Domestic Partnership vs. Marriage: Financial Considerations

In the past, marriage was often considered the traditional next step as relationships progress and couples start planning for their future. Today, roughly half of the U.S. population is unmarried[i] – and more couples are opting instead for a domestic partnership, which is a legal relationship for people who live together and share a common domestic life. Domestic partnerships are common for later-in-life couples, couples who have previously been divorced, and non-traditional and/or same sex relationships in which partners have chosen not to marry under the law.

The benefits to opting for a domestic partnership from a financial standpoint depend on the laws of the state you live in. Here’s a quick comparison which may be useful if you’re thinking about engaging an Accredited Domestic Partnership AdvisorSM or ADPA® professional.

 Domestic PartnershipMarriage
TaxesAvoids the “marriage tax penalty”.Larger standard tax deduction. Unlimited asset transfers in most states. Larger home sale exclusions. Gift splitting opportunities.
Retirement BenefitsCan be complicated to access depending on the state you live in. No spousal social security benefits.Clear and easy to access. Access to spousal social security benefits.
Health BenefitsYou are not guaranteed access to your partner’s health benefits.Spouses have access to health benefits.
Survivor BenefitsCould be more complicated to access survivor benefits. Only non-spousal IRA inheritance opportunities are available.Easier access and clear outlines for spouse to inherit spouse’s assets. Spousal opportunities when inheriting IRA.
Divorce ProtectionNo guaranteed protection in the event of a separation.Clear protection with some division of assets and potential spousal support.
Estate ProtectionRequires signed documents which can be challenged by family members.Most states provide for spousal inheritance in the absence of legally recognized estate planning documents.
Recognition by StateNot recognized in all states in the U.S.Recognized in all states in the U.S.

The ADPA® program is the only designation program of its kind that prepares financial professionals to address the unique planning needs specific to unmarried coupled persons. Here are some common questions couples ask regarding an ADPA® designation:

What does it mean to be an ADPA® professional?

There are subtle and important differences in financial planning for a non-traditional relationship. The ADPA® professional provides training on these differences. One of my college professors taught me that “knowledge is power.” Being an ADPA® gives me the power to best serve these clients to avoid costly mistakes.

What are some of the planning differences faced by domestic partners?

Many domestic partners assume they are subject to the legal benefits married couples enjoy. That is often not the case. As shown above, special attention needs to be given to asset titling and maintenance, lifetime tax planning, social security benefit elections, pension benefit elections, retirement cash flow planning, risk mitigation, wealth transfer, and end of life planning.

When should domestic partners seek advice from an ADPA® professional?

Financial planning is important at every stage of life. Couples experiencing significant life events should connect with a financial planner. Life events can include relationship changes, the addition (or loss) of child(ren), changes in employment such as retirement, suffering an illness/injury, or receiving a windfall/inheritance. ADPA® professionals are uniquely qualified to address the specialized needs of domestic partners.

What is most important for domestic partners to know?

Be aware that there are laws and regulations that won’t apply to your relationship. There are actions you can take today to ensure your wishes will be honored and your partner will be cared for as you desire. Working with an ADPA® professional will help you avoid pitfalls that could cost you both emotionally and financially.

Understanding all of the financial considerations can help guide your decisions if you’re contemplating a domestic partnership and its potential benefits for you, your partner, and your family.

Want to learn more? Contact Julie Williams at julie.williams@wealthspire.com.

Wealthspire Advisors is the common brand and trade name used by Wealthspire Advisors LLC and Private Ocean, LLC, separate registered investment advisers and subsidiary companies of NFP Corp.
Accredited Domestic Partnership AdvisorSM and ADPA® are trademarks or registered service marks of the College for Financial Planning in the United States and/or other countries.

[i] Source: https://www.census.gov/newsroom/press-releases/2021/families-and-living-arrangements.html

Julie Williams

About Julie Williams, ADPA®

Julie is a wealth advisor in our Delafield, Wisconsin office.

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