Nov11KCBADP CLE Slides · 2011-11-09 · Domestic Partnership Rights and Responsibilities • WA...

11/9/2011

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DOMESTIC PARTNERSHIPS

UPDATE: Key Points and Taxation

Issues

Copyright, Jonathan L. Bowman, Attorney

at Law, PS and Mona Smith, PLLC 2011

Who Can Register As Domestic Partners

• Same sex couples and different sex couples where one

partner is aged 62

• Partners share common residence

• Not Married or in a Civil Union, nor in another DP

• Able to legally consent

-Age and Capacity

• Not close blood relatives

-Not nearer than second cousins

• http://www.sos.wa.gov/corps/domesticpartnerships/

• http://data.lambdalegal.org/publications/downloads/gen_le

gal-rights-registered-domestic-partners-washington.pdfCopyright, Jonathan L. Bowman, Attorney


How to Register

• Complete Domestic Partnership Declaration

and file it with the Secretary of State

Corporations Division with $50 payment

-Must be notarized [Remember: It Becomes Public]

• May obtain Domestic Partnership Declaration

online or at County Department of Licensing

offices.

• http://www.sos.wa.gov/_assets/corps/domesticpartners

hips/DomesticPartnerships2.pdf



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Domestic Partnership Rights and Responsibilities

• WA legislature passed 3 DP bills over 3 sessions -

Chapter 26.60 RCW Ref. 71 challenge to repeal 3rd DP law

• “Everything but marriage.” Domestic Partners have

essentially all of the same state rights and

responsibilities as different sex married spouses in

Washington

• If federal law is involved such as with ERISA or some

insurance laws, federal law trumps state law

• RCW 26.60.090 - Reciprocity.

http://www.ngltf.org/downloads/reports/issue_maps/rel_recog

_6_28_11.pdf



Family Law Rights and Responsibilities

Highlights

• Divorce, Dissolution, legal separation, annulment

• Community property

• Joint responsibility for debts

• Real estate excise tax exemptions

• Second parent adoption without paying for home study

• Parental presumption for children born into DP

• Parenting plan and child support obligations

• Protection under DV and crime victim laws



Medical and Death-Related Rights

• Hospital visitation, medical decision-making & receipt of partner’s health care information

- Does not replace living wills / health care directives

• Privacy & shared room in long-term care facility

• Intestate Inheritance Rights of a Domestic Partner

• Administer deceased partner’s estate

• State Estate Tax protection – 2014 [Marital Deduction]

• Autopsy and funeral arrangements

• Wrongful death damages

• Spousal protection against duty to pay public medical costs

• Public employee pension & survivor benefits - 2014



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Other Rights & Responsibilities

• Sick leave to care for ill partner

• Equal treatment as spouses under State insurance laws, unless conflict with Federal law

• Spousal immunity

• Spousal rights under guardianship & power of attorney laws

• Inheritance claim under will pre-dating DP registration

• State benefits for veterans’ partners

• Recognition of same-sex marriage and civil unions from other states and nations as WA domestic partnerships



What’s Not Included• All 1138 Federal Rights and Responsibilities - NoNo

– Joint tax returns* - Income Splitting

– Exemption from income tax on partner’s health benefits

– Exemption for transfers and/or gifts of property between

partners

– Federal Marital Deduction

– SSDI and Social Security spousal benefits

– Immigration rights

– Pensions

– Veterans’ spousal benefits

• Few State’s recognize WA Registered DPs. Very little

Reciprocity. DP rights may not extend beyond WA border!Copyright, Jonathan L. Bowman, Attorney


When Should Partners NotNot Register

• If want to adopt from a state or country that does not approve adoptions by lesbians, gay men or same sex couples

• U.S. military – DADT

• If one partner receives public assistance

• If foreign national without permanent legal status

• If you do not want all of the state rights and responsibilities conferred upon you



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Property Rights

• So now what….RCW 26.60.080 Community

Property Rights- Date of Application. Any

community property rights of domestic

partners established by chapter 6, Laws of

2008 shall apply from the date of the initial

registration of the domestic partnership or

June 12, 2008, whichever is later.

• Separate Property

• Community PropertyCopyright, Jonathan L. Bowman, Attorney


RCW 26.16.020 - Separate Property of Domestic

Partner.Property and pecuniary rights owned by a person in a state registered domestic partnership before registration of the domestic partnership or afterwards acquired by gift, bequest, devise, descent, or inheritance, with the rents, issues and profits thereof, shall not be subject to the debts or contracts of his or her domestic partner, and he or she may manage, lease, sell, convey, encumber or devise by will such property without his or her domestic partner joining in such management, alienation, or encumbrance, as fully, to the same extent and in the same manner as though he or she were not in a state registered domestic partnership.



RCW 26.16.030 - Community Property Defined

— Management and Control.

Property not acquired or owned, as prescribed in RCW 26.16.010 and 26.16.020 [Separate Property], acquired after marriage or after registration of a state registered domestic partnership by either domestic partner or either husband or wife or both, is community property. Either spouse or either domestic partner, acting alone, may manage and control community property, with a like power of disposition as the acting spouse or domestic partner has over his or her separate property, except:



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RCW 26.15.030 (1)..(1) Neither person shall devise or bequeath by will more than one-

half of the community property.

(2) Neither person shall give community property without the express or implied consent of the other.

(3) Neither person shall sell, convey, or encumber the community real property without the other spouse or other domestic partner joining in the execution of the deed or other instrument by which the real estate is sold, conveyed, or encumbered, and such deed or other instrument must be acknowledged by both spouses or both domestic partners.

(4) Neither person shall purchase or contract to purchase community real property without the other spouse or other domestic partner joining in the transaction of purchase or in the execution of the contract to purchase.



RCW 26.15.030 (5)..

(5) Neither person shall create a security interest other than a purchase money security interest as defined in *RCW 62A.9-107 [a letter of credit] in, or sell, community household goods, furnishings, or appliances, or a community mobile home unless the other spouse or other domestic partner joins in executing the security agreement or bill of sale, if any.

(6) Neither person shall acquire, purchase, sell, convey, or encumber the assets, including real estate, or the good will of a business where both spouses or both domestic partners participate in its management without the consent of the other: PROVIDED, That where only one spouse or one domestic partner participates in such management the participating spouse or participating domestic partner may, in the ordinary course of such business, acquire, purchase, sell, convey or encumber the assets, including real estate, or the good will of the business without the consent of the nonparticipating spouse or nonparticipating domestic partner.



Do Not Forget About Committed

Intimate Relationships!• “A meretricious relationship is a stable, marital-

like relationship where both parties cohabit with knowledge that a lawful marriage between them does not exist.” Connell v. Francisco, 127 Wn.2d 339, 346, 898 P.2nd 831 (1995)

• Domestic partners who are not registered or registered domestic partners who were together prior to registering may be or have been in a “committed intimate relationship” or meretricious relationship



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Committed Intimate Relationships

• Five factors for a court to determine existence

of a “committed intimate relationship” or

meretricious relationship:

– 1. Continuous cohabitation

– 2. Duration of relationship

– 3. Purpose of relationship

– 4. Pooling of resources and services for joint

projects

– 5. Intent of the partiesCopyright, Jonathan L. Bowman, Attorney



• Rebuttable presumption that all property

acquired during relationship is owned by both

parties

• The Court evaluates the interest each party

has in the property acquired during

relationship and makes a just and equitable

distribution of property




• Income and property acquired during

committed intimate relationship characterized

similarly to income and property acquired

during a marriage. Treated as owned by both

parties or “quasi-community” property

• Remember: Title in one person’s name is not

necessarily determinative of ownership if the

property was acquired during the relationship



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• Separate property acquired prior to relationship is beyond the reach of non-title partner and not subject to distribution at the end of the relationship

• When funds or services of both partners are used to increase the equity, maintain or increase the value of property acquired by one party prior to the relationship, a quasi-community interest may be acquired and a reimbursement to the community may be necessary in making a fair and equitable distribution




• However, if separate and quasi-community

funds are commingled to acquire a separate

property without the ability to trace the origin

of the funds, a court may consider the asset

quasi-community and make a fair and

equitable distribution. Koher v. Morgan, 93

Wn. App. 398, 968 P.2d 920 (1998)



“I do love you, but….”

• What you can do to protect your clients:

- Domestic Partnership Agreements

- Real Estate Property Agreements



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Domestic Partnership Agreements

• Pre or post domestic partnership agreements– Similar to pre-nuptial and post-nuptial agreements

• Designate separate property; remains separate– Income

– Assets

– Can effect the need to file federal tax returns under IRS Income Splitting Rules

– Be sure to advise clients to work with a CPA

• Designate partner contributions as gifts to separate property

• Designation of future acquired property

• Agreed upon distribution of property for dissolution



Ending a Domestic Partnership

• Death

• “Decree of Invalidity” = Annulment

• “Decree of Legal Separation”

– Does not end partnership

– Can affect property, finances and child custody,

support and visitation

• “Decree of Dissolution of Domestic

Partnership” = Divorce

– Court action requiredCopyright, Jonathan L. Bowman, Attorney


Dissolution

• Residency Requirements:– Washington resident on date dissolution petition filed

RCW 26.60.090 Reciprocity [Watch out for Canadian Marriages and other State Marriages or Civil Unions – A Divorce may dissolve the relationship in WA, but not the marriage, civil union or DP from another jurisdiction]

• Filing for dissolution– Summons and complaint by one or both partners

• Temporary Orders– Residential arrangements for partners / children

– Child support

– Maintenance (alimony)

– Payment of bills



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Dissolution – RCW Chapter 26.09

• Division of property and debts – what a court

will consider for a fair and equitable division

– Community property

– Separate property

– Length of relationship

– Employment history

– Couple’s property

– Whether children will remain in family home



Dissolution: Remember..

• Bad behavior does not usually affect division of property and debts– Exception: Misbehavior intentional and resulted in

destruction of property

• Taxes– State exemptions for spouses apply to DPs

– Federal taxes may incur – work with accountant

• Parenting plans & child support– Biological / adopted

– De Facto parentage (In re the Parentage of L.B., 155 Wn.2d 679 (2005)



TAX ISSUES FOR WA REGISTERED

DPs

What Are Some Things to Watch Out For:

- What happens when real property (a home) is

transferred between partners.

- WA Registered DPs Federal Taxes and Income

Splitting



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EXCISE TAX

WAC 458-61A-200 - Exemptions and

Exclusions.

• Introduction. There are limited exemptions or

exclusions from the real estate excise tax

provided by law. WAC 458-61A-201 through

458-61A-217 discuss exemptions and the

procedures that must be followed to qualify

for an exemption.



WAC 458-61A-203 - Community Property,

Dissolution of Marriage or Domestic

Partnership, Legal Separation, Decree of

Invalidity.

(1) Community property. Transfers from one spouse or domestic partner to the other that establish or separate community property are not subject to the real estate excise tax.

(2) Court decree. The real estate excise tax does not apply to any transfer, conveyance, or assignment of property or interest in property from one spouse or domestic partner to the other in fulfillment of a settlement agreement incident to a decree of dissolution, declaration of invalidity, or legal separation.



WAC 458-61A-203(3)..

(3) Transfers to third parties. A sale of real property by either one or both spouses or domestic partners to a third party is subject to the real estate excise tax, regardless of whether the sale is pursuant to the terms of a decree of dissolution, declaration of invalidity, or legal separation.

(4) Former spouses or domestic partners. Transfers of real property between ex-spouses or former domestic partners that are independent of any settlement agreement incident to their decree of dissolution or decree of invalidity are subject to the real estate excise tax, unless otherwise exempt under this chapter.

Copyright, Jonathan L. Bowman, Attorney at Law, PS and Mona Smith, PLLC 2011

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Federal Tax Issue

• Even though at the Washington State level,

the transfer was exempted, at the Federal

level the transfer was a Federal taxable

event/gift!

• The choice is yours:

• Pay the Gift Tax owing to the IRS OR• Pay nothing and offset the gift against your

Unified Credit Equivalent “gift tax” exemption.



To use the Federal Unified Credit file

an IRS Form 709

Why File?:

You need to.

You want to start the 3 year look back period and cap off the IRS.

You want to memorialize the value of the gift (using an written appraisal or at least a CMA to attach to the return shows the “fair market value” of the property. [Do not just use the County Tax Assessment].





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Practice Note: Problems to watch out

for when transferring property:• Full Establishment of Community Property

• Unintentional breach of the client’s Deed of

Trust with his/her bank since the property is

being “transferred”

• Gifting issues:

-Public Assistance (Watch out for “look back

periods”)

-Fraudulent Transfer Issues

-Tax Consequences (get a good accountant!)Copyright, Jonathan L. Bowman, Attorney


The IRS and WA Registered DPs

• WA Registered DPs Federal Taxes Issues and

Income Splitting

http://www.lambdalegal.org/publications/facts

heets/fs_the-irs-applies-income-splitting-

community-property.html

Copyright, Jonathan Bowman and Mona

Smith 2011

11/9/2011

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The End….

• Jonathan L. Bowman, Attorney at Law

[email protected]

• Jordan B. Heitzman, CPA

[email protected]



Nov11KCBADP CLE Slides · 2011-11-09 · Domestic Partnership Rights and Responsibilities • WA...

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