Beware the Tax Man

chapter 8  | living together contracts for lesbian and gay couples |  285
Modifying Your Agreement
Modifications of a written living together contract should always be
in writing. This is because ancient, but still applicable, legal doctrines
usually make oral modifications of a written contract invalid. In addition,
these contracts expressly state that any modifications must be in writing.
A modification can simply state that you agree to change your contract,
and then set out the change. Date and sign all modifications. But if you’re
making really major changes, tear up the old agreement and start over.
Beware the Tax Man!
The government’s rules about money often create serious problems for
same-sex couples, and constitute some of the worst examples of antigay
government bias. Transfers of property or debt can be construed as
taxable income or as legal gifts, and if the amount is sufficiently high,
this can trigger a serious gift tax liability. If one of you is receiving
government benefits or alimony from a prior marriage, the legal
implications can be even more complicated. If you are contemplating a
transfer of more than $13,000 per year in assets (for example, where you
put your partner’s name on a property title without requiring payment
for the ownership interest) or debts (for example, when you “lend” your
partner $15,000 but don’t ever collect on the debt), it’s crucial that you
speak with an accountant who knows the rules for unmarried couples.
One of the trickier ramifications of the new relationship laws in
marriage-equality and marriage-equivalent states is dealing with tax
issues. Your state law may treat your assets as jointly owned and not tax
you because your relationship is legally recognized, while the IRS may
consider the merging of assets a taxable transfer. It is likely to be quite a
few years before these confusing issues are ironed out; in the meantime,
try to stay up to date on current developments (Chapter 11 tells you how),
and consult a lawyer or tax accountant if you have questions.
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