The legal landscape and concerns for those whose households challenge the traditional concepts of family in California.
By Howard S. Klein & Geoffrey M. Murray, Family Lawyers
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III. ESTATE PLANNING FOR COUPLES WHO HAVE REGISTERED AS DOMESTIC PARTNERS
The issues presented here, with respect to potential conflict of interest, actual conflict of interest, dual representation versus independent counsel, and conflict waiver letters are the same as those set forth in Section II, above.
Understanding the Family Relationships of the Partners
By definition, neither partner can be married for there to be a valid registered domestic partnership. (See Section I, Requirements for Domestic Partnerships, above.) The discussion of family relationships, including the spousal support obligation to a former spouse, the child support obligation to the other parent of a minor child, and the need to name any such former spouse or minor child in the estate planning documents in order to avoid their treatment as omitted and entitled to an intestate share, is equally applicable here.
Ensuring that the Domestic Partnership Has Been Registered
The attorney must not take the partners’ word for the critical fact of registering with the Secretary of State under DPRRA. The attorney should request and examine a copy of the Declaration of Domestic Partnership that was filed in Sacramento. This is of great importance in light of the several different species of domestic partnership that were available at one time both before and concurrent with the statewide recognition. Municipalities, like the City of West Hollywood, and counties, like San Francisco, had allowed couples of varying definitions to register as domestic partners. These registrations were of relatively little effect and were often used only to secure health insurance and other work-related benefits for partners of those fortunate enough to have worked for employers willing to extend those benefits to non-married couples.
The California Court of Appeal in a decision filed in September, 2006, found that a lesbian couple’s having registered as domestic partners only with the City and County of San Francisco in 1994, as part of that local government’s domestic partnership program, was not sufficient to bring them within the purview of the Family Code and hence the jurisdiction of the Superior Court for purposes of the property division and orders for partner support and the payment of attorney’s fees. “To obtain the benefits of the current law . . . compliance with the provisions for formation of a domestic partnership under the Domestic Partner Act, including formal registration. is necessary.” Lena Velez v. Krista Smith (2006) 142 Cal.App.4th 1154, 1165.
California local governments no longer provide domestic partner registration, as the statewide recognition has taken precedence. Regardless there are likely many potential clients who are under the impression that their original registration with a city or county has the same force and effect as the statewide institution.
Inquiry into Existing and Future Assets and Obligations
The discussion of this topic in Section II, above, is equally applicable here.
The estate planner must also be aware that the laws of community property and of joint liability for community debts are applicable in the case of registered domestic partnerships. Thus, assets acquired from and after the time of registering with the Secretary of State are presumed community property, and if they were purchased with the personal service earnings of either or both of the partners during that period are certainly community property unless the parties have contracted to the contrary. And if, during the same period, one of the partners has incurred a debt, that debt is also owed by the other partner, unless the parties have contracted to the contrary.
Explanation of the Property and Spousal Support Laws as They Affect Registered Domestic Partners
With respect to property, not only must the attorney explain to the registered domestic partners the differences between separate property, joint tenancy, tenancy in common, and payable on death holdings, but, most importantly, how community property, both with regard to assets and debts, factor into the partners’ relationship. In particular, the attorney must carefully explain how community property differs from separate property with respect to lifetime entitlement, the ability of the owner to transfer it by inter vivos or testamentary instrument, and perhaps most importantly the statutory requirement of an equal division of the community property in the event of a dissolution of the domestic partnership, which is exactly comparable to the situation in a marital dissolution.
The attorney must explain to the registered domestic partners that the duties to support the other partner during the partnership, and after the dissolution of the partnership through alimony awarded by the Court, are just as applicable as in the case of marriage. Further, the Family Court always has jurisdiction over the rights of minor children, whether such children are born of marriage or of domestic partnership (registered or not).
The registered domestic partners must be given to understand that their legal relationship is generally that of a marriage except that virtually none of the benefits that federal law confers upon spouses apply to same sex couples. Those excluded federal benefits include, but are by no means limited to, those relating to immigration, Social Security, Medicare, treatment as a couple under federal tax law, veterans’ benefits, and federal employment benefit laws such as ERISA.
Domestic Partnership Agreement
The domestic partnership agreement is the analog of the cohabitation agreement for heterosexual couples and nonregistered same sex couples and is recommended unless the partners agree that their relationship will be governed by the same rules that apply to marriage. That is because a domestic partnership agreement clearly defines the relationship of the partners with regard to several issues. For example, will partnership personal service earnings be considered community property, as provided by the divisional law or will they be the separate property of the earning partner? Will accretions to separate property be considered mixed under Pereira vs. Pereira (1909) 156 Cal.1, or Van Camp vs. Van Camp (1921) 53 Cal.App. 17? Or are they to remain entirely the separate property of the partner who brought them into the partnership? And if the domestic partnership is ultimately dissolved, will the partners waive or limit the amount and duration of alimony?
In sum, a domestic partnership agreement is analogous to a prenuptial agreement if it precedes the partners’ registering with the Secretary of State. Conversely, it is analogous to a postnuptial agreement if it is executed following such registration.
The requirements for the enforceability of prenups (or their analogs in the domestic partnership situation) are stringent. See the Uniform Premarital Agreement Act, Family Code Sections 1600-1617 (“UPAA”). As a practical matter, although not strictly required by UPAA, the parties should have independent counsel, the parties should exchange full information as to assets and obligations, and the agreement should be fair (whatever that means). The requirements for enforceability of postnups (or their analogs) are even more stringent, since the parties are subject to interspousal fiduciary duties under Family Code Sections 721 and 1100; with postnups, an adequate consideration is required. See Messenger vs. Messenger (1956) 46 Cal.2d 619.
Usual Estate Planning Documents
The discussion of this topic in Section II, above, applies with a vengeance in the context of registered domestic partners. Here, however, the planning is very much like estate planning for married couples except, alas, that the marital deduction is non-existent, there are no federal interspousal tax-free transactions, and placing one domestic partner’s property into a joint trust and comparably innocuous-appearing transactions may constitute federal taxable transactions. Thus, the estate planner must have his income, gift and estate tax thinking cap on at all times. And the frequency of the accountant’s preparing gift tax returns will be significantly greater than when dealing with marrieds.
When drafting estate planning documents, from trusts to wills to financial powers of attorney and advance health care directives, it is imperative to set forth the existence of the domestic partnership and the date of the partners’ registration, so that it is clear on their face that the documents are to be treated as analogous to those involving married couples.
For many reasons, the estate planner must handle transmutations of property with care. For one thing, the transmutation must strictly comply with the requirements of Family Code Sections 850 et seq., to wit: there must be a writing, it must constitute an express declaration of intent to change the character of particular property, for example, from separate to community; and it must be made, joined, consented to, or accepted by the partner who is adversely affected by it. Additionally, attorneys drafting such documents must be acutely aware of significant potential for conflicts of interest, particularly with respect to transmutations, since they almost always involve one party gaining and the other party losing as to the property involved.
By the same token, transmutations which occur after registration as domestic partners always are presumed the result of undue influence in a family law or family law-analogous setting, because in the context of an existing marriage or registered domestic partnership, any transaction which benefits one spouse or partner to the detriment of the other spouse or partner is presumed the result of undue influence and invalid. See, for example, Marriage of Haines (1995) 33 Cal.App.4th 277 and Marriage of Lange (2002) 102 Cal.App.4th 360.
Unmarried heterosexual couples and the attorneys who represent them have long recognized that cohabitation, without the benefit of clergy or the County Clerk’s office, is fraught with significant risks, both as to legal and tax aspects. For same sex couples and the lawyers who advise them, however, the recent domestic partnership statutes present a brave new world. It is a world in which same sex couples possess essentially all the benefits of married couples, except for federal tax benefits, but also are subject to the same detriments as married couples, including community property laws, duty of support, and dissolution. It is a world in which such couples and their lawyers must proceed with care.
1The Supreme Judicial Court of Massachusetts ruled in 2003 that the denial of marriage rights to same-sex couples was unconstitutional. Massachusetts remains the only state in the Union that recognizes same- sex marriage. Vermont and Connecticut provide for civil unions between same-sex partners. New Jersey, Maine and California provide for domestic partnerships.
2 The registration referred to here is required to have been at the state level. Prior registrations at the municipal or county level in California were nullified with the passage of the Domestic Partner legislation. See below.
3 Probate Code Section 6401
4 Probate Code Sections 8461, 8462
5 Probate Code Section 1811
6 E.g., Probate Code Section 1812
7 E.g., Probate Code Section 1874
8 Apparent anomalies in a review of Probate Code sections include the provisions relating to guardianship and conservatorship and specifically the interested persons who may appear at hearings, who may file requests for special notice, persons whose names must appear in the contents of petitions and who may object to petitions or accounts. Viz., both spouses and domestic partners of conservatees but only spouses of wards may claim the above rights. See Probate Code Sections 2622, 2653, 2700, 2803, and 2805. As well, Probate Code Section 2430, which covers payments of debts and expenses by a guardian or conservator, allows for the provision of “the necessities of life” to the “spouse and minor children of the ward or conservatee” but allows for the provision of only “basic living expenses . . . to the domestic partner of the conservatee.”
9 Family Code Section 308.5
10 Family Code Section 297.5(k)
Copyright: FMBK – Howard S. Klein and Geoffrey M. Murry
Howard S. Klein, a Certified Specialist in Estate Planning, Trust and Probate Law**, is the head of West Los Angeles Law Firm, Feinberg Mindel Brandt & Klein LLP’s, Probate Department. Mr. Klein graduated from UCLA and UCLA Law School. He worked as a trust administrator and has practiced law in Los Angeles County for over 40 years, including 35 years in Family Law. Mr. Klein has lectured, written and been a frequent panelist for Continuing Education of the Bar and most major local bar associations, primarily on probate/family law cross-over issues, on which he is an acknowledged authority.