Addressing the legal landscape and concerns about estate planning for non-traditional couples—challenging the traditional concepts of family in California.
By Howard S. Klein & Geoffrey M. Murray, family lawyers
The requirements of registration as domestic partners are largely identical to the requirements of marriage, with the exception that the parties must live together and, if the parties are not of the same sex, that at least one of the parties meets the eligibility requirements for the receipt of Social Security old-age benefits and at least one of them is aged over 62 years. As with prospective opposite-sex spouses, neither of the parties can be already married or registered as a domestic partner; they cannot be related by blood within the degree that the blood relationship would prohibit marriage, and each must meet the age and consent requirements.
Family Code Provisions
Family Code Section 297.5(a) makes explicit the legislative intent that its provisions be construed liberally in order to provide a full range of rights to By Howard S. Klein and Geoffrey M. Murry
Although the majority of estate plans created by practitioners will contemplate marriage between the settlor and a person of the opposite sex, life and the practice of law in the 21st century dictate that not all of those who seek the services of estate planning specialists and other estate and probate professionals will fit that mold. With that simple fact in mind, the author here surveys the current legal landscape in California and addresses the concerns of providing legal counsel to clients whose households challenge the traditional concepts of a family.
I. THE NEW LANDSCAPE OF CALIFORNIA DOMESTIC PARTNERSHIPS
The Establishment of State Recognized Domestic Partnerships
In 2000, the California legislature enacted and then Governor Davis signed legislation involving same-sex partners living together in committed relationships. The signal legislation in this field, the California Domestic Partner Rights and Responsibilities Act (“DPRRA”), [AB 205, comprising Division 2.5, including Sections 297-299.6, of the Family Code], was signed into law in 2003 and became fully effective January 1, 2005, creating perhaps the broadest grant of a marriage-like status to same-sex couples among those 49 states that do not recognize same-sex marriage1. As a result, non-married eligible couples who have already properly registered as domestic partners or who so register in the future have essentially all the rights and obligations of married persons under California law2. DPRRA was amended in 2004 by a “cleanup bill” [AB 2580, being Family Code Section 297.5(m)(1)], which provided that a domestic partnership would be deemed to exist on the date of its registration with the state (thus giving retroactive effect to the provisions of DPRRA as to those registered domestic partnerships which predated the effective date of the statute).registered domestic partners, whether such rights, protections and benefits, and responsibilities, obligations and duties derive from statutes, administrative regulations, court rules, government policies, common law or any other provisions or sources of law. Thus, registered Howard S. Klein domestic partners have been accorded hundreds of rights and obligations of community property and community debt, support, fiduciary duties, duties with respect to children of the relationship that married persons have, hospital visitation, medical decision-making, financial and legal decision-making, recovery for wrongful death, access to records, sick leave, financial support, community property and related rights, “marital privileges” in legal proceedings, and fiduciary duties to one’s domestic partner.
Probate Code Provisions
Registered domestic partners now have essentially the same rights as married persons under the Probate Code. These include (a) the right to an intestate share of a deceased partner’s estate3, (b) the same priority to a right to appoint an administrator of a deceased partner’s estate4, and (c) the same priority of right to serve as or nominate a conservator5. The vast majority of changes to the Probate Code consist of amendments to the statutory language to provide for domestic partners or domestic partnerships as a logical analog to statutes mentioning spouses and marriages or to include domestic partners in the list of affected or interested persons78. Entirely new Probate Code sections, added in 2001, include Sections 6122.1, which is the analog to Section 6122, regarding the effect of divorce on spousal testamentary provisions, and Section 4716, which gives a patient’s domestic partner the same authority as would have a spouse in making health care decisions for the incapacitated patient.
Rights Not Conferred Upon Registered Domestic Partners
The Act does not affect the California Defense of Marriage Act9, which provides that the only lawful marriage in this state is one between a man and a woman. More importantly, the Act expressly does not amend or modify federal law10.
This is highly significant from a tax standpoint in several ways: It denies to domestic partners the federal estate tax marital deduction and the ability to file joint federal income tax returns. Further, Internal Revenue Code section 1041 does not apply to transfers made in connection with the dissolution or legal separation of registered domestic partners, because 1041 only applies to transfers involving spouses or former spouses. In addition, the spousal property transfer exemption of Internal Revenue Code Sections 2056 and 2523 probably does not apply, and such transfers would be treated as taxable gifts.
With regard to taxation on the California state level, Governor Schwarzenegger recently signed into law a bill that allows registered domestic partners to file joint state tax returns. Although having no effect on federal treatment of domestic partners, SB 1827, which became law in early October, is likely to result in beneficial state tax treatment for many registered domestic partners. However the benefits may be outweighed by the potential complications of an individual filing a joint state tax return but still being forced to file federal taxes as single or head of household.
Finally, registered domestic partners are denied federal rights involving Social Security, Medicare, veterans’ benefits, immigration, ERISA and family leave, among others.
Termination or Modification of Registered Domestic Partnership
Family Code section 299 sets forth two currently available procedures for terminating a registered domestic partnership. First, if the partnership is less than five years in duration, there are no children of the relationship, the asset and debt amounts are de minimus, there is no real property except for a short-term lease and the parties waive support and have executed a property settlement and related documents, the parties may execute and submit to the Secretary of State a Notice of Termination of Domestic Partnership. This procedure is similar to the summary dissolution procedure of Family Code section 2400.
For all other registered domestic partnerships, the Family Court has exclusive jurisdiction over proceedings relating to the dissolution or nullity of the partnership and the legal separation of partners. The procedures are equivalent to those involving married persons. Thus, all rights and obligations that attach in marital status proceedings will apply to domestic partnership status proceedings, including equal division of community property, debt liability, spousal support, standard temporary restraining orders (“ATROs”), child custody and support determinations, and pendente lite orders. Note that the ATROs, which are set forth in Family Code Section 2040, are just as significant a factor in estate planning which occurs during the dissolution of a domestic partnership as they are in estate planning in the course of a marital dissolution.
Possible Downsides to Registered Domestic Partnerships
Clearly, one or both of the domestic partners may elect not to register under DPRRA, for one or more of the following reasons:
1. The wealthier partner may not wish to commit to paying support either during the partnership or following domestic partnership dissolution.
2. The higher earner may wish to retain his/her earnings as separate property rather than have them characterized as community property, as to which the lower earner would have a one-half entitlement.
3. The equal division of community property in the event of dissolution may be unattractive to the partner whose efforts produced most of that property, and that partner might just want to retain that property, or most of it, as his/her separate property.
4. If one of the partners is a spendthrift, the other partner might not want to be liable for the spendthrift’s debts.
5. If one of the partners is a low- income individual who would otherwise qualify for state benefits, e.g. Medi-Cal, that qualification might be eliminated if the state considered the other partner’s income, which would be the case with registered domestic partners.
6. The partnership can only be terminated judicially unless it is short term with no children and but little assets and the partners waive support.
Options Available to Domestic Partners
Domestic partners can elect to either register or not register under the Act. The decision should not be a strictly emotional one, but should involve considerations of the finances and health of each of the partners, the stability of the relationship, among other issues, and the pros and cons of entering into a legal relationship which is entirely “marriage-like.”
Under any circumstances, the domestic partners should seriously consider contracting as to the manner, rights and responsibilities of holding property, income, debt and support issues. And, of course, the parties should do estate planning. In this regard, while there is no federal estate tax marital deduction, the registered domestic partnership could involve the community property exclusion and the use of an equitable life estate on the death of the first partner to die.
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 panellist 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.
Proper planning is important for same-sex couples, whose marriages are not officially recognized everywhere.