Pitfalls in Planning for Domestic Partners
- Posted in: Domestic Partners
Domestic partners, even ones registered with a state, do not share the same rights as married couples. Therefore, domestic partners need to be extra careful when crafting their estate plans. A recent article describes several common pitfalls to avoid in domestic partner estate planning.
The first pitfall occurs in gifting assets to a partner. Domestic partners often try to protect each other by combining their assets and holding them jointly. However, this action could have negative gift tax implications. Under the federal gift tax for 2013, a person can only give $14,000 annually, tax-free. A gift tax return would need to be filed to report any gift over the $14,000 amount.
The next pitfall is failing to authorize both partners to make medical and financial decisions for the other. Without any legal documentation, it is all too easy for the estranged family of one partner to keep the other out of his or her hospital room. Luckily, this occurrence can be averted through a comprehensive planning using financial and health care power of attorney.
Another pitfall is using a simple will in order to transfer assets to one’s domestic partner. Because of a will is more susceptibility to challenge, this type of planning can cause significant problems that lead to unintended outcomes. Domestic partners should utilize methods of asset transfer that are outside of probate such as trusts and beneficiary designations. Such transfers have the best possibility of being effectuated quickly and without challenge.
This is a changing area of the law and it is important for domestic partners, same sex or otherwise, to seek the professional help from an estate planning attorney who is experienced in this type of planning.