All couples in California were quietly granted a new right on Jan. 2, 2020: the ability to register as domestic partners. Previously, this right was only permitted for same sex couples or heterosexual couples where both parties were over age 62. Now, any adult couple in California can register as a domestic partnership.
Why do couples choose to stay unmarried?
Beyond the many personal reasons why a couple might choose to remain unmarried, there could be financial or legal issues to consider. Couples later in life who have already accumulated their own wealth or those with blended families may elect to skip the marriage aisle the second time around. Other couples cite liability for their partner’s debt or worries about their high medical costs in retirement, as reasons to remain unhitched.
Why would you register as a domestic partner instead of getting married?
Domestic partnership in California affords all rights of marriage, such as access to health insurance, hospital visitation and next-of-kin survivorship rights. Also included are the right to change your last name, apply for any state-level benefits available to married couples, adopt children together, and even claim community property. Domestics partners must file joint CA returns, go to family court to dissolve their partnerships and even pay spousal support if ordered. At the same time, domestic partners can continue to receive Social Security, pensions, and other federal benefits if these are related to an ex- or deceased spouse. Many of these benefits would be lost in the event of a remarriage.
Beyond the pro’s and con’s, there are notable differences between domestic partnerships and marriage, and these should be considered based on personal circumstances in consultation with your tax preparer and attorney. The major differences between domestic partnership and marriage fall on the federal side of the equation and include exclusion from all federal tax and estate-related rights, such as IRA spousal rollovers, joint federal filing, unlimited marital deduction, as well as other benefits, such as spousal pension and Social Security benefits and more.
Despite a large number of exclusions, domestic partnership may be the right fit for the right client. Talk to your advisor for more information.