3 Knowing the Law

7 Same-Sex Family Finances

10 Planning Your Retirement

14 Controlling Your Legacy

LGBTOnYourTerms

planning your retirement / p10 /Achieving the flexibility and financial independence you want in retirement will require a careful analysis of the benefits that are—and aren’t—avail-able to same-sex couples.

controlling your legacy/ p14 / Your legacy is the opportunity to pass on the material rewards of your life in the way that best fulfills your goals and reflects your values.

knowing the law / p3 / The more you know about laws in your state and across the country—and about how they are changing—the more control you can have over your life.

same-sex family finances / p7 / With health care expenses, employ-ee benefits, income taxes and the treatment of dependents—building a workable financial strategy requires navigating the special considerations that apply to LGBT families.

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On your terms. Couples and families across America seek to live life on their own terms, but same-sex couples face additional challenges. Particularly in the financial area, couples' decisions require deeper analysis and more careful planning as they work together to achieve many of life’s most important goals. What do you need to know to make sound financial decisions? What factors are likely to affect your family’s finances and long term planning? The more you know, the better able you and your family will be to live life on your terms.

morgan stanley smith barney | 2012 3

If you are planning for the future with a same-sex partner, your decisions and strategies will necessarily be affected by the legal environment in which you make them. Begin with the big picture by considering your answers to the fol-lowing questions: How formal do you

want your relationship to be? Where do you want to live? What about children?

There are legal dimensions to each of these questions, and to many others that you will need to address—a situation made more complex by the rapid evolu-tion of state laws across the country.

The mOre yOu knOw abOuT laws in yOur sTaTe and acrOss The cOunTry—and abOuT

hOw They are changing—The mOre cOnTrOl yOu can have Over yOur life.

Do you want to marry or have a less formal relationship?

Do you plan to have children or adopt?

Are you already married?

Do you already have children?

The laws of your state will have an effect on your life with your partner—on your family structure, shared finances and long term plans.

2

Are you happy where you live?

Are the laws in your state LGBT-friendly? knOwing

thelaw

4 morgan stanley smith barney | 2012 morgan stanley smith barney | 2012 5

Under this law, the federal government does not recognize same-sex marriage. This means that you and your partner cannot file joint income tax returns, you cannot claim the estate tax marital deduction and your retirement assets will not automatically roll over to your spouse. In addition, same-sex couples are not entitled to their partner’s Social Security benefits.

state laws. States can make their own determination about same-sex mar-riage. If you live in a state that allows same-sex marriages, you are treated in

the same way as a heterosexual couple with regard to state income taxes. You also enjoy spousal inheritance rights, as well as spousal election at death. That means a surviving partner has the right to claim what the state deems is a fair share of the deceased spouse’s estate, rather than what is specified in a will. Other states are not required to recog-nize an existing same-sex marriage, so if you and your partner move, you will need to educate yourself about the laws of your new home state.

Depending on where you choose to live, current fed-eral and state laws differ widely, creating a complex planning environment for LGBT couples.

federal law. Depending on their state of residence, same-sex couples have various legal scenarios to work with. At the federal level, however, the De-fense of Marriage Act defines marriage as between one man and one woman.

Thelawsoftheland

creating a cohabitation agree-ment. A cohabitation agreement is a legal contract between two individuals who are living together in an intimate relationship. It is designed to simulate, as close as possible, the obligations and rights that married people have toward each other. The agreement typically details the length of the relationship, includes a statement of both partners’ assets and liabilities and specifies whether their assets and income should be treated as separate or joint property. You and your partner can also make specific provisions that cover the distribution of assets in the event of death or separa-tion, financial support if one of you is the primary breadwinner, responsibility for repayment of debts and support and custody arrangements for your children.

titling assets. Same-sex partners should give careful consideration to how their property is titled. If the home you and your partner share is in your name only, it will pass to the inheritors named in your will or, if you have no will, state law will govern who gets the property. In the case of a will, others may contest the will in its entirety, or some of its provisions.

One way to avoid this problem is to share ownership as "joint tenants with

rights of survivorship" (JTWROS). A JTWROS title allows a surviving partner to inherit property outright, regardless of the terms of the will or state law. Before creating a JTWROS, you and your partner should consult with a tax specialist to decide if this is a good choice given your specific situation.

designating beneficiaries. Nam-ing your partner as the beneficiary of an individual retirement account (IRA), an annuity or a life insurance contract is a simple way to make sure these as-sets end up where you want them in the event of your death. Same-sex couples are not entitled to their partner’s Social Security benefits or, generally speaking, their pension benefits. However, some companies now offer pension benefits to domestic partners.

drafting a will. A will specifies to what person, persons or charities every-thing you own goes upon your death. It is essential to have one. In your will, you can also name a guardian for your children. This is important for same-sex couples, particularly if you are the biological or adoptive parent. Without a will, the courts may choose a guardian you did not intend, and your partner may not be able to even visit your child should something happen to you.

ask for adviceGiven the complexity of the legal backdrop and the long term implications of your decisions, it is wise to seek professional advice. Lawyers, Financial Advisors and tax professionals are all good sources of objective guidance. You may want to find a Financial Advisor with the Accredited Domes-tic Partnership designation. These individuals have studied the specific issues domestic partners face with regard to wealth transfer, retirement planning and federal taxation, among other concerns. As with any professional service, choose someone you trust who communicates clearly and is responsive to your needs.

legaltoolsthatcanhelpprotectyou

What is included in a cohabitation agreement? This legal contract between you and your partner formally defines the financial status and obligations in your relationship—and can be particularly important if you split up.

recitals Helps to ensure clarity by stating when you began living together and providing a brief history of your relationship

disclosureofassetsandliabilities A balance sheet listing the value of each asset and liability along with ownership, an important financial baseline

distributingpropertyincaseofdeathorbreakupofrelationship

May reduce conflict and cost by detailing what will happen to assets in the event of death or a breakup

obligatingfinancialsupport Defines expectations and responsibilities for ongoing support when one partner is the main breadwinner in a relationship that dissolves; similar in concept to alimony

handlingthepaymentofdebts Details who will be responsible for the payment of debts both during the relationship and if it dissolves

dividingaprincipalresidenceuponbreakuporatdeath

Lessens the likelihood of a battle over the family home if you break up

defininghowchildrenwillbetakencareofintheeventofdissolutionoftherelationship

Provides guidance in the case of a breakup involving children by spell-ing out child support, custody and visitation rights; binding in marital situations only, but valuable in nonmarital situations as well

choiceoflaw Helps to ensure that the cohabitation agreement can be carried out by specifying a mutually agreed upon state that recognizes such agreements

same-sexpartnershipssame-sex couples who are legally married are entitled to the same rights as married heterosexual couples in the nine jurisdictions on the right, but are not considered married under federal law. (as of march 2012. source: http://www.ncsl.org/issues-research/human-services/same-sex-marriage-overview.aspx)

Despite differences in law, there are many financial and legal tools you can use to protect yourself and those you love.

marriage full rights limited rightsIowaMassachusettsConnecticutMarylandWashington VermontNew HampshireWashington, D.C.New York

CaliforniaHawaiiNew JerseyOregonNevada

ColoradoHawaiiMaineWisconsin

Partnerships with full or limited rights include civil unions, domestic partnerships, designated beneficiaries and reciprocal beneficiaries. There are current legislative and litigation efforts under way in New Jersey, Hawaii and California.

morgan stanley smith barney | 2012 7

As you and your spouse or partner deal with the practical aspects of life together, you will quickly encounter issues related to taxes, health care, insurance and, if offered to you, employee benefits. Then, if you have or adopt children, other questions will emerge. Every family must deal with these issues to some

degree but, as a same-sex family, you will face additional considerations. The decisions you make can have a real and immediate dollars-and-cents impact. It’s important to understand all your opportunities, as well as the attendant responsibilities.

wiTh healTh care expenses, emplOyee benefiTs, incOme Taxes and The TreaTmenT Of dependenTs—building a

wOrkable financial sTraTegy requires navigaTing The special cOnsideraTiOns ThaT apply TO lgbT families.

same-sex familyfinances

1990

2000

2010

145,130 same-sex families2 81,343 male 63,787 female

601,209 same-sex families2

304,148 male297,061 female

646,476 same-sex families1

313,599 male332,877 female

8 morgan stanley smith barney | 2012 morgan stanley smith barney | 2012 9

allocating ownership for tax pur-poses. Income and expenses associated with your holdings can be allocated in whole or in part to either of your tax returns. How you divide them depends on your respective tax situations; the person with the higher tax burden might want to claim deductions for such things as mortgage inter-est and capital losses.

the gifting issues. Keep in mind that the IRS considers some asset transfers between same-sex couples as taxable gifts. Gift taxes may be levied if one partner gives more than $13,000 to the other partner, unless the money is for certain medical and educational expenses that

•If you and your partner have a child and both of you qualify as legal par-ents, either biological or adoptive, you can decide which of you claims the child as a dependent on your federal income tax return. One of you may also be able to file as “head of household,” which may help to reduce taxes. If you have two children, you each may be able to claim this status. Be sure to discuss your options with a qualified tax professional.

According to the Human Rights Cam-paign's 2012 Corporate Equality Index, 89% of Fortune 500 employers extend domestic-partner coverage to employees with same-sex partners. If your partner’s employer does not provide coverage for you, you can research whether or not you can purchase health insurance from your own em-ployer. You can also investigate the cost of an indi-vidual plan or one offered through a group or associa-tion, which may be more cost ef-fective than an individual plan.

coverage and taxes. Even if your employer’s coverage does extend to your partner, the value of the benefit is counted as income paid to you and is included in your gross income by federal law. Some companies are now paying the added taxes or reimbursing employees for the added tax burden, but the practice is not yet universal. Be

are paid directly to the service provider. Your tax advisor can help you evaluate whether you may be subject to gift taxes and what you can do about it.

Joint versus individual returns. When filing federal returns, same-sex partners can rarely be dependents of each other and cannot file jointly. Each partner must file individually—which can add substantially to the combined tax

burden of the couple. Plus, in those states where a same-sex couple is entitled to file a married state return, they must also file a “dummy” married federal return with the state in order for their state taxes to be calculated properly and to appear correct.

sharedresourcesandtaxesUnder US law, almost any asset can be jointly owned by two persons, with the exception of retirement accounts. That means you have the opportunity to decide whether to commingle your assets with your spouse or partner, or keep your assets separate.

TaxesandchildrenWhile you and your same-sex spouse or partner will not be able to file a joint federal tax return, you can take advantage of tax deductions available to all families with children. For example:

factoringinthecostofhealthcareAll families need to set aside money for major goals such as buying a home, sending a child to college or retiring comfortably. Same-sex couples may also need to make specific provisions for health care expenses. To begin with, not every employer will extend coverage to a same-sex partner.

•If one of you claims a dependent child age 16 or younger on your return, you may be eligible for a tax credit of $1,000 per child. The credit is reduced as income increases.•If you adopt children, one of you may be able to claim an adoption credit of up to $12,650 for qualified adoption expenses for each eligible child in the year that child is adopted. There are income based limits and phaseouts, so consult your tax professional.

sure you understand your company’s specific policies.

coverage for children. Health coverage for children often depends on the relationship of the child to the em-ployee. If the employee is the biological or adoptive parent, then most employ-

ers will treat the child as they would for any other fam-ily. If your son or daughter is your partner’s biologi-cal or adoptive child, coverage will depend on the terms of your company’s policy.

cobra coverage. The Consoli-dated Omnibus Budget Reconciliation Act (COBRA) gives former employees the right to temporary continuation of health coverage at group rates. However, if your company provides health insur-ance for both of you and you change jobs, your partner will not be eligible for benefits under the federal govern-ment’s COBRA program.

setting up accountsSome couples choose to completely integrate bank accounts and elect one partner to be in charge of the finances. Others opt to maintain separate check-ing or cash-management accounts—divvying up the expenses and assigning each partner specific financial responsibilities. Another idea is to create three bank accounts—yours, mine and ours. With the first two ac-counts, each partner pays personal expenses and any other responsibilities. With the shared account, you pay for the expenses and invest-ments you make as a couple and for your family.

Your tax advisor can help you evaluate whether you may be subject to gift taxes and what

you can do about it.

Health coverage for children often depends on the

relationship of the child to the employee.

Could you replace your income?

Can your partner make up the difference?

How long would you be able to pay your bills on one (or no) income?

Disability insurance could potentially replace a portion of your income.

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keeping currentDecisions regarding retire-ment assets (and many oth-er financial matters) can be complex and technical. Make sure you seek the guidance of a qualified advisor, partic-ularly a tax attorney or certi-fied public accountant, as you consider various courses of action. That’s especially important at a time when both state and federal laws are in flux.

If you also want to moni-tor legislative developments and planning strategies on your own, online resources available to you include:

• lambdalegal—www.lambdalegal.org. They offer a range of updates and publications that may help you in planning.

• Thewilliamsinstitute —www.williamsinstitute.law.ucla.edu. Part of the University of California, Los Angeles Law School, the institute tracks demographic trends and legal develop-ments across the US.

whatifyoucouldn'twork?if you are the primary breadwinner, it may be wise to consider what could happen if you became ill or disabled.

10 morgan stanley smith barney | 2012 11

achieving The flexibiliTy and financial independence yOu wanT in reTiremenT will require a careful analysis Of The benefiTs ThaT are—and

aren’T—available TO same-sex cOuples.

planning your

reTiremenT

Successful retirement planning takes place on several levels. At the macro level, your plan needs to take account of inflation, which can significantly erode the purchasing power of your savings. Then there are all the issues that are unique to you and your family, including

where you want to live, what you plan to do and how much income you can plan for. For many same-sex couples, the support system presumed in retirement and disability planning may not exist, so ensuring financial independence is essential.

Your generation is likely to live longer in retirement than any before it. That creates more opportunities for enjoyment—and more years to incur substantial costs.

70afterage65,about70%ofallindividualswillneedsometypeoflongtermhealthcare,andmorethan40%willneed

nursinghomecare.4 80sOnaverage,ifyouare

a65-year-oldman,youwilllivetobe82;ifyouarea65-year-oldwoman,85.52x

Gayandlesbianindividualsage60to90aremorethantwiceas

likelytolivealone.3

12 morgan stanley smith barney | 2012 morgan stanley smith barney | 2012 13

TherealitiesofretirementassetsRetirement planning for same-sex couples is complicated by the fact that your spouse or domestic partner will be considered a nonspouse beneficiary under federal law in almost every circumstance. The differences between spouse and nonspouse can be mitigated somewhat by proper beneficiary designation on accounts like 401(k) plans but, under current laws, you need to take differences in distribution and taxation rules into account in your planning.

HiV,lTcandinsuranceAn HIV-positive status complicates LTC and other insurance coverage. If either you or your partner is HIV-positive, you should be aware that:

beneficiary designation. If you have a 401(k) and 403(b) plan or an IRA, assets in the account at your death will pass to the beneficiary you designate in the ac-count documents. If you do not designate a beneficiary, unless the plan or IRA docu-ments provide differently, the assets will become part of your estate and distributed according to your will. If you have no will, the state will determine who receives the assets, which may well not be your partner. In either case, assets will be subject to the probate process. Be sure to review your beneficiary designations regularly, and make adjustments whenever required by changes in your family situation.

iras. Rules regarding the rollover of inherited IRA assets were liberalized in 2007 but still provide less flexibility than that accorded under spousal rules. For example, your same-sex spouse or partner may roll over assets that pass to him or her as beneficiary to another IRA, helping to protect the tax-advantaged status of the

assets. However, distributions cannot be delayed until the beneficiary reaches age 70 1/2 as is the case of a federally recog-nized spouse. Your beneficiary will have to begin receiving distributions immediately.

401(k) assets. Assets in 401(k) plans are now governed by rules similar to those covering IRAs. As of 2010, a same-sex spouse or partner, while still considered a nonspouse beneficiary under federal tax law, can protect the tax-deferred status of plan assets by rolling them over into an IRA. Still, just as with assets rolled over from an IRA, your beneficiary must begin taking distributions immediately, without the option of waiting until age 70 1/2.

social security. Your same-sex spouse or domestic partner will not qualify as a spouse under current federal law. That means your Social Security benefits will cease upon your death. Likewise, should your partner die first, you will no longer receive benefits as you would if spousal-continuation rules applied.

It is illegal for an LTC services provider to discriminate against an HIV-positive person, denying care solely because of HIV. Only when spe-cific circumstances are met—conditions that apply to all pa-tients—can the right to care be denied.

It is legal for an insurance company, under preexisting-condition rules, to decline the application for LTC insur-ance by an HIV-positive person, making this insurance difficult to purchase for many individuals.

Increasingly, employers are offering LTC

coverage as part of their group benefits plans. In such situations, the coverage is usually available on an open-enrollment,

no-underwriting basis to all applicants. If you are HIV-positive and work for such a com-pany, you may want to consider this option.

Questions regarding unlawful discrimina-

tion, insurance coverage and employee benefits are complex and vary from in-dividual to individual. Be sure to discuss with a qualified legal advisor if you have questions about the rules or believe you have been discriminated against.

lgbt retirement communitiesCurrently there are about 25 existing or planned gay and lesbian retirement communities. Many adults over 50 choose these communities because they desire:

To be independent from their families

To increase social opportunities

To be in a community of people with similar lifestyles and interests

when your business partner is your life partnerIf you have a family busi-ness, you may want to con-sider a partnership agree-ment that protects you and your partner legally. Your Financial Advisor can work with your attorney to help maximize the benefits to which gay and lesbian business partners are en-titled. For business owners whose gifts or estate plans might be challenged by other family members, the business partnership may also provide a recognized relationship to strengthen those plans.

howinflationerodesretirementsavings.here’s what happens to the purchasing power of $1 million, assuming the historical 3.5% inflation rate, over 10, 20 and 30 years. put another way, you would need $2.81 in 30 years for every $1.00 of purchasing power held today.6

The long term care (LTC) question. long term care includes services provided to anyone with a chronic disease, disability or sudden illness who requires assistance with "activities of daily living" (adls) such as eating, bathing, dressing or moving from a bed to a chair. it also includes supervision of individuals with alzheimer’s disease and other mental illnesses usually associated with aging. lTc is expensive, and getting higher every year, as this table shows:

Figures in the table were computed by Genworth based on information from the 2011 Cost of Care Survey and represent room costs for an individual. Conducted by CareScout(R) 04/11.

These costs can rapidly erode even well funded retirement plans, leaving you, your partner or your children facing major, unexpected expenses. Given the magnitude of the potential costs, an increasing number of people are making LTC insurance a part of their retirement plan, and it is clearly something that same-sex couples may want to consider.

yearsofcare today 10years 20years

1 $77,745 $120,608 $196,458

2 $245,091 $380,217 $619,333

3 $429,590 $666,425 $1,085,553

2012$1 Million

2022 $708,918.81

2032 $502,565.88

2042$356,278.41

Increasingly, employers are offering LTC coverage as part

of their group benefits.

14 morgan stanley smith barney | 2012 15

There are many reasons to create an estate plan. The most common is to help ensure that your property passes to the people you wish to benefit in the way you desire. The same is true for gay and lesbian couples, but the com-plex and evolving legal environment sometimes presents added challenges. Proper planning can’t reconcile all the differences between federal and state laws, but significant opportunities exist to enhance control and minimize taxes, conflicts and costs.

Many of the traditional estate plan-ning tools and strategies take on a new dimension of importance for same-sex couples. For example, trusts and gifting can add a level of certainty to your plan-ning, helping to minimize family issues by providing clarity while greatly reducing the risk of potential legal disputes. By defining your goals and working with a qualified lawyer, accountant and Financial Advisor, you can achieve a high degree of confidence that your wishes will be carried out.

yOur legacy is The OppOrTuniTy TO pass On The maTerial rewards Of yOur life in The way ThaT besT fulfills yOur

gOals and reflecTs yOur values.

cOnTrOlling your

leGacy

Estate planning holds many benefits, including comfort for you because you can have confidence that your assets will go to the people and causes you intend.

fulfillingcharitableandothergoals

avoidingfamilyconflict

lesseningtaxburdens

speedingupsettlementofyourestate

avoidingpotentialreductionsinyour

networthretainingcontroloveryourwealth

1.2.

3.

4.5.

6.

16 morgan stanley smith barney | 2012 morgan stanley smith barney | 2012 17

The key word in revocable living trust is revocable. As grantor, you can make changes to or terminate a revocable liv-ing trust at any time. At your death, the trust becomes irrevocable and the instructions you indicated in the trust document are carried out by the trustee. Those instructions can include

distributing the assets to your partner, spouse or others. Even though assets funding your revocable living trust are now owned by the trust, you, as grantor, retain control. This includes amending the terms and provisions of the trust and changing the trustee, beneficiaries and asset management approach.

afundamentaltool:TherevocablelivingtrustThe revocable living trust is the most popular trust vehicle used today and probably the most basic. As the name suggests, it’s a legal arrangement made during your life for the purpose of managing and passing on assets. You can use it to involve your partner or spouse in the management of your finances and investments should you become incapacitated, and to ensure that your assets pass to your partner or spouse upon your death.

Assets you place in the trust are man-aged by the trustee you choose. Many people who have revocable living trusts name themselves as trustee. This is per-fectly legal and appropriate for many situations. Alternatively, a third-party trustee can manage the assets with input from you for the benefit of the benefi-ciaries. It is very important that you choose a qualified and capable current or successor trustee to ensure that the trust provisions are carried out properly.

Assets in a revocable living trust avoid the public disclosures of probate—a ma-jor reason why individuals establish revocable living trusts—and are often distributed more quickly and on a con-fidential basis.

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Is your partner or spouse financially dependent on you?

If children are involved, who has custody? Who will be the guardian?

Do you wish to treat all the children equally?

Do you have specific goals for certain beneficiaries?

Do you wish to leave any portion of your estate to a charitable organization?

Who should benefit from your estate?

six questions that can help you plan effectively

When you consider gifting, keep in mind that:

You can make annual gifts to your part-ner, spouse and/or children directly or in trust for their benefit—up to $13,000 per year ($26,000 for a married couple) to each of as many beneficiaries as you wish.

Gifts greater than $13,000 ($26,000

for married couples) will be subtracted from the individual or couple’s lifetime gift tax exemption and subject to tax.

Tax law in effect through 2012, how-ever, has significantly increased this ex-emption over prior years. It now stands at $5 million for an individual and $10 million for a married couple but, without

ThepowerandsatisfactionofgiftingOne way—perhaps the best way—to ensure that your assets are transferred as you intend is to make a lifetime gift. Making full use of the available estate and gift tax exemptions and exclusions is especially important for domestic partners or married gay or lesbian couples, who do not receive the same benefits under the law as do married heterosexual couples.

congressional action, will decrease to $1 million and $2 million, respectively, in 2013.

The bottom line, at least through 2012, is that you could give your partner or spouse a tax-free gift of up to $5 million, and you and your spouse could transfer up to $10 million to children or a trust.

Additionally, there is an exclusion for gifts made under the medical and educa-tional expense provision of the Internal Revenue Code. These transfers must be for medical expenses or tuition and must be made directly to the health care pro-vider or educational institution. There is no dollar limit for this exclusion.

ThebasicdocumentsLesbian and gay couples may need to be more aggressive than other couples in planning for the management and disposition of assets, both during their lifetimes and at death. As a result, certain strategies and documents may take on greater importance for you, and you should discuss the following with an attorney:

your will. Discuss a “no contest” clause to prevent challenges from fam-ily members.

living will. This legal document instructs health care professionals about your wishes regarding life-sustaining procedures in the event you become terminally ill.

medical durable power of at-torney. Also known as a health care proxy, this document allows you to name a person to act as your representative to make health care decisions on your behalf if you become seriously ill and are unable to make these decisions for yourself. In the absence of a health care proxy, the closest blood relative will generally be given the author-ity to make these decisions. Without this document your partner can be left standing on the sidelines while medical decisions are made.

financial durable power of attorney. Like a health care proxy,

a financial durable power of attorney authorizes another person to act as your representative to make financial decisions on your behalf.

guardianship appointment. Appointing a guardian helps ensure that the person you prefer assumes responsibility for a child upon your death. Keep in mind that guardian-ship does not override the rights of a biological parent.

domestic-partnership agree-ment. As a useful planning alterna-tive, this agreement is a legal contract outlining the distribution of assets upon termination of the relationship prior to death.

beneficiary designations. As described earlier, review any re-tirement, insurance or other benefi-ciary elections to make sure wishes are respected.

yourgoal consider benefit

reduceestatetaxes Charitable trust Supports charitable organizations while offering tax benefits and estate planning advantages

Qualified personal residence trust (QPRT)

May remove the value of your home from your estate while you continue to live in it

providesupportforchildren Minor’s trusts Allows greater flexibility and control than direct gifts, and possible tax savings

solidifyfinancialsupportforsurvivingspouseincomplexfamilysituations

Qualified terminable interest property trust (QTIP)

Provides for lifetime support for surviving spouse while allowing control of ultimate distribution of assets. May be applicable for state tax deduction. Contact your tax advisor for more information.

“freeze”thevalueofappreciatingassetsforestatetaxpurposes

Grantor retained annuity trust (GRAT)

Locks in asset value on date of transfer to trust, and appreciation is passed to benefi-ciary free of estate taxes

asamplingofwhattrustscando

18 morgan stanley smith barney | 2012 morgan stanley smith barney | 2012 19Please read imPortant disclosures on the back cover of this brochure.

investmentmanagementI have so many goals and priorities. How can one investment strategy balance them all?

charitablepursuitsThe charities I support are like extended family. How do I maximize the good I can accomplish?

estateplanningMaking sure my estate goes to the people and organizations I care about is a priority. How do I transform my assets into a legacy?

integratedplanningDecisions about both assets and liabilities need to be made within the framework of important life goals. What steps are also the most tax efficient? How can a strategic approach to banking and lending simplify my financial life and maximize the value of what I own?

liquidityI can predict some expenses, but others I know I can’t. How can I plan to have the cash I need?

retirementWhen I retire, it will affect just about everything that matters: my lifestyle, my company, my family. Is there a way to plan for retirement that takes it all into account?

BusinessstrategiesHow do I manage my personal wealth with so much tied up in my company?

riskmanagementThe ups and downs of the markets is just one kind of risk—but so is not protecting my assets and my family. How do I protect what I care about most?

educationfundingWill I be able to pay for a good education for my children—and my grandchildren?

Thoughtful decision making usually begins with a lot of questions. As you get answers and information, you can develop a framework for evaluating different choices and strategies. Little by little, you gain both the knowledge and the confidence to make decisions and create a wealth plan that helps you achieve your goals.

You will find your Morgan Stanley Smith Barney Financial Advisor to be a source of objective information and ideas as you begin to assess how to best manage your wealth. Over the course of many years, our firm and Financial Advisors have developed an in-depth understanding of virtually all the chal-lenges, goals, preferences, styles and

strategies that distinguish wealthy in-vestors. This experience is combined with access to a wide array of tools designed to help you maximize what you have and accomplish your specific goals—whether you are preparing for the cost of educating children, managing risk in your portfolio or finding ways to increase the impact of your charitable contributions.

Your Financial Advisor is an ad-vocate within our firm, an intelligent editor who selects and aligns the many capabilities of Morgan Stanley Smith Barney for you, delivering resources to you in the way that is ap-propriate for how you invest and what you want to achieve.

Over The years, yOu will make many financial decisiOns. One in parTicular is likely TO have a lasTing

impacT On yOur well being and ThaT Of yOur family: The chOice Of a financial advisOr.

a culTureofexcellence

20 morgan stanley smith barney | 2012 morgan stanley smith barney | 2012 21

Tax laws are complex and subject to change. This information is based on current federal tax laws in effect at the time this was written. Morgan Stanley Smith Barney LLC, its affiliates and Morgan Stanley Smith Barney Financial Advisors do not render advice on tax and tax accounting matters to clients and are not “fiduciaries”( under ERISA, the Internal Revenue Code or otherwise) with respect to the services or activities described herein. This material was not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer under U.S. federal income tax laws. Clients should consult their own legal, tax, investment or other advisors, at both the onset of any transaction and on an ongo-ing basis to determine the laws and analyses applicable to their specific circumstances. Clients should consult their tax advisor for matters involving taxa-tion and tax planning and their attorney for matters involving trusts, estate planning, charitable giving, philanthropic planning or other legal matters and before establishing a retirement plan or to understand the tax, ERISA and related consequences of any investments made under such plan.

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1 http://williamsinstitute.law.ucla.edu/wp-content/uploads/Census2010Snapshot-US-v2.pdf 2 "Gay and Lesbian Families in the United States," Tax Policy Center,Urban Institute and Brookings Institution. August 22, 2001. http://www.taxpolicycenter.

org/publications/urlprint.cfm?ID=1000491 3 "Aging as Ourselves: LGBT Aging Health Issues for Health Care Providers," page 21. Loree Cook-Daniels, 2008. http://www.dvsacmiami.org/Resources/

Complete%20curricula%20text%20with%20references.pdf 4 National Clearing House for Long Term Care Information, http://www.longtermcare.gov/LTC/Main_Site/Understanding/Definition/Know.aspx 5 Social Security Actuarial Life Table 6 Morgan Stanley Smith Barney, Financial Planning Group

In many states, same-sex couples have greater flex-ibility than ever in managing their finances, creating families and controlling their lives. Whatever your cir-cumstances, location and goals, planning is still critical if you and your partner or spouse are to live the life you envision together. Start by understanding the ground rules, seek out knowledgeable resources and build a solid foundation for the family you're creating. With foresight, analysis and planning, you'll be much better positioned to lead life on your terms.

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