For most opposite sex couples, the question of their legal status in California or elsewhere is generally a simple one - they are either married or single*. Under the current legal framework in California, the answer is not as clear for same sex couples because there are five distinct legal statuses that a same sex couple may hold. Furthermore, if an opposite sex couple who is married and residing in California purchases real property, it is generally understood among titling professionals that the couple can hold title to the subject property as community property with right of survivorship, community or separate property, in joint tenancy, or as tenants in common. The five different statuses available to same sex couples inherently cause confusion, even among the most well-intentioned titling experts, which can be problematic because incorrectly titled real property can create adverse tax liabilities for same sex couples that cannot be easily remedied since same sex couples are not yet entitled to the unlimited marital deduction, which allows federally recognized spouses to freely change the nature of property from community property to separate property, or vice versa.

Under current California law, there are five distinct legal statuses that a same sex couple may hold, depending in large part of the date and location of their registration or marriage. These statuses are: Registered Domestic Partners, married, Registered Domestic Partners and married, “married equivalent,” and Registered Domestic Partners and “married equivalent.”

One of the most common statuses for California same sex couples is Registered Domestic Partners (RDPs). This applies to any couple who registered with the State of California on or after January 1, 2000 and who did not “opt out” of the RDP status before January 1, 2005 when AB 205, the California Domestic Partners Rights and Responsibilities Act of 2003, became effective, or who have not subsequently dissolved their relationship.

Pursuant to California Family Code Section 299.2, this title also applies to those same sex couples who entered into a legally recognized relationship in a foreign jurisdiction, whether elsewhere in the United States or in another country, that is “substantially equivalent” to a California domestic partnership. Such “substantially equivalent” relationships include the Civil Unions or Comprehensive Domestic Partnerships provided by state law in Connecticut, the District of Columbia, Oregon, Nevada, New Jersey, and Washington. The limited rights granted to same sex couples in Colorado, Hawaii, Maine, Maryland, and Wisconsin are not characterized as “substantially equivalent” and, as a result, a couple who has registered in one of those states but has not subsequently registered with the State of California would not be deemed RDPs under California law.

The second status, which applies to those approximately 18,000 same sex couples who were married in California between June 16 and November 4, 2008, is “married.” As a result of SB 54, which went into effect on January 1, 2010, this title is also applicable to those same sex couples who were validly married in a foreign jurisdiction, whether in the United States or in another country, on or before November 4, 2008.

The third option, which is quite common for those whose marriages are recognized by the State of California, as set forth above, is “RDP and married.” Because California law allowed RDPs to marry without first dissolving the registered domestic partnership, many couples who had previously registered with the State as domestic partners subsequently married and, as a result, now hold both statuses. For purposes of property ownership and accumulation of community property, the earlier of the two dates controls.

The next status is more difficult to name. SB 54, which became effective on January 1, 2010, said, in part, that couples who have been legally married in a foreign jurisdiction before or after November 5, 2008 are entitled to all the rights, benefits, and obligations of marriage, except for use of the term “marriage” to describe their relationship. The latter part of this language is what makes this last option difficult to name. If a couple has been legally married outside of California after November 5, 2008, and has not also registered as domestic partners in California, then they cannot be called RDPs, but they are also precluded from being called “married.” So, you may ask, what are we to call couples who fall in to this category? Although there is no definite answer to this question, “married equivalent” is an accurate description, as is “spouses under the laws of [name of the officiating jurisdiction].”

Finally, it is possible for those “married equivalent” couples to register as domestic partners with the State of California. In that case, both titles would be applicable. This is complex and can be very confusing, both for professionals working with same sex couples and, not surprisingly, for same sex couples themselves. It is precisely because it can be so confusing to determine the actual status of the same sex couples that professionals who work on titling real estate and other assets owned by same sex couples must be particularly intent on making sure that you talk freely with your clients and ask as many questions as necessary to insure that you have all of the information you need to properly identify the status of the couple on the titling documents.

Once the actual legal status of your clients is determined, the second, and most significant, issue is to insure that the subject property is characterized properly as community property with right of survivorship, community property, separate property, joint tenancy, or tenancy in common, in the title documents. Because RDPs, married same sex couples, and “married equivalent” couples are entitled to all of the same rights and subject to all of the same responsibilities as opposite sex married couples under California law, all same sex couples with any of these legal statuses are subject to California’s community property regime. This means that there is a presumption that if such a couple acquires property during the tenure of their legally recognized relationship, the property is community property. However, the source of the down payment and the source of mortgage payments must also be taken into account. Only income acquired after the date of registration or marriage is community property (IRS Chief Council Advisory 2010210, May 28, 2010), and, as such, only real property acquired with community property funds is truly community property. Even real property acquired after the date of registration or marriage with previously owned assets, no matter the intent of the couple, will have a separate property interest that must be accounted for.

It is especially important that the intended ownership is properly identified on the original title because, although under California law, a transfer of real property between RDPs or same sex spouses does not constitute a change of ownership that would trigger a reassessment, same sex couples do not have use of the unlimited marital deduction, a federal right, and, as a result, they do not have the option of making unlimited transfers between themselves without the potential of those transfers being characterized as taxable transfers by the IRS. This means that if title is taken incorrectly in the original title and must later be corrected to reflect the intended ownership of the property, there is a chance that this latter “change in ownership” will have negative tax consequences for the affected couple if it is treated as a gift or a taxable event. In addition, because at the death of the first partner or spouse, the survivor is entitled to a full step up in the basis of the property for purposes of California law if the property is owned as community property with the right of survivorship or community property, but not for separate property, joint tenancy property, or property held as tenants in common, improperly titled property may create a significant capital gains issue for the survivor.

If property is incorrectly titled, it is also possible that the incorrect titling could lead to a situation where upon the death of one partner or spouse, the survivor could lose control over the decedent’s one-half of the property, which, when there are other family members involved, can ultimately result in the survivor’s being unable to retain ownership of the property.

Although the laws have changed significantly in recent years, and are likely to continue changing in the future, it is often difficult, but certainly not impossible, to insure that real property assets are titled correctly. The existing legal framework does, however, require that the professionals involved with the transfer and titling of those assets understand the issues, talk freely with their clients to insure that they have all of the necessary information to properly title an asset, and know what resources are available for both the professionals and their clients in the event that questions arise that cannot be answered by the titling professional or the client.

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In light of the current legal framework and the significant issues associated with titling, we recommend the following language for use in titling documents:
For RDPs: “Jane Smith and Sally Jones, Registered Domestic Partners, as [community property with right of survivorship/community property/separate property/joint tenants/tenants in common]”
For married same sex couples: “Jane Smith and Sally Jones, spouses, as [community property with right of survivorship/community property/separate property/joint tenants/tenants in common]”
For RDPs and married same sex couples: “Jane Smith and Sally Jones, spouses and Registered Domestic Partners, as [community property with right of survivorship/community property/separate property/joint tenants/tenants in common]”
For “married equivalent” same sex couples: “Jane Smith and Sally Jones, spouses under the laws of [Name of the jurisdiction], as [community property with right of survivorship/community property/separate property/joint tenants/tenants in common]”
For RDPs and “married equivalent” same sex couples: “Jane Smith and Sally Jones, spouses under the laws of [Name of the jurisdiction] and Registered Domestic Partners, as[community property with right of survivorship/community property/separate property/joint tenants/tenants in common]”

*California Family Code Section 297(b)(5)(B) permits opposite sex couples to register as domestic partners if at least one of the parties is at least 62 years old and eligible for Social Security benefits.