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Ensuring both partners’ fair share with a Domestic Partnership Agreement
by Grace S. Yung

Because most states do not allow domestic partners to marry, the majority of laws don’t recognize the relationship of domestic partners as being equivalent to that of a legally married couple. While this may cause some hardship in terms of financial issues in the relationship, it can really do some damage if domestic partners separate.

There is, however, a legal method known as a Domestic Partnership Agreement, or DPA, that can work as a solution in alleviating the impact of these gaps in the law and provide some amount of fairness and protection to both partners.

How Domestic Partnership Agreements Work

Domestic Partnership Agreements are legal contracts that obligate the parties involved to abide by its provisions if either of them suffers a loss due to a breach by the other. There are several requirements that are necessary in executing a fair DPA, including:

• Each party must enter into the DPA on a voluntary basis;

• Each party is required to disclose all of the pertinent facts that would have a bearing on the other partner’s decision to sign the agreement— including full financial disclosure;

• Both parties to the DPA must have an opportunity to examine the agreement and to have the provisions of the agreement fully explained to them by independent counsel.

In fact, a Domestic Partnership Agreement is more likely to be fairly enforced if each of the partners is represented by his or her own independent counsel. This can better ensure that there will not be a conflict of interest.

Issues That Are Covered in a Domestic Partnership Agreement

There are a number of issues that can be covered within a Domestic Partnership Agreement. Just some of the many topics can include:

• A statement as to whether any of the financial assets that are brought into the relationship by one partner will remain separate or be re-titled in both partners’ names;

• Information regarding the debts of each partner, and how and by whom those obligations will be paid;

• Notification of how property that is purchased during the relationship will be titled, as well as how it will be paid for;

• Provisions with regard to the part- ners’ home, including how the property will be titled (or re-titled if originally owned by just one of the partners). If the residence is leased, the DPA will state how and by whom the lease payments will be made.

In addition, if children are involved in the relationship, issues of child custody, support, and welfare as they relate to
the child’s best interest may also be covered in the agreement, as well as who will claim the child as a federal income tax deduction.

How a Domestic Partnership Agreement Can Ensure a Win-Win for Both Partners

A Domestic Partnership Agreement can be looked at as being similar to prenuptial agreements used by heterosexual couples who are contemplating marriage. The DPA, typically executed at or near the inception of the relationship, states the solutions that each partner feels are fair for potential issues that could arise should the relationship terminate.

Rather than viewing a DPA as an admission that the relationship may fail
at some point, it is much better seen as a way to ensure that both partners care about each other in facing the situations and decisions that can arise in any relationship, and thus to have a plan for defusing conflicts. In fact, the relationships of domestic partners who have executed a DPA are often more solid than those without.

Unfortunately, even though a DPA is considered to be a legal contract, not all states will enforce Domestic Partnership Agreements. Therefore, it is a good idea to discuss this issue with an attorney in your state who specializes in LGBT partnership issues.

Editor’s note: This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

Grace S. Yung has over 18 years experience as a certified financial planner and is a principal at Midtown Financial Group, LLC, in Houston.

 

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Grace S. Yung

Grace S. Yung, CFP, is a certified financial planner practitioner with experience in helping domestic partners plan their finances since 1994. She is a principal at Midtown Financial LLC in Houston and was recognized as a “Five-Star Wealth Manager” in the September 2017 issue of Texas Monthly.

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