Marriage is a serious personal, legal and financial contract that can have lasting implications on numerous aspects of a person's life—especially in the later years. Many family caregivers look after significant others whom they have been living with for many years, but have never married. Some couples do not feel the need to have a ceremony or obtain a formal license to validate their relationship. Regardless of the reasons, though, marriage is designed to provide couples with numerous legal and financial rights. But how does an "unwed" couple determine whether or not they are also entitled to these rights and other related issues?
VA Benefits, Medicaid, Social Security, and countless other programs can be directly influenced by whether or not a couple is considered legally married. Medicaid is a particularly complicated assistance program that can become even more complex when trying to determine how an "unofficial" significant other may affect eligibility and the application process.
What is a domestic partnership?
The meaning of this term is rapidly changing as more and more couples choose to identify as domestic partners. The purpose of this designation is to provide two individuals who live together and “share a common domestic life” with some of the benefits that married couples are entitled to.
Until 2015, many states did not recognize same-sex marriage. However, to meet demand, a number of states passed laws recognizing same-sex “domestic partnerships.” Then on June 26, 2015, the United States Supreme Court ruled in Obergefell v. Hodges that state-level bans on same-sex marriage were unconstitutional. As a result, same-sex marriages are now legal and recognized in all 50 U.S. states, Washington, D.C., and U.S. Territories.
Each state’s specific legal definition of a domestic partnership varies slightly, and it may be possible for opposite-sex partners as well as same-sex partners to avail themselves of this option. Some states still have laws on the books regarding common law marriages and civil unions, so it is important to be familiar with your own state’s legal definitions and requirements.
Why opt for a domestic partnership over marriage?
In situations where both partners have similar annual incomes, there is an income tax disadvantage for having to file a federal tax return as a married couple. A couple could avoid this so-called marriage penalty by registering as domestic partners.
Additionally, if one partner needs to enter a nursing home and apply for Medicaid, the partner living in the community will have their assets exposed to the cost of the nursing home if the couple is legally married, but not if they are just domestic partners. That is because under Medicaid rules the assets of both spouses are combined for calculation purposes and the spouse at home is only permitted to protect $119,220 (2016 figure).
In 2011 the Obama administration via the U.S. Department of Health and Human Services announced that if a state so desired, it could adopt changes to its Medicaid regulations that would grant same-sex domestic partners the same status as married couples for eligibility purposes. Since the Obergefell case discussed above, it is no longer necessary for a state to have such a regulation, and further, it is questionable whether such regulations would apply to opposite-sex domestic partners.
Indeed, there are certain advantages in Medicaid planning for married couples, e.g., there are no penalties for transfers of assets between spouses, and where the income of the at-home spouse is very low, some income may be shifted from the nursing home spouse to the at-home spouse before having to pay the nursing home bill.
But there are also huge disadvantages when the at-home spouse has a higher net worth than the nursing home spouse. As mentioned above, in such cases the at-home spouse is only entitled to keep $119,220 (plus a house, car, and personal property) and must spend down everything above that amount on the care of the nursing home spouse before he or she can qualify for Medicaid coverage of his or her expenses.
How do I decide what is right for my significant other and myself?
The bottom line is that a couple must first find out whether a domestic partnership is recognized in their state, whether it applies to opposite-sex as well as same-sex couples, and whether their state's Medicaid rules will treat such a partnership as if they were married. A local attorney who specializes in family law or elder law can help clarify these specifics for your place of residence and assist you in making decisions regarding legally recognized relationships.