Domestic Partner Agreements
Addresses the sharing of income, expenses, and property
A domestic partner agreement can be used by all unmarried couples, whether of the opposite or same sex. It is a written contract between you and your partner that is primarily used to address the sharing of income, expenses, and property. It supports your ownership rights and clarifies your intentions for the distribution of your property if you die or your relationship ends. Although it needn't address concerns that are covered by other legal instruments (such as deeds of title, wills, living trusts, durable powers of attorney for health care and finances, parental rights documents, and
living wills or Declarations of Desire), it can provide a valuable supporting document for them. You can also use a domestic partner agreement to identify responsibility for nonfinancial matters (e.g., who will handle household duties), although courts tend to provide only limited remedies for these so-called personal service agreements. For issues of particular concern to same sex couples, see Special Considerations for Gay and Lesbian Couples.
Provides protection you otherwise lack
Few, if any, laws specifically govern the rights and responsibilities of unmarried partners regarding the sharing of property and finances. Only Massachusetts currently authorizes same-sex marriages between its residents, and only Vermont, Connecticut, and New Jersey have enacted statutes regarding civil unions that afford homosexual married partners the same rights as heterosexual married partners. If your relationship ends, there are no uniform guidelines for sorting commingled finances and dividing shared property. Because you can't turn to a divorce court as a married couple can to effectuate property division, costly and emotionally draining legal battles may ensue, leaving it to a judge to rule on your intentions and to determine the disposition of your shared property.
Sets clear ground rules up front
By setting clear ground rules, a domestic partner agreement can help your relationship run more smoothly and ease the handling of disputes in case of separation or death. It can, however, be a delicate subject to broach with your partner.
When can you use it?
You might wish to consider a domestic partner agreement if any of the following apply:
- You want to protect your income and property rights in case of separation or death
- You have more than a minimum of assets
- You expect to commingle your finances, perhaps by purchasing household goods or other property together, sharing income, or holding joint bank accounts or credit cards
- You want your relationship to run smoothly with a clear understanding of your financial rights and responsibilities
What does it cover?
A domestic partner agreement primarily addresses the sharing of income, expenses, and property. You can also use it to support other legal documents, such as your will or the title to jointly owned property. Some couples use it to identify responsibility for various household duties, although courts tend to provide only limited remedies for so-called personal service agreements. The following questions and comments can guide you in identifying areas to address in a domestic partner agreement.
What rights, if any, do you and your partner have to each other's income now—and in the future—if you separate?
Although you enter a relationship with the sole right to your personal income, a spoken or implied agreement to share the income with your partner may permit him or her to assert a claim for support against you. Without a written understanding to the contrary, you can spend a lot of time and money contesting this in court. Your right to your partner's income is especially important to clarify if you depend on your partner's income (e.g., if you're a homemaker or the parent primarily responsible for child rearing).
How will you share household expenses—equally, according to income, or according to use? Will you share a joint bank account? If so, how much money will you keep in it, and what is it earmarked for? If you maintain separate bank accounts, what expenses will these cover? A candid discussion of your financial values, priorities, and goals will provide a solid foundation for planning your finances. Clarifying values, goals, and priorities now can ease your financial decision making and activities, including managing household expenses, deciding whether to open joint accounts, and developing a budget.
Shared property ownership
How will you own property—separately or together? There are four categories of property to consider:
- Property you each individually bring into the relationship—Usually, this remains the property of the partner who originally owned it.
- Property you each individually receive during the relationship through gifts or inheritances—Generally, this remains the property of the partner who received it.
- Property without titles you acquire during the relationship, either separately or together—Possessions you purchase separately during the relationship are best kept separate, documenting your ownership with receipts in case the relationship ends. Property you acquire together is usually owned equally, or in proportion to each partner's contribution. It's especially important to document what share of jointly held property you each own. A written agreement strengthens your ownership claim if the relationship ends.
- Property with titles you acquire during the relationship, either separately or together—Ownership of this property depends on how it is listed on the title, whether as a sole ownership, a joint tenancy with rights of survivorship (JTWROS), or a tenancy in common.
If you jointly hold property, identify what share you each own. If the ownership is not split equally, specify the terms. Outline any arrangement you have for the minority owner to equalize his or her share.
Caution: If you list your partner on a title without a fair exchange of value, the IRS could consider this a gift subject togift tax. For more information, seeTaxable Gifts. Describe how you'll divide jointly held property if your relationship ends. Will one of you have the right of first refusal, that is, the first right to remain in a jointly owned house and buy the other out? If so, how will you determine the value, and over what period of time will the buyout take place? Or, will you sell the property and divide the proceeds? For more information, refer to Property Ownership Issues That Concern Unmarried Couples.
Supports other legal documents
A domestic partner agreement needn't address concerns that are covered by other legal documents, such as deeds of title, wills, living trusts, and durable powers of attorney for health care and finances. However, it can provide an important supporting document for them. Suppose the title to your home was not properly recorded as a JTWROS, and at your death, it is discovered that it was drafted and recorded as a tenancy in common. Your legal next of kin could lay claim to your share. A written agreement declaring your intention to leave sole ownership of the property to your partner will support your partner's claim to the property. It can also bolster your will in case disapproving relatives contest it.
Other nonfinancial concerns
You can use a domestic partner agreement to delegate responsibility for nonfinancial matters, such as who will wash the dishes and who will cut the grass. These are called personal service agreements. Although a court may uphold these agreements, don't expect a judge to dispatch the sheriff if your partner fails to mow the lawn. The most you're likely to receive is a cash award reimbursing you for the cost of the lawn service you hired to do the job.
What are the strengths of a domestic partner agreement?
Helps prevent disagreements before they occur
By setting clear ground rules, a domestic partner agreement can ultimately help your relationship run more smoothly. Many relationships break down over differing expectations about the handling of money and finances. These differences are often only discovered when dissension occurs.
Helps prevent disagreements before they occur
If your relationship ends, a well-written domestic partner agreement can protect you, helping you avoid emotionally draining and costly legal battles.
Supports your wishes after your death
In case of death, it can support your will and your partner's right to jointly held property by stating your wishes and intentions for the disposition of your property.
What are the tradeoffs of a domestic partner agreement?
Can be a sensitive subject to broach
domestic partner agreement can be a delicate subject to broach with your partner, especially if your relationship is young or you've never held candid discussions of financial matters. You need to consider whether attempting to address these matters legally will help or hurt your relationship.
Requires periodic updating
If you decide to proceed with a domestic partner agreement, be prepared to update it periodically as you acquire possessions together.
Will your domestic partner agreement hold up in court?
Courts generally recognize contracts between unmarried partners
Courts generally recognize contracts between unmarried partners as long as they violate no laws or public policy, are consistent with contract law, and are entered into willingly. However, there are no guarantees—contracts can be contested in court. Have an attorney draft your agreement or at least review it.
What happens if your relationship ends and you don't have a domestic partner agreement?
No uniform guidelines exist to divide shared property and finances
If your relationship ends, no specific guidelines exist to divide shared property and finances other than the general principles of contract law. Because you cannot turn to a divorce court or to specific statutes regarding cohabitation and domestic partner arrangements, costly and emotionally draining legal battles may ensue. Your fate will be left to a judge who must rule on your intentions and those of your partner and must determine the disposition of your shared property.
Does a domestic partner agreement provide all the legal protection you need?
Should be supplemented with other legal documents
Because a domestic partner agreement primarily covers the sharing of income, expenses, and property, it doesn't address the many other areas requiring protection. In order to provide more complete legal coverage, you should supplement it with the following documents:
- Durable power of attorney for health care, also called a health-care proxy
- Durable power of attorney
- Will or living trust
to protect your parental rights
Caution: Taken together, these documents, plus a domestic partner agreement, still don't provide the numerous benefits and protections conferred by legal marriage. Preparing them can cost thousands of dollars in legal fees, and they need to be periodically reviewed and updated as your circumstances change. Consult an attorney to draft these documents. They may need to be notarized or witnessed, and all of them can be contested in court..
What if you still don't want a domestic partner agreement?
If you're young (or old) and in love or you simply don't choose to base your relationship on a legal contract with the ongoing tension it could create, there are still some things you can do to prevent problems and protect your rights.
Own property separately
Consider owning household goods and other personal property separately. Make it a practice to keep receipts showing who owns what.
Clarify ownership with deeds of title
For titled property, such as a house or a car, the name(s) listed on the title determines who owns the property. Titles supersede any written documents to the contrary, including a domestic partner agreement or even a will.
Maintain separate finances
Keep your finances separate. Avoid holding joint bank accounts and credit cards. Either divide up the household bills or reimburse your share to each other from individual checking accounts. For a more complete discussion, see Money Issues That Concern Unmarried Couples.
Hope for the best
Some relationships endure for decades with hardly any problems. However, many couples require extensive legal action to resolve issues once they arise.
Questions & Answers
Is a domestic partner agreement similar to a prenuptial agreement?
A domestic partnership is a registered relationship between unmarried partners that provides official recognition of your union. A growing number of cities allow domestic partner registrations, although a few states have begun to recognize them. They generally require you and your partner to sign an affidavit declaring your relationship and to pay a small fee of perhaps $35 to $45, approximately the same cost as a marriage license.
Some believe that these registrations offer few if any benefits while possibly exposing you to liability for your partner's debts. Be sure to examine your rights and obligations before registering your relationship. Because of their relatively recent introduction, it's unclear how domestic partner registrations will fare legally. You don't need to have a registered domestic partnership to sign a domestic partner agreement. Nor do you need a domestic partner agreement to register a domestic partnership. The two operate independently of each other.
Massachusetts is currently the only state that allows same-sex marriages between its residents, and Vermont, Connecticut, and New Jersey are the only states that permit civil unions between two persons of the same sex. Parties to a civil union are responsible for the support of one another to the same degree and in the same manner as prescribed by law for married persons. In addition, parties to a civil union are entitled to all of the same benefits, protections, and responsibilities under state law as are granted to spouses in a marriage. Several other states have passed legislation that accords domestic partners some of the special rights accorded to married persons. Note, however, that these protections generally do not extend to heterosexual couples who live together but choose not to marry.
What are domestic partner benefits?
Domestic partner benefits refer to a wide variety of fringe benefits employers offer the unmarried partners of employees. These can include health insurance, family medical leave to care for an ailing partner, and bereavement leave at the death of a partner. Often, the most important benefit is health insurance. Unfortunately, the value of health insurance provided to your domestic partner is taxable to you as income. For more information on this, see Insurance Issues That Concern Unmarried Couples or Special Considerations for Gay and Lesbian Couples.
Caution: The laws regarding domestic partner benefits generally apply only to same-sex
partners. However, some employers restrict domestic partner benefits to same-sex
partners, while others offer benefits to both same-sex and opposite-sex
How do you know if your relationship is protected as a common law marriage?
To be valid, a common law marriage must meet the following conditions:
- You must be an opposite-sex couple
- You must reside in a state that recognizes common law marriage (Alabama, Colorado, Iowa, Kansas, Montana, New Hampshire (for inheritance only), Oklahoma (though the law is somewhat unsettled), Rhode Island, South Carolina, Texas, Utah, and the District of Columbia)
- You must live together for a significant period of time, although no state defines the exact length of time
- You must present yourselves as a married couple, typically by using the same last name, referring to each other as husband and wife, or filing a joint tax return
- You must intend to be recognized by others as a married couple
When a common law marriage exists, the relationship can only be ended through a formal divorce.
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