If you are in a domestic partnership, civil union, or marriage that is not recognized at the Federal Level most of the software that financial planners use won’t work for you.
Here’s why:
Most software is keyed off the IRS tax filing status. This filing status is used to generate future tax projections. Let’s say you are in a newly minted Civil Union here in Illinois which is not recognized by the Federal Government. The planner has two options.
Option 1: Plan jointly but get the taxes wrong
In this scenario the planner enters in the information for both partners together. This allows for sharing of household expenses, and joint purchases, or liabilities. That’s great but in order to do that the software only allows the planner to check the “married” box, which means that all of the federal tax calculations will be incorrect leading to possible misleading projections.
Option 2: Get the taxes right but no joint planning
In this scenario the planner enters information for each partner separately. This means that the Federal tax calculations will be correct, but the couple will have two separate plans, vs. a joint plan.
Luckily a few software programs, including the one I use, do allow for joint planning with a “single” federal tax status. If you are part of a couple that is not considered married under Federal law make sure to ask your planner if their software can handle that. You may be surprised by the answer.