CALIFORNIA DOMESTIC PARTNERSHIP

CALIFORNIA DOMESTIC PARTNERSHIP REGISTRATION

Effective January 2005, all of California's family law rules were applied to state-registered couples. This dramatic change in law is probably the biggest legal change 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. And, because opposite-sex couples over the age of 62 (and who qualify for certain Social Security benefits) can also register, the pool of affected people is even larger.

This change in law means that all income and all assets and savings acquired 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 equally owned (community property), regardless of titling of deed, asset, or account.

In general, there is a requirement of a written agreement to transmute property from community to separate or from separate property to community property, subject to specific family law provisions for reimbursement of certain contributions based upon a tracing argument. See Fam C §852. The rules of community property also will apply to savings accounts, stock options and accounts, real property acquired, businesses developed, and IRA/pension benefits accrued -- though it is unclear how all of these rules will be applied to domestic partners.

In addition, pre-registration assets, or gifts or inheritances received at any time, are presumed to be separately owned -- with the well-established complex statutory rules for allocating mixed assets/debts applying as well.

Moreover, as with any "married" couple, the lesser-earning partner is eligible for post-separation spousal support as determined by family law court judge, based on statutory factors; spousal support is generally for a period no longer than half the "marriage." So too, the fiduciary duty of married couples will be imposed on partners, with potential liability for mismanagement or wrongful transfer of community property assets.

Most significantly, in the future, dissolutions of domestic partnerships will require judicial process, the same as for marital dissolutions, except for couples registered for less than five years with no disputes, few assets, and no real property and no children, who can use the "extra" summary dissolution process of Secretary of State termination. See Fam C §299. And, just as with married couples today, couples with pre-registration assets/debts may, in some situations, have those disputes resolved by the Family Court; 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 -- but only if both parties waive their right to a jury trial for the adjudication of pre-registration assets.

UNCERTAINTIES REGARDING REGISTRATION

While the basic rules of AB 205 are simple to summarize, there are several particular uncertainties in the new legislation that will make planning difficult . The key uncertainties are as follows:

1. Couples have been allowed to register since 2000. Thus, for couples that registered before January 2005, is the "date of marriage" the date of initial registration or is it January 1, 2005.

The current legislation is silent on this issue; there is a proposed amendment to AB 205 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 is difficult to analogize this provision to the retroactive provisions in family law that have generally been ruled invalid.

2. It is anticipated that none of the state or federal tax benefits and burdens that apply to married couples will apply to domestic partners, which makes it very hard to analyze property and asset issues and to anticipate dissolution allocation issues. It is less certain, however, whether a partner's assets will be used to disqualify his or her partner from obtaining means-tested benefits.

3. It is uncertain whether couples that registered with their partner out-of-state (e.g., Vermont civil union) will be covered automatically by AB 205 if they reside in California, but the answer is probably yes.

4. It is uncertain whether partners who were registered with someone else out-of-state (e.g., Vermont civil union) will need to terminate that registration before registering as domestic partners in California, but the answer is probably yes -- and they should be able to do so in California courts under the provisions of AB 205.

5. It is uncertain whether California courts will recognize a Massachusetts or a Canadian marriage.

6. It is uncertain whether oral and/or written agreements entered into by couples prior to their registration will be valid with regard to post-registration assets, unless they are expressly modified to meet the standards of post-marital agreements.

FOUR OPTIONS FOR CALIFORNIA COUPLES

Given all these complexities and uncertainties, it is difficult to predict all of the benefits and burdens of registration. In order to help simplify the decision-making process, it will be easier to divide the options into four basic categories:

1. Remain unregistered and organize all property and debt allocations by title, account name, and so forth, without executing any formal asset or property agreement.

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

3. Register and agree to be bound by all community property rules (note: some couples may still need written agreement to address their pre-registration assets and debts).

4. Register and execute property co-ownership and cohabitation agreement to modify the community property rules regarding assets, debts, and post-separation support (support waivers subject to court review).

MAKING THE REGISTRATION DECISION

In making the registration decision, I recommend that clients go through a "decision-tree" analysis, along the following lines:

FIRST, decide whether registration is vital for your relationship (e.g., to obtain insurance or other private benefits, to be eligible for adoption procedures, to minimize property tax or transfer tax implications).

Then, if registration is clearly vital for you, evaluate what private written agreements are desired 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 those facing adoption issues and for emotional reasons: make sure you have your limiting agreements in place BEFORE you register, not afterwards (if you have not already registered)!

SECOND, 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 to not register: Immigration concerns, tax issues, eligibility for public benefits, exposure to debt liability, high-risk business/professions, and remember to keep assets separate until your written agreements are signed.

THIRD, 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).

FACTORS TO CONSIDER

1. Consistency with your basic arrangements (are you a shared-asset couple or a separate property couple? If basically shared, registration probably is best; if basically separate assets, not registering is probably best).

2. Consider the tax implications, symbolic value, simplicity of rules, and the making of a political statement, and the other benefits of registering (e.g., wrongful death claims)

3. BIG RISKS: tax uncertainties, post-separation spousal support claims.

Once the decision has been made, either register or, if you decide not to be registered, then draft and execute the appropriate agreements: Property co-ownership agreements: ownership and management of property

4. Cohabitation agreements/pre-registration agreements: sharing of financial assets and provision for or waiver of post-separation support Mindset: intend to stay together, but clarify your decisions and agreements to help you each make appropriate decisions regarding savings, career goals/plans, sharing of assets and debts, property purchases/residential decisions. Act consistently to make sure the "paper" reality is consistent with the heartfelt reality!

FOURTH, remember: registering as a California Domestic Partner does not relieve couples of the duty to take care of estate planning and tax planning issues.

TERMINATING A DOMESTIC PARTNERSHIP

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

Termination By Filed Notice
You can use the notice procedure if all of the following conditions are met:

1. Both parties sign the termination notice.

2. You do not have any children and neither of you is pregnant.

3. The partnership is not more than five years old.

4. Neither of you owns an interest in any real estate, except for a residence lease without a purchase option that will end within one year from the date when the notice of termination is filed.

5. Your debts are less than $4,000.00.

6. Your community property, minus motor vehicles and debts is less than $25,000.00.

7. You have a written agreement regarding the division of your property.

8. You each waive the right to support from the other.

9. You have both read the Secretary of State's brochure on termination of domestic partnership.

10. You both agree that you want the domestic partnership to end.

Termination By Court Action

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

PALIMONY CASES

The absence of a registered domestic partnership does not necessarily mean that neither party has any rights in the property of the other. Under the California Supreme Court's 1976 decision in Marvin v. Marvin, even in the absence of a registered domestic partnership, parties who have been living together for extended periods of time can still bring a "palimony" action. Palimony actions have their basis in contract law - that is, an agreement between the parties as to how they would share or pool their assets and income. The ageement can be written or oral and sometimes can even be "implied" from the facts.

Prior to the Marvin case, courts had refused to enforce these agreements on the theory that they were agreements to engage in prostitution - the exchange of sexual services for property or money. Under the rule of Marvin, such agreements are enforceable to the entent that they are NOT based on the exchange of sexual services.

FILES RELATING TO DOMESTIC PARTNERSHIP

From the Domestic Partnership File Folder in the Files section of this website, you can obtain the following files:

1. Domestic Partnership Divorce Petition.

2. Response to Domestic Partnership Divorce Petition.

3. Domestic Partner Registration Statement.

4. Domestic Partner Termination Statement.

5. The Marvin v. Marvin Case.

All of the files are in Adobe Acrobat (pdf) format. If you do not have Adobe Acrobat Reader, you get it free from the Links section of the website.