California's New Registered Domestic Partnership Law - What It Can Do for You & Your Union

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So you have finally found "The One" and are ready to tie the knot.  But wait, before calling the Justice of the Peace/Minister, have you considered all the aspects, including tax/financials?  Did you know you have an alternative that could possibly save you thousands in taxes each year? Learn about Registered Domestic Partnership (RDP) and its tricky tax implications before taking the next step.

 

In a nutshell, this is what RDP is about:

 

  1. It is an alternative to getting married, while having much the same legal benefits as marriage.

  2. Potentially significant additional tax benefits are available for California RDP Filers than MFJ.

  3. Prior to legalization of same-sex marriage, RDP was the only means of declaring their union for same-sex couples.  RDP was mostly available to same-sex couples.  Due to changes in California law last year, now straight couples are availed of the benefits of RDP also.

  4. Californians entering into a registered domestic partnership are still seen as SINGLE tax filers in the eyes of the federal government, regardless of whether they’re a same-sex or opposite-sex couple.

  5. Couples file joint for California (like married couples), but two separate federal returns as SINGLE or HOH.  This is the main differentiating factor of RDP filing – creating unique benefits because of the way the federal RDP and California Community Property rules interact.

  6. Each partner would claim ½ of the income of each party.  Two single returns filed this way generally yield better results than filing a joint return.  You also avoid the “Marriage Penalty”.

  7. A domestic partner receiving state disability aid or other income-based benefits MAY become ineligible for those benefits if their new domestic partner earns a higher wage, because California views domestic partners the same way as married people.

  8. A worker who chooses to add a domestic partner to a benefits plan MAY be taxed on the value of those benefits as reported income.

  9. For widows who have been previously married and have survivors’ rights to a former spouse’s assets, entering a domestic partnership, rather than a new marriage, MAY ALLOW THEM TO KEEP THOSE BENEFITS. 

  10. If married less than five years with no children, “divorce” is much simpler than if legally married.

  11. Only “earned income” is subject to split down the middle on the federal return.  For inheritance, retirement, and other unearned categories, partners have the option of whether to include or not.

  12. Many legal alternatives exist (e.g. which partner should claim any children, filling as HOH, itemized deductions, whether to elect to include unearned income as community property) which could be utilized to earn the maximum legal tax avoidance.

There are many more religious, moral, social, and financial/tax implications.  For instance, if your religion prohibits you from getting married more than once in your lifetime; RDP could be the perfect solution!  Also if you are under 18, but need to form a union before you reach the age of majority (i.e. pregnancy), it may be easier to obtain a special court order permitting your union if you opt-in for Registered Domestic Partnership – rather than a full-fledged “Marriage”.  Dissolution may be easier also.  Additionally, RDPs may elect to get married at a later date.

 

 

For further discussion, or questions that apply to your particular situation, please contact us.

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