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Los Angeles Estate Planning Attorney | Law Office of Philip J. Hoskins

 Same-Sex Marriage Rights 

Now that the United States Supreme Court has ruled in favor of same-sex marriage rights, we are seeing various attempts to limit that right by some states. It is likely they will be ruled invalid, but that may depend upon the new member of the court when approved.

This means that same-gender married partners will be treated by the federal government the same way opposite gender couples are treated. This applies for immigration, Social Security, taxation and other programs and departments.
  • Community Property

This means that all income and all assets and savings acquired after marriage, 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 apply to savings accounts, stock options and accounts, real property acquired, businesses developed, and IRA/pension benefits accrued during marriage. In addition, pre-marriage 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." The fiduciary duty of married couples includes the potential liability for mismanagement or wrongful transfer of community property assets.

The termination of a marriage requires judicial process, except there is a simplified process or couples married 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.

  • Tax issues

For purposes of California tax laws, domestic partners are treated the same as married couples. That is not the case under federal tax law, however. Domestic partners are still individuals for that purpose.

  1. You must file your state tax return as married, either filing jointly or separately. Married couples also must file their federal tax returns in this manner.
  2. Property transfers between married couples or domestic partners, whether during your life or on death are exempt from California taxes. Such transfers are not exempt for domestic partners regarding federal taxes.
  3. The IRS has ruled that Domestic Partners must claim one-half of each other's income on their federal tax returns. This is a major issue that you should speak about with your tax advisor. IRS publication link A portion of the ruling:

    Community or Separate Property and Income

     The following is a summary of the general rules. These rules are also shown in Table 1.

    Community property.   Generally, community property is property:

    • That you, your spouse (or RDP/California same-sex spouse), or both acquire during your marriage (or registered domestic partnership/same-sex marriage in California) while you and your spouse (or RDP/California same-sex spouse) are domiciled in a community property state.
    • That you and your spouse (or RDP/California same-sex spouse) agreed to convert from separate to community property.
    • That cannot be identified as separate property.

    Community income.   Generally, community income is income from:

    • Community property.
    • Salaries, wages, and other pay received for the services performed by you, your spouse (or RDP/California same-sex spouse), or both during your marriage (or registered domestic partnership/same-sex marriage in California).
    • Real estate that is treated as community property under the laws of the state where the property is located.

       Separate property.   Generally, separate property is:

    • Property that you or your spouse (or RDP/California same-sex spouse) owned separately before your marriage (or registered domestic partnership/same-sex marriage in California).
    • Money earned while domiciled in a noncommunity property state.
    • Property that you or your spouse (or RDP/California same-sex spouse) received separately as a gift or inheritance during your marriage (or registered domestic partnership/same-sex marriage in California).
    • Property that you or your spouse (or RDP/California same-sex spouse) bought with separate funds, or acquired in exchange for separate property, during your marriage (or registered domestic partnership/same-sex marriage in California).
    • Property that you and your spouse (or RDP/California same-sex spouse) converted from community property to separate property through an agreement valid under state law.
    • The part of property bought with separate funds, if part was bought with community funds and part with separate funds.

    Separate income.   Generally, income from separate property is the separate income of the spouse (or RDP/California same-sex spouse) who owns the property.

    Table 1. General Rules — Property and Income: Community or Separate?

    Community property is property:

    • That you, your spouse (or RDP/California same-sex spouse), or both acquire during your marriage (or registered domestic partnership/same-sex marriage in California) while you are domiciled in a community property state. (Includes the part of property bought with community property funds if part was bought with community funds and part with separate funds.)
    • That you and your spouse (or RDP/California same-sex spouse) agreed to convert from separate to community property.
    • That cannot be identified as separate property.

    Separate property is:

    • Property that you or your spouse (or RDP/California same-sex spouse) owned separately before your marriage (or registered domestic partnership/same-sex marriage in California).
    • Money earned while domiciled in a noncommunity property state.
    • Property either of you received as a gift or inherited separately during your marriage (or registered domestic partnership/same-sex marriage in California).
    • Property bought with separate funds, or exchanged for separate property, during your marriage (or registered domestic partnership/same-sex marriage in California).
    • Property that you and your spouse (or RDP/California same-sex spouse) agreed to convert from community to separate property through an agreement valid under state law.
    • The part of property bought with separate funds, if part was bought with community funds and part with separate funds.

    Community income 1,2,3 is income from:

    • Community property.
    • Salaries, wages, or pay for services of you, your spouse (or RDP/California same-sex spouse), or both during your marriage (or registered domestic partnership/same-sex marriage in California).
    • Real estate that is treated as community property under the laws of the state where the property is located.

    Separate income 1,2 is income from: 
     
    • Separate property. Separate income belongs to the spouse (or RDP/California same-sex spouse) who owns the property.

     Click here for the IRS bulletin

Remember: Getting married or registering as a California Domestic Partner does not relieve couples of the duty to take care of estate planning and tax planning issues.

This has been a brief summary of some points regarding Marriage and Domestic partnerships. If any of the above points applies to your circumstance, we urge you to seek legal counsel before deciding upon a course of action.


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