I was recently speaking with a woman who is in committed relationship, but there is a significant asset and income disparity between her and her partner. She wants to take the next step in their relationship but worries about all the legal and financial ramifications that come with marriage, so we discussed the possibility of a domestic partnership. Here are the financial and practical considerations in choosing between marrying your partner and choosing a domestic partnership.
Tax Implications
Many people associate marriages with tax benefits. With some exceptions, filing joint taxes can lower tax rates and result in increased deductions. By filing jointly, you could also be personally pursued by the IRS if your spouse makes filing mistakes or commits fraud.
Because recognition of a domestic partnership varies on a state-by-state basis, domestic partners may have the opportunity to file state taxes jointly but are not recognized on a federal level.
Inheritance And Estate Planning
Marriage has some marked benefits in inheritance and estate planning. Couples with assets more than $20 million stand to benefit most from some of the estate planning strategies under today’s federal tax laws. For starters, spouses enjoy an unlimited martial deduction, meaning they can transfer an unlimited amount to each other during life or at death without incurring gift or inheritance taxes.
As of 2025, a taxpayer’s lifetime gift and estate tax exemption is $13.99 million. This means that when an unmarried person passes away with an estate valued higher than that amount, the excess is subject to estate taxes. If married to a US Citizen, 100% of what passes to the spouse is excluded.
Inherited retirement accounts are also subjected to less restrictions when passed to a spouse. Non-spousal beneficiaries are often forced to distribute pre-tax retirement accounts within 10 years after the death of the original holder. Spousal beneficiaries have more choices and may choose to distribute the funds over the course of their own lives.
Regardless of if you choose to marry or pursue a domestic partnership, dying without updated beneficiaries or a trust can be messy. When there is a question of how assets should be distributed, the state court system gets involved in a procedure called probate. There, they will aim to follow laws of intestate succession which vary from state to state. In most cases, the spouse or domestic partner will be the first in line to receive assets. You can make sure your actual wishes are followed by working with a qualified estate planning attorney, updating your beneficiaries, and ensuring the correct assets are held in trust.
Health Insurance And Benefits
While laws vary from state to state, many states that allow for domestic partnerships treat spouses and domestic partners equally when it comes to including your partner on your health insurance and benefits.
Social Security And Retirement Benefits
Social Security was a system that was created when there was less of a need for two-income households and when most adults opted to get married. Because of this, it is built to ensure that the non-working spouse still receives income and can survive during retirement years.
Individuals who were married to a Social Security beneficiary for more than 10 years before divorcing or who are currently married to one can collect reduced benefits based off that Social Security beneficiary. If the original Social Security beneficiary passes away, those benefits can be increased.
While this isn’t particularly beneficial in two-income households where both people are entitled to Social Security, it can still be impactful for two-income households where one spouse is a pensioned employee who doesn’t contribute to Social Security.
Many pensions and annuities also have spousal continuation options available in exchange for reduced benefits, which may not be available to non-spousal beneficiaries. Domestic partners cannot be considered as equal to spouses in the eyes of Social Security and many other pension systems.
Assets and Debt
Treatment of debt and financial obligations can vary in marriages depending on if the spouses live in a common law or community property state. You could end up being responsible for your spouse’s debt even if you end up separating down the road. You also might end up having to divide significant assets in half even if you were the sole contributor. Marital law around the divisions or assets and debt is usually clear on the state level. You can arrange other agreements if you have a prenuptial or postnuptial agreement in place. As a provision of the divorce, you may also need to pay alimony or be paid alimony dependent on the circumstances.
When domestic partners separate, there are no court proceeding or lawyers required to divvy out assets and debts because with some exceptions, the assets and debts are considered separate. In most jurisdictions, you cannot be forced to make alimony payments to an ex-partner either. Where separation of assets and debts can get complicated is if you choose to make a purchase or cosign on a loan together. It could still be beneficial to have a legal agreement in place dictating what happens in the event of separation.
Legal Proceedings
The legal proceedings around weddings and divorce are typically much more costly than that of a domestic partnership.
Conclusion
In deciding between marriage and a domestic partnership, financial and practical considerations play a crucial role. Marriage can offer significant benefits in taxes, estate planning, and retirement planning, but may come with shared debt liabilities, asset risk, and complex legal proceedings. Domestic partnerships provide more flexibility and simpler legal processes but lack federal recognition and certain benefits. Carefully weighing these factors with professional advice can guide partners in making the best choice for their situation.
This informational and educational article does not offer or constitute, and should not be relied upon as, tax or financial advice. Your unique needs, goals and circumstances require the individualized attention of your own tax and financial professionals whose advice and services will prevail over any information provided in this article. Equitable Advisors, LLC and its associates and affiliates do not provide tax or legal advice or services. Equitable Advisors, LLC (Equitable Financial Advisors in MI and TN) and its affiliates do not endorse, approve or make any representations as to the accuracy, completeness or appropriateness of any part of any content linked to from this article.
Cicely Jones (CA Insurance Lic. #: 0K81625) offers securities through Equitable Advisors, LLC (NY, NY 212-314-4600), member FINRA, SIPC (Equitable Financial Advisors in MI & TN) and offers annuity and insurance products through Equitable Network, LLC, which conducts business in California as Equitable Network Insurance Agency of California, LLC). Financial Professionals may transact business and/or respond to inquiries only in state(s) in which they are properly qualified. Any compensation that Ms. Jones may receive for the publication of this article is earned separate from, and entirely outside of her capacities with, Equitable Advisors, LLC and Equitable Network, LLC (Equitable Network Insurance Agency of California, LLC). AGE-7541945.1 (1/25)(exp. 1/29)
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