New domestic partners law casts a wide net, raises legal issues

By Nancy McCarthy
Staff Writer

A new law that confers a wide array of marriage-like rights and responsibilities on same-sex couples who register in California as domestic partners cuts across numerous areas of legal practice in the state, affecting virtually every state law, regulation, court rule or decision that confers protections and obligations on spouses.

Although codified only in the Family Code, experts say the legislature intended the California Domestic Partner Rights and Responsibilities Act of 2003 to apply to all state statutes that affect spouses.

A good rule of thumb for any lawyer browsing California law, says Warren A. Sinsheimer, past chair of the State Bar’s Trust & Estates Section, is, “when we see ‘spouse,’ we should ask, ‘How will this apply to domestic partners?’ In any case where somebody’s marital status would be an issue, it’s important to be thinking in terms of whether they have a registered domestic partner.”

The new law, which took effect Jan. 1, states that from that date, “registered domestic partners shall have the same rights, protections and benefits, and shall be subject to the same responsibilities, obligations and duties under [California state] law, whether they derive from statutes, administrative regulations, court rules, government policies, common law or any other provisions or sources of law, as are granted to and imposed upon spouses.” (California Family Code, §297.5(a))

Signed into law in 2003 by then-Gov. Gray Davis, AB 205 included a one-year delay in implementation in order to give couples time to study the new law and determine whether it meets their needs. Currently, about 28,000 couples are listed in the state’s registry of domestic partners.

Opponents of same-sex marriage used the past year to try to halt the measure. The Campaign for California Families joined other groups and sued to overturn the legislation, on the ground that it violates Proposition 22, the Knight Initiative that defined marriage as a union between a man and a woman. Sacramento Superior Court Judge Loren E. McMaster rejected the challenge in September, and the 3rd District Court of Appeal in Sacramento denied a request in December to block the law from taking effect. The appellate court ordered an expedited briefing schedule to be completed last month.

The new legislation significantly widens the provisions of California’s old domestic partner program. The major areas of change include creating and dissolving domestic partnerships, community property and financial obligations, parental rights and responsibilities, public benefits, and health care and end of life issues.

The primary exceptions to the new law are:

• Domestic partners still pay taxes as single people;
• Federal protections for married couples are not honored. In addition, the unions are not recognized by the federal government in qualifying individuals for national programs and subsidies including Medicare, Social Security, food stamps, or veterans, housing and immigration benefits;
• It does not affect statutes or constitutional provisions that were enacted through the initiative process.

Certain couples are advised to be particularly careful before registering as domestic partners because the federal government does not recognize the partnerships: couples in which one partner receives benefits such as SSI or Medi-Cal; couples in which one partner serves in the military; and couples in which one partner is not a citizen.

Not surprisingly, the new law raises many questions and is likely to be heavily litigated, particularly around issues of community property and trusts and estates. Tax consequences can be expected in certain circumstances. Furthermore, AB205’s provisions are retroactive to the date that partners registered with the state, courtesy of AB2580, a provision that also raises a variety of issues.

Even the terminology must be clear: registered domestic partners are defined as same-sex couples or heterosexual couples in which one partner is 62 or older.

Under the new law, said Sinsheimer, it is not “crystal clear” that community property applies to domestic partners. He provided a hypothetical that assumes that someone has been a registered domestic partner for two years. Even before that time, he was employed at Google and received a fair amount of Google stock. If the domestic partnership ended in 2004, it was clear the stock was not community property. Now, as a result of retroactivity, the stock may be community property.

Federal tax law also comes into play. For example, if a wealthy individual dies and leaves his money to his wife, there is no estate tax. If the money is left to a domestic partner, however, there is no unlimited marital deduction and much of the money is subject to an estate tax.

In family law, a host of new issues arise, says Larry Ginsberg, a Los Angeles lawyer who serves on the State Bar’s Family Law Section executive committee. He quickly ticked off several problems. Among them:

• Domestic partnerships may not be recognized outside California. If the parties move to another state, what happens to property rights and support rights?
• Spousal support is tax deductible for the payor and taxable for the recipient as long as certain requirements are met. If a domestic partnership is dissolved, spousal support is neither taxable nor deductible because there’s no marriage. As such, Ginsberg said, “it’s an open question as to how best to handle or treat the support payable by one partner to the other and how to come up with reasonable amounts.”
• Pension problems. Under AB205, a community interest may develop in one partner’s pension plan. At the end of a marriage, the non-participant’s interest may be rolled out to his or her designated account by a Qualified Domestic Relations Order, created by state and federal law to avoid tax consequences resulting from the transfer. But QDROs won’t apply to domestic partnerships since they are outside the federal tax system.

Sinsheimer thinks that although the legislative intent was to substitute “domestic partner” for “spouse” throughout California law, the fact that such a Herculean task was not undertaken might come back to haunt the bill’s backers. The key language setting out legislative intent “is not codified anywhere,” Sinsheimer said. “It’s going to end up being looked at a lot.”

Attorneys who do not handle family or trust and estate issues may well find that their clients are affected by the legislation. Say, for example, that a man who holds a liquor license dies. California law contains provisions that permit his wife to continue the business without getting a new license. Because the code does not contain language substituting “registered domestic partner” for spouse, it is not immediately clear that similar rights are now available to a domestic partner.

“A person who regularly deals with those kinds of issues and alcohol beverage control compliance may not be focused on this,” Sinsheimer said.

“As people read through various codes where the word ‘spouse’ is used, they don’t have a clue that’s the state of the law unless they’ve been poked into consciousness by a continuing education program and then they’re aware that this is something you need to look at.

“It’ll catch a lot of people by surprise.”