06 Dec Why domestic partnership can help
Q. With same sex couples allowed to marry nationwide, why are domestic partnerships still around in New Jersey? Are there other benefits?
— Trying to understand
A. Before same sex couples could marry and before civil unions, establishing a domestic partnership was the closest thing to marriage New Jersey had to offer.
The Domestic Partnership Act was signed into law on Jan. 12, 2004 and was effective on July 10, 2004. It was created to provide basic legal and economic protections to all couples who cohabitated — same sex couples as well as opposite sex couples that were 62 or older.
When Civil Union became effective in February 2007, same sex couples could no longer establish new domestic partnerships, but those existing before civil unions remain valid, said Betty Thomas, a financial planner with Lassus Wherley in New Providence.
New Jersey has not eliminated the Domestic Partnership Act, Thomas said. It remains an available option to opposite sex couples (62 and older) that choose to establish them.
“Opposite sex couples choosing a domestic partnership status and same sex couples that have chosen to remain domestic partners have their reasons for doing so,” Thomas said. “It could be as simple as they don’t want to get married but want some sort of formal commitment, it could be for financial reasons, it could be anything.”
Here are some of the benefits.
Thomas said living together as domestic partners and providing financial support to each other may provide a tax benefit.
“When filing the New Jersey state tax return, it could give one member of the household the ability to have an additional personal exemption,” she said. “A domestic partner is able to claim an additional $1,000 personal exemption for a qualified domestic partner that does not file a separate income tax return.”
This exemption does not apply to the federal return.
Another important benefit might be health care, Thomas said.
“Some employers allow employees to add the domestic partner to their health care plans,” she said. “This could be a huge savings for the couple, especially with the increasing cost of medical services.”
If hospitalized, domestic partners can make medical treatment decisions for each other, as well as have visitation rights equal to those of a spouse, Thomas said. Without a domestic partnership, civil union, or marriage, if a couple is cohabitating and one becomes ill and hospitalized, the other person would not be able to make any medical decisions and technically, they would not be able to visit with their “loved one” if visitation is limited to family, she said.
For estate purposes, in New Jersey, a domestic partner can make a gift or transfer property while living or in death to the other partner, Thomas said. The partner receiving the gift or transfer does not have to pay New Jersey state estate or gift taxes.
Note the New Jersey estate tax is scheduled to disappear in 2018.
Lastly, Thomas said, some relationships last forever, and some don’t.
“If a same sex couple that opted to maintain the domestic partnership status or opposite sex couple (62 or older) decide they want to marry, the domestic partnership will be automatically terminated – this is the `last forever’ scenario,” Thomas said. “If the relationship has turned sour, the domestic partnership may be easier to terminate than a marriage.”
To some this might be a benefit because ending a domestic partnership may not be as costly as a traditional divorce, she said.
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This post was first published in December 2017.NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.