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<p class="MsoNormal"><span style="font-size:12.0pt">I have clients in a 17-year relationship who are not married (and not at all inclined to get married). They have significant wealth, so of course I am concerned about the tax challenges they will face, and
benefits they will miss, as a result of not being married.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:12.0pt"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="font-size:12.0pt">They are interested in knowing more about registered domestic partnerships, and because one of them is 66, they will qualify.
<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:12.0pt"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="font-size:12.0pt">From a state law standpoint, I see registered domestic partners are afforded all the state benefits that would adhere were they married. So the real questions are federal tax law questions.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:12.0pt"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="font-size:12.0pt">Because under state law their property can be characterized as community, and because federal law looks to state law to determine character of property, does that not mean their community property would get
a full step-up in basis on the first death (set aside for the moment any possibility of estate tax repeal and the potential for new carry-over basis rules)?<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:12.0pt"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="font-size:12.0pt">What about gifts to one another? Since they are not married, I do not see how the unlimited marital deduction could apply.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:12.0pt"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="font-size:12.0pt">Similarly, on the first death, I do not see any potential for portability of the federal estate tax exemption or for the application of the unlimited marital deduction for bequests from the decedent to the
survivor of them. Correct?<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:12.0pt"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="font-size:12.0pt">In short, seems to me I need to tell them there are few tax benefits from becoming registered domestic partners. With the possible exception of step-up in basis, looks to me like the only potential benefit
is relative to maintaining any social security or pension benefits that they might lose if they marry. And that to the extent they convert any separate property to community property they will face gift tax consequences.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:12.0pt"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="font-size:12.0pt">Your wisdom will be greatly appreciated!<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:12.0pt"><o:p> </o:p></span></p>
<p class="MsoNormal"><span style="font-size:12.0pt">Kate<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:12.0pt"><o:p> </o:p></span></p>
<p class="MsoNormal"><b><i><span style="font-size:13.5pt;font-family:"Cataneo BT",serif;color:blue">Kate Szurek</span></i></b><span style="font-size:12.0pt;font-family:"Times New Roman",serif;color:black">, J.D., LL.M.<o:p></o:p></span></p>
<p class="MsoNormal"><a href="mailto:kate@skagitlaw.com"><span style="font-size:12.0pt;font-family:"Times New Roman",serif;color:blue">kate@skagitlaw.com</span></a><span style="font-size:12.0pt;font-family:"Times New Roman",serif;color:#1F497D"><o:p></o:p></span></p>
<p class="MsoNormal"><o:p> </o:p></p>
<p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman",serif;color:#1F497D"><img border="0" width="193" height="51" style="width:2.0083in;height:.5333in" id="Picture_x0020_1" src="cid:image001.jpg@01D35E1A.58255A80" alt="SkagitLaw_Signature (2)">
<o:p></o:p></span></p>
<p class="MsoNormal"><b><i><span style="font-size:14.0pt;font-family:"Times New Roman",serif;color:#1F497D">Skagit Law Group, PLLC<o:p></o:p></span></i></b></p>
<p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman",serif;color:#1F497D">P.O. Box 336 / 227 Freeway Drive, Suite B<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman",serif;color:#1F497D">Mount Vernon, WA 98273<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman",serif;color:#1F497D">360.336.1000<o:p></o:p></span></p>
<p class="MsoNormal"><span style="font-size:12.0pt;font-family:"Times New Roman",serif;color:#1F497D">360.336.6690 (fax)<o:p></o:p></span></p>
<p class="MsoNormal"><a href="http://www.skagitlaw.com/"><span style="font-size:10.0pt;font-family:"Arial",sans-serif;color:blue">http://www.skagitlaw.com</span></a><span style="font-size:10.0pt;font-family:"Arial",sans-serif;color:#1F497D">
</span><span style="font-size:12.0pt;font-family:"Times New Roman",serif;color:#1F497D"><o:p></o:p></span></p>
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