Representing Non-Traditional Couples In the Aftermath of DOMA

1. Representing Non-Traditional Couples In the Aftermath of DOMA George N. Seide, CFLS Adelman & Seide, LLP 23975 Park Sorrento Suite 420 Calabasas, CA 91302-4015 george@adelman-seide.com www.adelman-seide.com Telephone: (818) 222-0010 Fax: (818) 222-0310 Willow A. Mc JiltonA Professional Law Corporation 1875 Century Park East Suite 700 Los Angeles, California 90067 Willow@willowlaw.com www.willowlaw.com LA: 310.684.3688 ▪ SF: 415.889.6899

2. Traditional 1950’s Nuclear Family Archetype

3. Evolving Definition of Family

4. Couples With Legal Recognition • Same-Sex Married Couples • Registered Domestic Partners/Civil Unions

5. Federal State of AffairsPre-June 26, 2013 • Defense of Marriage Act was signed into law by President Bill Clinton on September 21, 1996 • Section 1. Short Title. This Act may be cited as the `Defense of Marriage Act' • Section 2. Powers Reserved to the States. “No State, territory, or possession of the United States, or Indian tribe, shall be required to give effect to any public act, record, or judicial proceeding of any other State, territory, possession, or tribe respecting a relationship between persons of the same-sex that is treated as a marriage under the laws of such other State, territory, possession, or tribe, or a right or claim arising from such relationship”

6. Section 3 of DOMA • Section 3. Definition of Marriage. “In determining the meaning of any Act of Congress, or of any ruling, regulation, or interpretation of the various administrative bureaus and agencies of the United States, the word 'marriage' means only a legal union between one man and one woman as husband and wife, and the word 'spouse' refers only to a person of the opposite sex who is a husband or a wife”

7. Practical Implications Under DOMA • Income Tax • No MFJ or MFS income tax filing status • No deduction for alimony to paying spouse, but income to receiving spouse • No basis adjustment for Survivor’s ½ community property interest • Estate/Gift/GST Taxes • No unlimited marital deduction • No portability • No Disclaimer Trust • Not considered related part for planning strategies • Retirement • Not recognized as a spouse under ERISA • Not recognized as a spouse for IRA spousal beneficiary/inherited rollover

8. No Recognition ForOther Federal Benefits • No social security survivorship benefits • No veterans’ family benefits • Not recognized for granting visas to same-sex spouses or fiancés • No recognition as married couple for purposes of filing bankruptcy

9. California State of AffairsPre-June 26, 2013 • Proposition 8 • Passed on November 5, 2008, added the following provision to the California Constitution: “Only marriage between a man and a woman is valid or recognized in California.” • Legal Relationships in California • Same-sex marriage occurring prior to November 5, 2008 (in CA or another jurisdiction), recognized as a marriage and referred to as spouses • Same-sex marriage occurring on or after November 5, 2008 in another jurisdiction, recognized as having the same rights/responsibilities as a married couple but not referred to as spouses • Registered Domestic Partners limited to same-sex; or opposite sex and one is eligible for social security benefits and is at least age 62

10. California Recognition • Same-Sex Married Couples (SSMCs) and RDPs • Both SSMCs and RDPs enjoy rights and responsibilities of married persons under California law, including: • Community property • Exclusion from property tax reassessment • Subject to dissolution proceedings to terminate legal relationship • Must file using MFJ or MFS income tax filing status on California return • Conflict with Federal Law on Income Tax Filing Status • While federal law recognized community property rights of California SSMCs and RDPs, couples required to file separately for federal income tax purposes

11. Cases Changing the Landscape • United States v. Windsor, 570 U.S. _____ (2013) • Challenging DOMA • Hollingsworth v. Perry, 570 U.S. _____ (2013) • Challenging Proposition 8 • Both Windsor and Perry involved technical standing issues and equal protection issues • Decisions handed down in both cases on June 26, 2013

12. Windsor • Circumstances Edith Windsor and TheaSpyer, residents of New York, were legally married in Ontario, Canada in 2007. Spyer passed in 2009, leaving her entire estate to Windsor. Windsor was barred by Section 3 of DOMA from claiming the unlimited marital deduction, thus resulting in an estate tax liability of $363,053 • Refusal to Defend /Substitution In February 2010, U.S. Attorney General Eric Holder announced he would no longer defend DOMA. In April 2011, the Bipartisan Legal Advisory Group (BLAG) stepped in to defend DOMA

13. Windsor • Ruling • Standing: As a Congressional committee, BLAG was representing the interests of the federal government in collecting taxes it believed were due. (Note: This is distinguished from the standing issues raised in Perry) • Merits: The Court ruled Section 3 of DOMA unconstitutional as violative of the Fifth Amendment because the “avowed purpose and practical effect'' of DOMA was to impose "a disadvantage, a separate status, and so a stigma upon all who enter into same-sex marriages made lawful by the unquestioned authority of the States" • Limitation of Ruling Although hailed as ruling DOMA unconstitutional, the ruling only overturned Section 3 of DOMA, and left Section 2 (the Full Faith and Credit exception) intact. Therefore, more litigation is anticipated regarding the constitutionality of Section 2

14. Perry • Circumstances Kristin Perry and Sandra Stier were denied a marriage license by the Alameda County Clerk-Registrar in May 2009 • Refusal to Defend /Substitution In June 2009, California Attorney General refuses to defend Prop 8 as he believes it is unconstitutional. The original Prop 8 proponents take up the appeal in the state’s stead • Ruling • Standing: Prop 8 proponents had no standing fpr the appeal as the proponents lacked a “direct stake” in the outcome of the case - they had not suffered a personal and tangible harm. (Note: This is distinguished from the standing issues raised in Perry) • Merits: Zip, zilch, nada. No ruling on the merits

15. The Aftermath of Windsor & Perry Same-Sex Married Couples • Recognition and Legal Status • State of Celebration versus State of Domicile • Income Taxation • IRS Revenue Ruling 2013-17 effective Sep. 16, 2013 • SSMCs recognized using State of Celebration • “Marriage” does not include RDPs, Civil Unions or other similar relationships • MFJ or MFS income tax filing status (but not for RDPs or Civil Unions • Tax deduction for alimony paid • Basis adjustment for surviving spouse’s ½ community property interest

16. Same-Sex Married Couples • Estate/Gift/GST Taxes • Unlimited marital deduction • Portability • Disclaimer Trust • Related party for planning strategies • Miscellaneous Laws and Regulations • Qualify for 1,138 Federal Benefits/Programs • Social security survivorship benefits • Veterans’ benefits • Granted leave to go to celebration state for marriage ceremony • Immigration • Homeland Security immediately permitted visas for SSMCs and SS fiancés • Bankruptcy

17. Same-Sex Married Couples • Recognition and Legal Status • Federal recognition • State recognition • Remaining impact of DOMA – Section 2 Maine Maryland (Jan. 1, 2013) Rhode Island (Aug. 1, 2013) Delaware (Jul. 1, 2013) Minnesota (Aug. 1, 2013) New Jersey (Oct. 21, 2013) Hawaii (expected to be signed this week) Illinois (to be signed on Nov. 20, 2013) Massachusetts California Connecticut Iowa Vermont New Hampshire District of Columbia New York Washington

18. Remaining Impact of DOMA Section 2, full faith and credit clause • Changing definition of the legal relationship on a state by state basis • Constitutional questions for states not recognizing same-sex marriage – Garden State Equality v. Dow • Superior Court of New Jersey, motion for granted for summary judgment • NJ must either grant same-sex couples the right to marry or create a parallel statutory structure that allows such couples to have all the same rights and benefits available to opposite-sex married couples. Lewis v. Harris 188 N.J. 415 (2006) • Motion granted. Court held that same-sex couples in NJ do not have all the same rights and benefits with Civil Unions because not federally recognized (at least for some federal agencies).

19. Future of CaliforniaRegistered Domestic Partnerships • Possible controversy: same-sex couples and opposite-sex couples age 62 can effectively elect federal tax law based on entering into a marital union versus RDP • Possibility of Conversion • E.g., New Hampshire and Washington • Remaining question of RDP status for those age 62+

20. CaliforniaRegistered Domestic Partnerships

21. Recognition • Local v. State Registration • Planning tip – obtain a copy of the certificate to verify state registration • State v. Federal Recognition • Except with respect to community property, it is likely that federal law does not recognize legal status of RDPs • Reciprocity • CA – recognition of substantially similar legal relationships. Query: how will a Civil Union recognized in another state will be recognized in California on a moving-forward basis?

22. Pre/Post Registration Agreements • Enforceability • Legal representation (individual v. joint) • Full financial disclosure • Timing of execution • Partner/spousal support waiver • Public policy issues • When a Registration Agreement May Be Advisable • Significant separate property, retirement accounts and/or other assets • Significant debt • Children (conceived or born pre/post registration) • Potential move out of state • Estate of Wilson (12/2012) Domestic Partnership Agreement not automatically invalidated when partners marry

23. Dissolution of Partnership • Summary Process • California Family Code Sections 299, 2400 and 2401 • Regular Process • Residency requirement • Jurisdiction • Petition, summons, declaration of children, etc. • Financial disclosure (preliminary and final) • Discovery • Orders to show cause • Temporary orders • Trial or stipulated judgment • Couples who are both RDPs and married can dissolve both in a single proceeding

24. Partnership Support • Determination • Stipulation or order to show cause • Exchange of income/expense declaration; income proof • Pendentelite support v. permanent support • Short term marriage v. long term marriage (10+) • Income Tax Issues • Taxable to recipient • Not tax deductible to payor • Attempt to ameliorate income tax issue

25. Estate Planning Notes • Trust Structure • No legally recognized relationship – separate trusts • Legally recognized relationship (with CP) – joint trust • “Spouse” • Generally - adjust definition of “spouse” in form provisions to include any individual legally recognized under California law as a RDP. • Conflict Waivers

26. Registering • How to Register • Complete a Declaration of Domestic Partnership Form • Signed and notarized • Filed with the CA Secretary of State with fee ($10-33) • Confidential domestic partnerships available • Requirements • Not married or currently RDP • Not related by blood • Age 18 or older (Court approval required for under-age RDP) • Same-sex; or opposite sex and one is eligible for social security benefits and is at least age 62 • Capable of consenting to be RDP • (Common residence requirement eliminated)

27. Rights/Responsibilities CA Family Code §297.5 - Registered domestic partners shall have the same rights, protections, and benefits, and shall be subject to the same responsibilities, obligations, and duties under 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.

28. Some Benefits of Registration • Right to take unpaid leave to care for partner • Right to control disposition of remains, authorize autopsy, make anatomical gifts • Presumption of parenthood • Ability to avoid probate of jointly owned property • Right to extended unpaid leave to care for partner • Exemption from property tax reassessment • Access to married student housing

29. Community Property (CP) • Family Law Considerations • Real Property title considerations financing reimbursement rights • Co-mingling • Tracing • Estate Planning Considerations • Transfer tax free equalization of estate • Utilization of transfer tax exemptions • ERISA Governed Plans • RDPs are not recognized with respect to the usual survivor rights

30. Income Tax Implications • IRS Memorandum 200608038 (02/24/2006) • RDPs are not allowed to split any income earned by the other partner • CA State Law SB 1827 (01/2007) • RDPs must file income tax returns as if married – joint or married filed separately (same if out of state union substantially similar to CA) • IRS Memorandum 201021050 (05/05/2010) • From 12/31/2006 forward, each partner must report one-half of community income. Optional to file amended returns

31. Income Tax Implications • Private Letter Ruling 201021048 • Must report ½ community property on unearning partner’s federal return • Entitled to ½ the amount allowed as a credit against the income tax imposed on the income • CP NOTa taxable gift because the transfer is by operation of law • Current State of Affairs • Joint CA return • Separate federal returns, each reporting ½ of the community property • IRS Form 8958 – Allocation of Tax Amounts for RDPs with community property

32. Tax Planning • No Marital Deduction • Outright Distribution • Use of Bypass Trust • Avoid adding to the survivor’s taxable estate • Lock up final disposition to desired heirs • Potential for utilization of survivor’s GST exemption/estate tax exemption

33. Long-Term CouplesWithout Legal Recognition

34. Ancillary Documents • April 15, 2010 - Presidential Mandate any hospital receiving Medicare or Medicaid funding must extend visitation rights to same-sex partners • Practice Tips • Additional language in Advance Health Care Directive reciting relationship and desire that partner be accorded same rights as a legal spouse with respect to visitation and making health care decisions • Advance Health Care Directive card • Digital copy of documents

35. Estate Planning Provisions • Disposition of tangible personal property • Giving the survivor sufficient time to relocate and pay expenses • Insurance for payment of co-owned property expenses • Mortgage • property tax • HOA dues

36. Co-Habitation Agreement • Characteristics and Goals • When a Co-Habitation Agreement May Be Advisable • Children - presumed parentage • Defining co-habitant’s role (e.g., domestic engineer) • Purchasing/co-owning real property

37. Hybrid Trust – Real Property Title Holding Trust/Co-Habitation Agreement • Terms can include: • Recitation of down payment • Continuing payments • Any “covering” by one partner is a deemed loan at stated rate of interest • Division of property in the event of termination of relationship • Distribution of property upon death of either party (distribution to survivor, living trust, option to purchase, etc.)

38. Representing Non-Traditional Couples In the Aftermath of DOMA George N. Seide, CFLS Adelman & Seide, LLP 23975 Park Sorrento Suite 420 Calabasas, CA 91302-4015 george@adelman-seide.com www.adelman-seide.com Telephone: (818) 222-0010 Fax: (818) 222-0310 Willow A. Mc JiltonA Professional Law Corporation 1875 Century Park East Suite 700 Los Angeles, California 90067 Willow@willowlaw.com www.willowlaw.com LA: 310.684.3688 ▪ SF: 415.889.6899