CALIFORNIA DOMESTIC PARTNERSHIPS

What Domestic Partners or Potential Partners Need to Know about California Domestic Partnerships

As of January 2005, all of California's family law rules (i.e. for divorce, legal separation, annulment, spousal support and child custody) apply to state-registered domestic partners. This dramatic new set of laws is one of the most substantial legal changes world-wide to affect same-sex couples, given the very large number of gay and lesbian couples in California who have already registered as domestic partners. In addition, because opposite-sex couples over the age of 62 (and who qualify for certain Social Security benefits) can also register, the group of affected people is even larger.

This change in the law means that all income and all assets and savings acquired by domestic partners after registration (or after January 1, 2005, depending on whether the law is considered to be retroactive), and all assets accumulated from earned income, are presumed to be community property (equally owned), regardless of the title of deeds, assets, or accounts.

In general, there is a requirement of a written agreement to transmute (change) property from community to the separate property of one of the partners or from separate property to community property, subject to specific family law provisions for reimbursement of certain contributions, based upon a tracing of separate assets (Family Code §852). The rules of community property for domestic partners apply to savings accounts, stock options and accounts, real property acquired, businesses developed, intellectual property and IRA/pension benefits accrued.

Assets acquired by a domestic partner before registration, or gifts or inheritances received at any time, are presumed to be separately owned (separate property) of the acquiring partner – subject to complex statutory rules for allocating mixed assets/debts applying as well.

Partner Support: As with any "married" couple, the lower-earning domestic partner will be eligible for post-separation partner (spousal) support, as determined by a family law court judge, based on statutory factors. Partner support is generally for a period no longer than half the "marriage" in shorter lasting partnerships (10 years or less) and perhaps longer in partnerships lasting over 10 years.  This is a “rule of thumb” concept and many other factors may come into play in setting partner support.  The fiduciary duty of married couples will also be imposed on domestic partners, with potential for liability for mismanagement or wrongful transfer of community property assets.

Dissolution of Partnership: Dissolutions of domestic partnerships will require resolution through the judicial process, the same as for marital dissolutions.  As with married couples, partners with pre-registration assets and debts may, in some situations, have those disputes resolved by the Family Courts along with partnership assets.  In other situations, a separate lawsuit over pre-registration claims may be possible, and in some situations, the two lawsuits can be combined in one action (“joinder”).

Unresolved Legal  Issues Concerning Domestic Partnerships:

There are several particular uncertainties in the new domestic partnership laws that make planning difficult . The key uncertainties are as follows:

Couples have been allowed to register as domestic partners since 2000. Thus, for couples that registered before January 2005, the "date of the establishment of the domestic partnership" may be the date of the initial registration or January 1, 2005, when the new law went into effect. This date is not yet certain. The current law is silent on this issue; there are proposed amendments that, if enacted, will impose all duties/benefits retroactive to the couple's registration date rather than January 2005. There is some question as to whether this retroactivity provision would be constitutional, but since there was an opt-out period (until December 31, 2004) that allowed either partner to terminate the registration before these new provisions went into effect, it may be constitutional to make this law retroactive.

Few of the state or federal tax benefits and burdens that apply to married couples apply to domestic partners, which can make it very hard to analyze property and asset issues and to anticipate dissolution allocation issues.  State law is changing and there have also been changes in federal law that now benefit domestic partners.  It is less certain, however, whether a partner's assets will be used to disqualify his or her partner from obtaining means-tested benefits.

It is also uncertain what the outcome will be of the dispute over same sex marriage.  In addition, it is unclear if California courts will fully recognize an out of state or out of country same sex marriage.

Alternatives for California “Non-Marital” Couples:

It is difficult to predict all of the benefits and burdens of registration due to the state of flux of the laws dealing with domestic partnerships and same sex marriages. In order to help simplify the decision-making process for potential domestic partners, potential partners should consider the following alternatives:

Remain unregistered and organize all property and debt allocations by title and account name,  without executing any formal asset or property agreement.  Formal wills and powers of attorney for healthcare and asset management should be executed for individuals choosing this alternative as well as all of the alternatives set forth below.

Remain unregistered but execute property co-ownership and/or cohabitation agreements to address allocation of property, assets, debts, and post-separation support.

Register and agree to be bound by all community property rules.  Potential partners should definitely consider written agreements to address their pre-registration assets and debts.

Register and execute property co-ownership and cohabitation agreements to modify the community property rules regarding assets, debts, and post-separation support. (Support waivers are now legal but are closely scrutinized by family law courts).

Making a Decision to Form a Domestic Partnership:

The first step is to decide if registration is important for your relationship (i.e. to obtain insurance or other private benefits, to be eligible for adoption procedures, to minimize property tax or transfer taxes, to establish a more committed relationship). If registration is clearly important for you, evaluate what written agreements you would like to modify the community property rules regarding property or debt or inheritance issues, or spousal support obligations, and if such modifications are desired, draft and execute the required agreements.

For partners addressing adoption issues and for those who want to limit the effect of partnership family law, have your limiting agreements in place before you register, not afterwards (if you have not already registered).

Decide whether registration is clearly harmful to your situation (e.g., disqualification from benefits, exposure to partner's debt, privacy issues).  If registration is clearly harmful for the two of you, evaluate what private written agreements are needed to provide for property or debt or inheritance rights and benefits; if such agreements are necessary, draft and execute the agreements.

Reasons not to register may include: Immigration concerns, tax issues, eligibility for public benefits, exposure to debt liability, high-risk business/professions.  Remember to keep assets separate, if possible, until your written agreements are signed.

If registration is neither vital nor harmful, decide whether you prefer registration (with or without private agreements limiting the community rules) or non-registration (with private agreements providing for property and debt protections).

Terminating a Domestic Partnership:

There are two ways to end a California registered partnership: (1) Filing a notice of termination with the Secretary of State; (2) Filing a petition for termination of the domestic partnership with the family court in the county where you reside.

Termination By Filed Notice

Termination By Court Action

In all cases where you do not meet the 10 conditions above, you will need to go through a court action to dissolve the domestic partnership.