individual said that it was virtually impossible to file federal taxes because of the Defense of Marriage Act [ which only recognizes opposite-sex marriages ] . The tax stuff is just crazy."

Steve can be reached at .

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