In the recent Tax Court case of Estate of Marie P. Frappolli v. Director, Division of Taxation, a domestic partnership lost estate tax benefits because they did not register as a couple with the state. As an alternative to marriage equality, New Jersey had introduced the option to register as a domestic partnership. Ms. Frappolli and her partner, Ms. Dorothea Angelou, qualified under the requirements for a domestic partnership in New Jersey, but they never filed with the state to make it official.
Marie Frappolli passed away, leaving her estate to Ms. Angelou. In addition, the couple lived in Ms. Frappolli’s home that was transferred to a joint tenancy with the right of survivorship in 1993. The tax division argued that because the couple never registered with the state the entire estate could be taxed. Furthermore, the value of the home could be added to the total value of the estate when determining tax liability. As a result, Ms. Angelou was hit with a transfer tax bill by the state for $178,845.57.
Legal Arguments Over the Estate
The estate and Ms. Angelou’s attorneys argued that given the length of the couple’s relationship the formality of filing a piece of paper with the state could be overlooked. Clearly, the couple had fulfilled the qualifications for being a domestic partnership within the state. However, the tax court rejected that argument and stated that in order to bypass the transfer taxes on an estate the law requires that a couple register as a domestic partnership with the state.
Even if the couple meets all of the requirements the form must be filled out except for in limited circumstances. For example, in dire medical situations a couple can be treated as a domestic partnership even if the paperwork is not filled out with the state registrar. But the court would not apply the same reasoning to a couple making estate planning decisions.
The attorney for the couple also made the argument that an estate planning attorney reviewed the New Jersey state tax website, and nowhere in the website for domestic partnerships did it say anything about filling out a form with the state. However, the tax court also rejected that argument by stating “It is difficult for this court to accept the proposition that an attorney with longtime experience . . . would credibly argue to this court that it was reasonable for him to draw conclusions about New Jersey tax law and provide assistance in completing an inheritance tax return based solely on his review of [the New Jersey tax law] website.”
Ramifications on Domestic Partnerships and Estate Planning
The New Jersey tax court affirmed in its decision that domestic partnerships are not equal to heterosexual marriages in the state. As a result, domestic partnerships must have every possible aspect of their estate plans covered in states that do not recognize gay marriage or risk the same outcome as Ms. Angelou and Ms. Frappolli’s estate. It is incredibly important to speak with an experienced estate planning attorney who knows the law of the state as well as every potential legal pitfall to avoid. By not filling out a single affidavit for the state Ms. Angelou will be forced to spend the majority of her partner’s estate just paying off the taxes for it.