78 CBJ 261. LEGAL AND TAX STATUS OF PERSONS IN CONNECTICUT CIVIL UNIONS AND OTHER UNMARRIED COHABITANTS.

• Author: BY FRANK S. BERALL*

Connecticut Bar Journal

Volume 78.

78 CBJ 261.

LEGAL AND TAX STATUS OF PERSONS IN CONNECTICUT CIVIL UNIONS AND OTHER UNMARRIED COHABITANTS

CONNECTICUT BAR JOURNALVOLUME 78, NO. 4LEGAL AND TAX STATUS OF PERSONS IN CONNECTICUT CIVIL UNIONS AND OTHER UNMARRIED COHABITANTSBY FRANK S. BERALL*THIS ARTICLE MAY NOT BE RELIED ON FOR PENALTY PROTECTIONIt is not designed or intended to provide financial, tax, legal, accounting, or other professional advice. Such advice always requires consideration of individual circumstances. Further, to ensure compliance with I.R.S. requirements, please be aware that any discussion of U.S. tax matters contained herein is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing or recommending to another party any transaction or matter discussed herein. INTRODUCTION 265

GRADUAL RECOGNITION OF RIGHTS OF UNMARRIED COUPLES 265

LEGALIZATION OF SAME-SEX MARRIAGE IN THE NETHERLANDS, BELGIUM, SPAIN, CANADA AND MASSACHUSETTS LED TO THE BREAKING OF THE DAM THAT HELD BACK GAY RIGHTS 266

FEDERAL AND STATE DEFENSE OF MARRIAGE ACTS (DOMAS), STATE CONSTITUTIONAL AMENDMENTS AND CASE LAW 269

The Federal DOMA 269

State DOMAs 269

3. Challenges to the Federal DOMA and similar State Constitutional Amendments 270

   V. GAY MARRIAGE IS LEGAL IN MASSACHUSETTS AND PROHIBITIONS AGAINST IT ARE BEING LITIGATED ELSEWHERE 273

   Attempts to Overturn the Goodridge Case 273

   DOMA is only violated by same-sex marriage; not by civil unions 275

3. Other State Litigation 275

   * Copyright (c) 2006 by Frank S. Berall of the Hartford Bar. All rights reserved. Neither the author nor the Connecticut Bar Journal nor the Connecticut Bar Association is responsible for the applicability, accuracy, validity, tax or legal consequences of the materials or forms contained in this article as applied to any client's situation.

   FEDERAL AND STATE DOMAS AND STATE CONSTITUTIONAL AMENDMENTS MAY PERMIT STATES TO DENY FULL FAITH AND CREDIT TO OTHER STATES' LAWFUL SAME-SEX MARRIAGES UNDER THE LIMITED EXCEPTION TO ARTICLE IV OF THE CONSTITUTION 276

   WHILE MOST, IF NOT ALL, STATES REFUSE TO RECOGNIZE SAME-SEX MARRIAGES AND OTHER GAY RIGHTS, THERE IS A TREND TOWARDS RECOGNITION OF NON-MARITAL COHABITANTS' RIGHTS 278

   Oral Agreements, Implied Contracts and Common-Law Marriages 279

   Putative Marriages 281

   Spousal Rights 283

   Rights of Unmarried Cohabitants 283

5. Uncertain Direction of the Law 286

   VIII .DECRIMINALIZATION OF GAY SEX 287

   IX. DOMESTIC PARTNERSHIP AND CIVIL UNION LAWS 290

   California's Domestic Partner Rights and

   Responsibilities Act of 2003 290

   The Legal and Tax Consequences of Vermont's Civil Union Law 291

3. Connecticut's Civil Union Law 293

   What Connecticut's Civil Union Act does and does not do 295

   Connecticut tax consequences to couples in a civil union 304

   New state tax revenue expected from couples in civil unions 307

   Events that occurred when civil unions became legal on October 1, 2005 308

   Recognition by other states and challenge to

   Designating a non-legally related adult to

   have certain rights and responsibilities 311

   Potential Conflict Between the IRC and the DOMA 312

   Reaction to Civil Unions 312

   X. ESTATE PLANNING FOR UNMARRIED COHABITANTS SHOULD INCLUDE A PARTNERSHIP CONTRACT BESIDES THE USUAL DOCUMENTS 313

   A Partnership Contract is a Cohabitation Agreement Expressing the Parties' Intentions; Somewhat Similar to But Broader than an Antenuptial or Postnuptial Agreement 314

   Estate Planning is Somewhat Similar to that for Spouses 314

3. Estate Planning for both Cohabitants and Dealing with their Potential Conflicts of Interest 314

   The partnership (cohabitation) agreement 314

   Wills, trusts and powers of attorney, etc 316

   Broadly and carefully define the class of beneficiaries 317

   Financial and Health Care Powers of Attorney, Advance Directives and

   Conservator Nominations 317

   3. Coping with HIPPA 318

   XI. UNMARRIED COUPLES LIVING TOGETHER MUST FILE THEIR FEDERAL INCOME TAX RETURNS AS SINGLE PEOPLE 318

   Only Married Couples and Putative Spouses may File Joint Income Tax Returns 319

   Income Tax Returns by Couples in Domestic Partnerships and Civil Unions 319

   Income Tax Minimization for Unmarried Cohabitants 320

   Head of Household Status for One of the Parties to a Civil Union 321

   XII. DEPENDENCY EXEMPTIONS AND HEALTH INSURANCE 321

   Requirement for a Dependency Exemption 321

   An Unmarried Partner may Claim a Dependency Exemption for a Child even if the parents are living

   apart

   324

   XIII.GIFTS AND INCOME

   325

   Necessaries are Not Support

   325

   Treatment of "Alimony" when a Civil Union is

   Dissolved

   326

3. Property Transfers

   327

   PARTNERSHIP AGREEMENTS

   328

   Tax Consequences of Transfers Between Unmarried People 328

   Gift Tax will Apply to all Gratuitous Transfers Between Unmarried People 329

   Gratuitous transfers and gift splitting 330

3. The Estate and Gift Tax Marital Deduction is Apparently Overridden by the DOMA 330

   A potential conflict exists between the IRC and the DOMA 331

   No definition of a surviving spouse exists 331

   3. The estate and gift tax marital deductions are not available for unmarried cohabitants, domestic partners nor parties to a civil union and are probably not available to a married same-sex couple 331

   XVI.CONCLUSION 332

   APPENDIX A - NON-MARITAL PARTNERSHIP AGREEMENT

   (LIVING TOGETHER AGREEMENT) 334

   APPENDIX B - SUGGESTED SHORT FORM LIVING TOGETHER AGREEMENT 347

   APPENDIX C - ATTORNEY GENERAL'S OPINION 348

   THIS ARTICLE MAY NOT BE RELIED ON FOR PENALTY PROTECTION FOR FURTHER DETAILS, SEE TOP OF PAGE 261.

   LEGAL AND TAX STATUS OF PERSONS IN

   CONNECTICUT CIVIL UNIONS AND OTHER

   UNMARRIED COHABITANTS I. INTRODUCTION

   Throughout recorded history and at least since the development in almost all cultures of the institution of marriage, the traditional nuclear family has consisted of a husband, wife and children. The non-traditional family consists primarily of unmarried heterosexual and gay couples, domestic partners and same-sex couples united in Vermont or Connecticut civil unions,(fn1) with or without their mutual children or a child or children of one of them. The question now is whether civil union is a stepping stone to same-sex marriage.

   II. GRADUAL RECOGNITION OF RIGHTS OF UNMARRIED COUPLES

   Starting in the second half of the Twentieth Century, there has been a gradual worldwide recognition that unmarried people living together have certain rights that traditionally had been granted only to married couples. Initially, each person could only enforce claims for support against the other, usually after the end of their relationship. Now, however, a number of countries, including the United States, give more rights to unmarried couples living together. There has also been a great increase in unmarried cohabitants' rights to inherit from each other, as well as their children's rights, including posthumous ones.

   Beginning slowly, property, support and other rights of same-sex cohabitants have been gradually analogized to those of unmarried partners of the opposite sex. Now, this has evolved into a revolution, with the law concerning gay relationships developing at an increasingly fast pace. Several countries have now recognized rights and privileges former-

   1 71 VT. STAT.ANN., Ch. 23, 1201 et seq. and 18 VT. STAT.ANN. 5160 et seq. Conn. Acts 05-10 authorized civil unions. The latter was effective on and after October 1, 2005, and codified in CONN. GEN. STAT. 46b-38aa through 46b-38pp.

   ly given only to married couples. Same-sex marriage is sanctioned in the Netherlands,(fn2) Belgium,(fn3) Spain(fn4) and Canada.(fn5) A law recognizing same-sex civil partnerships went into effect in Great Britain on December 5, 2005.(fn6) Other countries allowing same-sex registered partnerships or alternatively providing substantially all the benefits of marriage are Andorra, Czech Republic,(fn6A) Denmark, Finland, France, Germany, Greenland, Hungary, Iceland, Ireland, New Zealand, Norway and Sweden. Similar legislation has been enacted in South Africa.

   III. LEGALIZATION OF SAME-SEX MARRIAGE

   IN THE NETHERLANDS, BELGIUM, SPAIN, CANADA AND MASSACHUSETTS

   LED TO THE BREAKING OF THE DAM THAT HELD BACK GAY RIGHTSWhat appears to be happening is similar to what occurs when a dam is breaking. First water pressure causes minor crumbling, then a few little chips of the masonry begin to fall, followed by huge concrete chunks. This allows high-pressure water to pour through the gaps. Finally the entire dam collapses. Thus, first in The Netherlands, then Belgium, then in most Canadian provinces, Massachusetts,(fn7) Spain, all of

   2 Act of December 21, 2000, Title 5, Article 30(1) of the Netherlands Civil Code, amending Book 1 of the latter effective April 1, 2001. One member of the couple must either be a Dutch citizen or else live in the Netherlands.

   3 United Press International, January 31, 2003. Belgian Chamber 2002-2003, No 2165/3, which resulted in the Act of February 13, 2003, Belg. Staatsblad, February 28, 2003, effective Straatsblad, June 1, 2003. All rights of marriage are granted, but there is no provision for the presumed paternity of children born during marriage and it does not change lack of provision under Belgian law for joint adoption by a same-sex couple. The Netherlands (1998) and Belgium (2000) have permitted both opposite and same-sex couples to enter registered partnerships, as do several Australian states, France and New Zealand. Harris, Same Sex Unions Around the World, 19 PROBATE & PROPERTY 31, 32 (September/October 2005).

   4 Legalization of marriage by same-sex couples in...