lesbian estate planning
AB 205
As of January 1, 2005, registered domestic partners in California are provided with most of the rights and responsibilities of married couples under California law. However, even after the new law goes into effect, registered domestic partners still will not have any of the 1,138 rights and benefits of married couples under federal law. And they also still will have less security than married couples when they travel or move outside of California.
From that date forward, "registered domestic partners shall have the same rights, protections, and benefits, and shall be subject to the same responsibilities, obligations, and duties under [California state] law, whether they derive from statutes, administrative regulations, court rules, government policies, common law, or any other provisions or sources of law, as are granted to and imposed upon spouses." California Family Code § 297.5(a). Registered domestic partners still will be denied all of the 1,138 federal rights and responsibilities that are conferred on different-sex spouses and still will have less security than heterosexual married couples if they travel or move out of state.
Those parties who have already registered as domestic partners and those who are considering registration should be aware of the following points:
Other States or the Federal Government May Not Recognize Domestic Partnership Status. As noted above, there are 1,138 federal rights and protections that are given only to legally married spouses. Accordingly, the federal government will not respect your domestic partnership because domestic partnership is not marriage. This is one of the reasons that domestic partnership is not equal to marriage and does not provide adequate protection for domestic partners and their families. We are hopeful that other states will honor domestic partnerships. Depending on the law of each state, however, it is possible that public and private entities in other states will not respect domestic partnership status. In some states, where the law is extremely hostile to lesbian and gay couples, this is almost certain to be the case. For this reason, it is extremely important that you and your partner have trusts and/or wills, powers of attorney for finance, advance health care directives, and a written agreement about how you will divide your assets if you separate, and – for couples with children – that you obtain an adoption or parentage decree or take whatever other steps are available in your state to protect your children.
Termination of Domestic Partnership after January 1, 2005, May Require Divorce Proceedings. If you or your partner choose to terminate your domestic partnership, in most cases, you will be required to go through a court dissolution proceeding, just as most heterosexual married couples must do to terminate their marriage. There is a small subset of people who may be able to terminate their domestic partnership without court approval. You are only eligible to use this process if you and your partner meet all of the following requirements:
a. You have no children together, and neither of the domestic partners, to their knowledge, is pregnant;
b. You have been registered domestic partners for five years or less;
c. Neither party has any interest in real property, in California or elsewhere, except in the lease of the residence where either of you lives (as long as the lease does not include an option to purchase and ends within one year from the date that you file the Notice of Termination of Domestic Partnership);
d. You and your partner do not have any debts (excluding automobile debts) that either or both of you incurred after you registered as domestic partners totaling more than approximately $6,500;
e. You and your partner do not have assets (excluding automobiles and encumbrances) totaling more than approximately $30,000 and you and your partner have executed an agreement that lists how the assets and/or debts will be divided;
f. Both you and your partner have executed an agreement setting forth how you are going to divide your assets and the assumptions of liabilities of the community property, and have executed any documents, title certificates, bills of sale, or other evidence of transfer necessary to effectuate the agreement;
g. Both you and your partner waive any rights to support from the other;
h. Both you and your partner have read and understood a brochure prepared by the Secretary of State describing the requirements for terminating a domestic partnership; and
i. Both you and your partner desire the domestic partnership to be terminated.
Possible Negative Affect on Immigration Status. You can register as domestic partners regardless of either partner’s immigration status. Unfortunately, however, doing so will not allow you to sponsor your partner for permanent residence. In addition, for some non-U.S. citizens, registering as a domestic partner might be used as evidence of an intent to stay in the U.S. on a permanent basis, which can be a problem for people who are here on non-immigrant visas. Generally speaking, if you are not a U.S. citizen or legal permanent resident, you should consult an immigration attorney before registering as a domestic partner.
Responsibility for Debts. You are responsible for any debts incurred by your partner from the date you first registered as domestic partners with the State of California. For example, if you and your partner registered as domestic partners on February 1, 2001 and your partner incurred $10,000 of debt between February 1, 2001 and February 1, 2005, you are equally responsible for the $10,000 of debt -- even if you later dissolve the partnership. If your partner dies, you are fully responsible for her/his debts.
If you and your partner do not want to be jointly responsible for each others’ debts and assets, you can draw up a property agreement (similar to a prenuptial if drawn up prior to registration or a postnuptial if drawn up after registration) to define how your assets are divided in a manner other than how state law would divide them. Any such agreement must meet the requirements for a valid prenuptial or postnuptial agreement to be enforceable. Note, however, that it is not possible to create a contract that dissolves your responsibility to pay child support upon dissolution.
Effect on Income. After January 1, 2005, 50% of all of the wages that you earn -- or have earned from the date that you first registered your domestic partnership -- are considered to be your domestic partner’s property. In contrast, any money or property that you inherit or are gifted after the date you first registered as domestic partners will not be considered “community property” and your partner will not be entitled to any portion of it so long as it is kept separate and not commingled.
Potential Gift Tax Liability. Even after the new law goes into effect, domestic partners will not be entitled to all of the same tax protections given to married couples. While most state tax laws will apply equally, federal tax laws will not. So, for example, federal tax laws allow married spouses to transfer unlimited amounts of property between themselves, without any tax penalty. However, because domestic partnerships are not marriages, these rules of unlimited transfers may not apply to transfers between registered domestic partners. Thus, a transfer of over $12,000 in any given year may be considered a “gift” and taxed as a gift. For example, if a wife owns a beach house and transfers the title to her husband, the property is not taxed. However, if one domestic partner owns a beach house and transfers the title to his or her partner, the value of the property, over $12,000 might be taxed as a gift by the federal government.
Income Tax Filing Status. California enacted SB 1827 as law, beginning January 1, 2007, which requires registered domestic partners to use the same filing status as married couples. Beginning with their 2007 tax returns, most registered domestic partners will use either married filing joint or married filing separate filing status (applying the same rules applicable to spouses). Federal law does not recognize registered domestic partners. Registered domestic partners will remain individual filers for federal purposes. Where preparation of a California return relies on a federal return or federal law, registered domestic partners may need to perform special calculations to arrive at the proper California tax.
Property Settlement Upon Dissolution of Partnership. As noted above, a dissolution of domestic partnership will be treated the same as it is for married couples who are divorcing. A judge will oversee the dissolution to make sure that there is a fair division of property between the two domestic partners. For example, if one partner has been working while the other has been the primary care giver for children, the court will divide the total partnership assets evenly between the two partners, even if the primary care giver did not earn any income. In dividing your assets, a court will take into account the provisions of any property agreements.
To make matters worse, because the federal government currently does not recognize registered domestic partnerships for any federal purpose, and because federal tax laws give special protections to married couples that are not available to unmarried couples, it is possible that transfers of assets greater than $121,000 between domestic partners will be taxed either as income or as a gift by the federal government, even if the transfer is part of or related to a dissolution proceeding. By way of contrast, transfers between spouses during a marriage or as part of a divorce proceeding are not taxable events.
Effect on Public Assistance. It is likely, although not absolutely certain, that your registered domestic partner’s income will be taken into account when calculating your eligibility for some public assistance benefits, such as Medi-Cal or food stamps, just as a spouse’s income is taken into account when a married person applies for benefits. Therefore, it is possible that your eligibility for some forms of public assistance will be negatively impacted by the new law. If you are or believe you may be receiving public benefits, the Law Offices of Afshin A. Asher, Inc. strongly encourages you to contact the specific program administrator to find out more information. Generally speaking, people who are receiving public assistance should be very cautious about registering as domestic partners, because in many instances there is a great likelihood that you will lose your benefits.
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