Domestic Partners


Biggest Challenge: Making the world see you as a pair

A few decades ago, unmarried people were those who hadn’t found true love, or gay couples who were legally prohibited from tying the knot. No longer. According to the Census Bureau, there are 8 million unmarried couples who are living together, a 25% increase just since 2007.

Increasingly, employers are recognizing these committed relationships. Nearly half of companies with 500 or more workers now offer some benefits to same-sex domestic partners, up from about a third in 2010, according to Mercer, and many extend those rights to opposite-sex partners as well. Several states, the District of Columbia, and many local governments also offer legal standing to domestic partnerships, or called civil unions.

Still, if you’re living together without the status of marriage, you typically forgo more rights than you gain. You aren’t eligible for survivor benefits from retirement plans or Social Security, for example, and transferring or bequeathing assets to each other may trigger a tax bill that married couples don’t face. You aren’t the default decision-maker in case of ill health or death, and you have no automatic rights to your loved one’s property and other assets if you split up. Partners of people who are self-employed or work at a small company are more likely not to have access to their health insurance or other benefits. And even if you can get on her plan or vice versa, the value of those benefits will be counted as taxable income to you, not pretax income, as would be the case for married folks.

The Solution: Create a legal partnership

Register your domestic partnership or civil union with the proper authorities, if that option is available. Ensure that your partner can make health care or financial decisions on your behalf if something happens to you by completing the paperwork to name him or her as your power of attorney for health care and finances. Both of you need wills to make sure you each inherit the assets you want the other to get. Concerned that your blood relatives may contest the will? Create a revocable living trust, says Atlanta estate planning attorney Richard Barnes. Expect to pay an attorney from $1,500 to $2,500 in setup fees, but the trust can’t be as easily fought in court.

What if you break up? While divorce laws aim for an equitable division of assets, unmarried partners generally have no claim on each other’s possessions. So keep a portion of your money in an individual account and keep non-mortgage debts separate; if you co-sign for a loan or a credit card, you’ll be on the hook for the entire amount if your partner refuses to pay his share. Also consult a lawyer about a life partnership agreement, similar to a pre­nup, that spells out who owns what and how your assets should be divvied if the relationship ends.

And Don’t Forget…

Know where you stand. You can usually find out whether your city or state offers domestic partner privileges and what it takes to qualify for them by contacting the agency that handles marriage certificates, often the county clerk’s office or bureau of vital statistics. Your HR department can tell you what benefits are available at work to you and your partner. If you’re both employed at companies with good coverage, though, you may be better off each going your own way, since the value of benefits obtained through your partner’s work will be added to his income, making this a potentially costly way to get insurance.

Decide how to co-own your home. A joint title with rights of survivorship is usually the best arrangement, since it allows your partner to automatically inherit the home, says Chicago real estate attorney Sam Tamkin. If one of you has contributed a lot more, however, you can use a tenants-in-common title, which lets each of you specify a percentage of ownership. Then outline inheritance wishes in your will.

Name beneficiaries. Your partner can’t roll over your IRA or 401(k) into her account. However, thanks to a 2006 law change, she no longer has to immediately take the money out as a lump sum; she can take distributions (and pay the tax bill) over time.

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