Urgent November, 2004 update:

NEW RIGHTS (AND RESPONSIBILITIES)

2008:  See  Gay Marriage and Estate Planning

Secretary of State Kevin Shelley recently sent letters to all registered domestic partners, alerting them of the recent passage of the Registered Domestic Partners Rights and Responsibilities Act of 2003 (AB 205), and urging them to contact an attorney. This is a brand new law (so new it's not law until 1/1/2005).

I went to a class about the new law. It is scary in its uncertainty. There are several issues which are known, and several unknown. The new law equates Registered Domestic Partners to married couples for purposes of California law, but not Federal tax law.  In fact, the new law says that for California purposes (other than income tax) as used throughout California laws, the word "SPOUSE" includes Registered Domestic Partners. 

Registered Domestic Partners can be either:

1. SAME SEX COUPLES or
2. UNMARRIED COUPLES OVER AGE 62 (who may choose not to marry for Social Security or tax purposes)

Along with all of the (State Law) benefits of marriage come many (unexpected) responsibilities, including:

•         Alimony
•         Divorce
•         Inheritance
•         Property Tax
•         and a host of other "benefits."

1) Medi-Cal and need-based programs.

Effective 1/1/05, Registered Domestic Partners are subject to the same financial qualification requirements as married couples. Assets of both Partners are examined; if 1 Partner has low income and has no assets he was qualified in 2004. 1/1/2005 eligibility for both Partners will be determined as if they are married.

2) Community Property.

For married couples, community property is whatever is earned by working during marriage. The new law applies retroactively to the date of domestic partner registration, which might have been 4 years ago.

This can be dramatic. Bob makes a lot of money. His forward-thinking employer provided medical benefits several years ago for Registered Domestic Partners, so in 2002 he and Bill registered.

Bill's credit is terrible; he is unemployed; he has liens and judgments. Bob buys a home in his name in 2002. Bob supports the household.

Effective 1/1/05, Bill has a community property claim to that home, retroactive to 2002.  Can the claims against Bill can be asserted against the house???

3) Effective 1/1/05, Registered Domestic Partners get the last benefits of marriage: divorce and alimony.

Right now, "divorce" can be done by filing a termination form in Sacramento; next year it means going to Court.  And of course, spousal support will apply.

4) If community property law applies, and Bob makes $100,000, but Bill owns 50%, that means each pays tax on $50,000. But that violates income tax rules (assignment of income, to try to spread the tax to low bracket people). So maybe Bill reports $100,000 and pays all the tax.

But if Bob owns half, did Bill make a taxable gift to Bob of $50,000?

And effective 1/1/05, this is retroactive back to when they first registered. If it has been 4 years, that could be a big gift.

The above laws, and a bunch more, are way beyond my expertise, apply 1/1/05.  No one knows the answers to the questions raised here.  The top experts can teach classes and write articles (which I read) and no one knows any of the answers yet.

What can be done RIGHT NOW IF you are already Registered Domestic Partners and IF want to avoid the above, especially the retroactivity of the community property claim?

Do a Pre- / Post-Marital Agreement, subject to the same laws as married couples. This takes mutual agreement of both parties.

[NOTE: If you ALREADY HAVE a property agreement, it may not be an effective waiver of these new community property rights, as they did not exist until now.]

CANCEL (at least for a while) the Registration. This can be done by any 1 Partner at any time, but it must be filed in Sacramento on or before 12/30/04.    (Note: 12/31 might be a holiday.)

Again, this is beyond my area of expertise. I just wanted to alert you to study the issue and take appropriate action before the end of the year.

See also:

California's Domestic Partnership Law: Is Registration Under AB 205 Right for Your Clients? by Frederick Hertz

AB205--The New Domestic Partnership Law by Virginia Palmer
 

 Please do not rely on these articles as everything about these new rules is preliminary and must be resolved.

See also information about  Living Trusts for Unmarried Couples