---

Family Law

Print

---

Dissolution Planning for Domestic Partners: Tips for Estate Planners
Frederick Hertz is an attorney and mediator in Oakland, specializing in the formation and dissolution of non-marital relationships. More information on his practice can be found at www.samesexlaw.com.

Introduction
Rules for Non-marital Dissolution Inadequate
Importance of Dissolution Planning
Six tips for Estate Planners Dealing with Domestic Partnerships

Introduction
One truth that estate planners understand very well is that planning for one’s demise is a good thing. It doesn’t cause anyone to die any earlier, and it can avoid enormous heartbreak, not to say financial detriment, when the inevitable death does occur. What is less well recognized is that a similar logic applies to dissolution planning, especially for unmarried couples — whether they are registered domestic partners or simply cohabitants. What is equally misunderstood is that the decisions made and the actions taken in the course of estate planning can have significant consequences if the couple breaks up prior to the death of either partner.

Rules for Non-marital Dissolution Inadequate
The family law system is, in effect, a well-thought out set of rules for breaking up, establishing who gets what and who owes what to the other spouse. Unless these rules are at odds with what the married couple wants, no one needs to undertake any legal work to set out their personal dissolution rules. By contrast, the rules for non-marital dissolution are vague, incomplete, and often very inadequate — especially when it comes to protecting the needs of economically dependent partners. Claims can be made under the Marvin ruling (Marvin v Marvin (1976) 18 CA3d 660), which held that non-marital partners can make legal and equitable claims against each other based upon implied and express agreements, and on other equitable legal theories as well, but such claims are rarely successful. Claims can even be made against a deceased partner’s estate, pursuant to Byrne v Laura (1997) 52 CA4th 1054, which held that the statute of frauds is inapplicable to a non-marital Marvin claim, even against the estate of a deceased non-marital partner.

Effective January 1, 2005, the new domestic partnership rules extend Family Law provisions to registered partners, retroactive to the date of their registration. Both same-sex couples and older opposite-sex couples can register, but any assets acquired pre-registration continue to be treated as non-marital assets. As a result of these dramatic changes in California law, dealing with the dissolution potential when creating an estate plan has become an even more daunting task.

Importance of Dissolution Planning
Dissolution planning is an effective way of focusing on what each partner owns, who has or doesn’t have an adequate safety net in the event of a parting of the ways, and what each partner’s financial obligations are to the other in the event of a break-up. What many estate planners do not recognize is that resolving these issues up front is essential for drafting an estate plan. Moreover, it can also motivate the partners to re-think their financial relationship, and can inspire them to establish savings plans, acquire property, or pursue their parenting decisions and their careers in open recognition of each party’s long-term needs — even if the relationship should dissolve. Good dissolution planning can also greatly reduce the strife, not to say the legal expense of a dissolution, whether the couple is married, domestically partnered, or simply living together as cohabitants.

Six tips for Estate Planners Dealing with Domestic Partnerships
1. Re-think your approach to dual representation. Dual representation can still work, but it is crucial that you obtain a written waiver of the conflict of interest, and equally crucial that you discuss the dissolution implications of the estate planning asset characterization in your conflict-of-interest waiver letter. Speak openly about the possibility of a break-up, and highlight the specific ways that various titles or documents could be used to defeat the other partner’s claim in the event of a break-up. Assume that the couple will break up, and point to real-life examples that will be readily understood for these particular clients. If you observe inconsistencies between the ways that the partners talk about their assets and how things are written up (watch out for the all-too-common use of the “our house” reference for a residence owned solely by one partner), point this out openly to the clients. Remember, dual representation means you have full legal duties to each party, not simply a shared duty to the “relationship” as a single unit.

2. If the parties have not already figured out who owns what and are not able to do so easily and amicably, it is likely that you will need to refer each of them to separate attorneys — or jointly to an attorney mediator — to assist them in doing so. If they have recently registered as domestic partners, sorting out these allocations will not be a simple task, especially where the retroactivity provisions of the new domestic partnership law forces them to re-think previously acquired assets. Until each of your clients knows what he or she owns, she can’t really engage in any estate planning work.

3. Gain a basic knowledge of the new domestic partnership law, so that you can spot the issues and warn your clients of the central uncertainties and long-term possibilities. You won’t be expected to do the detailed analysis of the property issues or actually draft whatever transmutation agreements are needed, but you should be able to see a big problem in the making, and know when to recommend independent counsel for one or both clients. This is especially true with regard to the tax aspects of registration, in light of the broad non-recognition of domestic partners as spouses for federal tax purposes.

4. Review your estate planning templates to make sure they are in sync with the realities of the rules of non-marital cohabitation and domestic partnership registration. Domestic partners have community property rights and now they can take title as such, and most registered partners must go through a formal dissolution in the Family Courts if they break up — but at the same time, they aren’t married spouses, not even under California law. Some estate planning documents state that the trust’s allocation of assets is not meant to determine the ownership outcomes of a dissolution proceeding, but it’s uncertain whether such waivers really mean what they say. In addition, the power of a court to impose family law rules on divorcing spouses and thus disregard estate planning documents is much greater than what a judge or jury can do in the case of non-marital dissolutions. As a result, it is not so clear what impact such disavowal statements will have for unmarried partners. Certainly, how properties are titled will have powerful legal implications, even if done in the context of an estate planning document.

5. Rethink the way you interview your clients and how you handle the information gathering process. Talking about an anticipated break-up or focusing on reimbursement rights requires a kind of “me first” thinking, something that is typically quite hard to do in the actual presence of one’s partner — especially in the offices of an intimidating attorney. Estate planning already requires the contemplation of one’s death; dealing with the possibility of dissolution is beyond most couple’s horizons, however happy the couple appears to be. But if each partner is meeting separately with you, at least for one session, there is a far better chance that these issues will float to the surface, at least to some degree.

6.Document what you have done and what you have observed. If the parties talk about an informal asset-sharing arrangement, send them a letter urging them to put their agreement in writing. If one of the parties is staying off title of an asset for legitimate reasons, encourage them to have an agreement establishing the non-titled partner's reimbursement rights to a portion of the equity in the property. If one of the parties is about to do something that will have particularly powerful negative impacts in the event of a dissolution, such as quitclaiming off an account or property, send a separate letter to that client, pointing out these concerns, or if this is too awkward, send a joint letter but give special attention to these particular concerns.

Keep in mind that your primary goal in raising these issues will be to motivate the client to take care of these problems. But along the way, of course, you will also be protecting yourself from any claim of malpractice for failing to warn your clients of the consequences, lest they part before they die.

Back to top

California Domestic Partnerships