RDP vs Married
Are you a same-sex couple who is thinking about tying the knot? Are you wondering if your status as California registered domestic partners (RDPs) will protect you sufficiently if one of you dies or becomes incapacitated? The goal of this post is to give same-sex couples living in California a better understanding of the differences between being RDPs and being a married couple so they are able to make informed choices and avoid unintended consequences.
In the Beginning, There Were RDPs
California same-sex couples have only been able to obtain state recognition of their relationships since late 1999. If we meet the statutory requirements, file a document with the California Secretary of State, and pay a small fee, we can become RDPs.
Although the legal rights of RDPs were initially quite limited, due to several subsequent expansions of the law, we now have all of the same rights and responsibilities that opposite-sex spouses have with respect to California law. For example, not only do RDPs have the right to file their California income tax returns as either “married/RDP filing jointly” or “married/RDP filing separately,” we are required to do so.
Then There Was Same-Sex Marriage, Briefly
For a five month period in 2008, same-sex couples were able to obtain a valid marriage license in California. An estimated 18,000 same-sex couples got married during that period.
However, because the legal definitions of “marriage” and “spouse” in Section 3 of the federal Defense of Marriage Act (DOMA), enacted in 1996, were specifically limited to the legal unions of opposite-sex couples, same-sex couples who got married in California in 2008 were not considered married under federal law, and were therefore denied all of the same rights and responsibilities under federal law that opposite-sex couples had long enjoyed.
Prop 8, Litigation, and the Return of Same-Sex Marriage
In November 2008, a small majority of California voters passed Proposition 8, a state constitutional amendment barring same-sex marriage. Passage of Prop 8 was quickly followed by litigation challenging its constitutional legitimacy.
On August 4, 2010, in a case commonly referred to as Perry, a federal district court ruled that Prop 8 was unconstitutional. However, same-sex couples in California remained unable to obtain a marriage license for nearly three years while the ruling was on appeal.
On June 26, 2013, the United States Supreme Court issued two decisions that dramatically affected the legal rights of same-sex couples in California. The ultimate result of the Supreme Court’s ruling in the Perry case was to uphold the District Court’s 2010 ruling that Prop 8 was unconstitutional. Consequently, county clerks in California began issuing marriage licenses to same-sex couples again on June 28, 2013.
The second case, Windsor, involved a widow who was required to pay $363,000 in federal estate tax on property she inherited when her spouse died in 2009 that she would not have had to pay if her spouse had been a man. Even though Edith Windsor and Thea Spyer’s marriage was legally recognized by the state of New York, where the couple had lived together for over forty years, Ms. Windsor was required to pay the federal tax, because the definition of marriage in DOMA precluded the federal government from recognizing her 2007 marriage to Ms. Spyer.
The Supreme Court held in the Windsor case that same-sex couples who reside in a state that recognizes their marriage are also married for federal law purposes. The federal government also issued Edie Windsor a very big tax refund check.
Remaining Questions and IRS Answers
A key question that remained unanswered after the Windsor ruling was whether the federal government would recognize the marriages of same-sex couples who were married in a state that recognizes same-sex marriage, but reside in, or move to, a state that does not. In other words, the pending question was whether the federal government would apply the law governing marriage in (a) the state of celebration, or (b) the state of residence when making a marital status determination.
On August 29, 2013, the Internal Revenue Service (IRS) announced its position on the subject. Revenue Ruling 2013-72 provides that regardless of where a couple currently resides, if they were legally married in a state that recognizes their marriage, they are married for federal tax purposes. In other words, going forward, the IRS will determine marital status based on the state of celebration’s marriage laws.
The IRS also clarified in Revenue Ruling 2013-72 that for federal tax purposes, “marriage” does NOT include “registered domestic partnerships, civil unions, or other similar formal relationships recognized under state law that are not denominated as a marriage under that state’s law.”
Distinctions With Differences
The IRS’s pronouncement – that registered domestic partnerships not denominated as marriage under state law are not marriage for federal tax purposes – bears repeating, because it is extremely important and too often misunderstood. Same-sex RDPs are still essentially married for state law purposes, but are NOT married for purposes of federal law UNLESS they have also gotten married in a state that recognized their marriage when it occurred.
Currently, RDPs are not required to dissolve their registered domestic partnership in order to get married in California. Same-sex couples can now have dual legal status as both RDPs and married.
Although 2013 is technically the first tax year for which same-sex married couples can file federal income tax returns jointly, they may – but are not required to – file amended tax returns for prior tax years. It’s therefore worth taking the time to determine (a) whether you’re eligible to file amended federal tax returns, and (b) whether filing them would be advantageous or not. I would be happy to assist you with this process.
Unmarried California RDPs, on the other hand, must continue to file their state income tax returns using “Married/RDP” as their filing status and their separate federal income tax returns using “single” as their filing status. Each RDP must also still report half of all the couple’s community property income and all of his or her separate income on his or her federal income tax return. In addition to federal income tax status, California RDPs who are not also married will NOT be considered married for purposes such as federal capital gain, gift, and estate tax obligations, benefits associated with federal employment, and federal benefits like Social Security.
The decision to get married is important in so many respects. The desire to have your relationship recognized as legally equal to those of all your coupled fellow citizens is certainly legitimate and compelling.
Although the benefits of being married are many, sometimes marriage can result in adverse financial consequences, such as an increase in the amount of federal income tax the couple owes in a particular year. Such burdens need to be carefully weighed against applicable benefits and, to the greatest extent possible, planned for in advance. A variety of different factors will influence the outcome of any such benefit-burden analysis, and will necessarily vary from couple to couple.
In addition to tax and other financial consequences, changing your marital status will directly influence your estate planning, especially in a community property state like California. Depending on each client’s unique situation and goals, a pre-nuptial or an ante-nuptial agreement such as a transmutation agreement may be appropriate.
If you are:
- in the process of deciding whether or when to get married;
- already married and need help determining whether you should file an amended federal tax return;
- need to review your estate plan in connection with a change in your marital status
- just have a few questions or concerns about the potential legal and financial consequences or your current or future marital status,
let’s work together to get your question answered, your problem solved, or your plans finalized. Request an appointment today by clicking here.