Transferring Assets to a Domestic Partner

I recently had a client, David, come to me absolutely distraught. He’d meticulously planned his estate, created a trust, and then, in a moment of generosity – and frankly, a bit of naiveté – transferred his rental property into a joint tenancy with his domestic partner, Emily. A month later, Emily tragically passed away. David was certain the property would pass directly to his children, as he intended, but because of the joint tenancy, it didn’t. It went directly to Emily’s estranged sister, who David barely knew, and who promptly began eviction proceedings against his long-term tenants. The cost? A legal battle exceeding $40,000 and the loss of a stable income stream.

This scenario, unfortunately, isn’t uncommon. Domestic partnerships offer many of the same rights and responsibilities as marriage, but estate planning requires a far more nuanced approach. Simply changing a title isn’t enough to ensure your wishes are honored. As an estate planning attorney and CPA with over 35 years of experience here in Escondido, I’ve seen firsthand how these oversights can dismantle years of careful planning.

What are the implications of joint tenancy with a domestic partner?

Joint tenancy with rights of survivorship means that when one partner dies, their share of the property automatically transfers to the surviving partner, regardless of what’s stated in a will or trust. While this seems straightforward, it bypasses the entire probate process and the protections built into a well-structured estate plan. It’s a powerful tool, but it can be disastrous if it’s not aligned with your overall goals. For domestic partners, the key issue often arises when the intent is to leave assets to children or other family members. The automatic transfer to the surviving partner overrides these intentions.

How can a trust protect assets transferred to a domestic partner?

A properly drafted trust can offer significant protection, even if assets are held jointly. The trust should specifically address what happens to jointly held property upon the death of one partner. This can involve provisions that direct the surviving partner to transfer their portion of the joint tenancy into the trust, or it could outline a specific distribution scheme that overrides the survivorship rights. However, and this is critical, the trust document must be unambiguous and clearly state the intention to control these assets. We routinely include “pour-over” provisions in trusts, specifically designed to capture assets titled outside the trust at the time of death, but these only work if the ownership structure doesn’t prevent the transfer.

Does the type of domestic partnership matter?

Yes, absolutely. California recognizes two types of domestic partnerships: registered domestic partnerships and informal domestic partnerships. Registered partnerships provide more legal protections than informal ones. However, even with a registered partnership, the same principles of joint tenancy apply. The crucial point is that the legal ownership structure dictates the flow of assets, not the relationship itself. Furthermore, when dealing with real estate transfers, it’s essential to consider Prop 19: “…before distributing a parent’s home to a child, the trustee must verify if the child intends to make it their primary residence within one year; failure to file the proper exclusion claim forms will trigger a property tax reassessment to current market value, potentially forcing a sale.” This applies even if the property initially transferred into the partnership was a gift from the parent.

What happens if we haven’t done any estate planning?

If you and your domestic partner haven’t established a trust or will, California’s intestacy laws will govern the distribution of your assets. These laws prioritize surviving spouses and registered domestic partners, but the outcome can still be unpredictable, especially if there are children from a prior relationship. It’s vital to understand that intestacy laws may not reflect your wishes. Without a clear plan, the state decides who gets what, and that can lead to costly legal battles and family disputes.

What is the trustee’s responsibility to keep beneficiaries informed?

Trustees have a legal duty to keep beneficiaries reasonably informed about the administration of the trust. This includes providing regular updates on the trust’s assets, income, and expenses. Failing to do so can be a breach of fiduciary duty and could result in legal action. Specifically, Probate Code § 16062: “…trustees are legally mandated to provide a formal accounting to beneficiaries at least annually and at the termination of the trust; waiving this requirement in the trust document does not always protect the trustee if a beneficiary demands a report.” As a CPA as well as an attorney, I understand the importance of accurate and transparent accounting, especially when it comes to capital gains implications and the step-up in basis for inherited assets.

What about business interests held within the trust?

If the trust holds interests in limited liability companies (LLCs), there are additional considerations. While the FinCEN 2025 Exemption: “…as of March 2025, domestic U.S. LLCs managed by the trust are exempt from mandatory BOI reporting; however, trustees managing foreign-registered entities must still file updates with FinCEN within 30 days of the settlor’s death.” It’s critical to ensure that any changes in ownership or control are properly reflected in the LLC’s operating agreement and reported to the appropriate authorities.

What failures trigger court intervention and contests in California trust administration?

Success in trust administration depends on more than just the document; it requires active management of assets, precise accounting to beneficiaries, and careful navigation of tax rules. Whether dealing with a blended family or complex real estate, understanding the mechanics of trust law is the only way to ensure the grantor’s wishes survive scrutiny.

A stable trust administration relies on the trustee’s ability to balance investment duties, beneficiary communication, and tax compliance. When these elements are managed proactively, families can avoid the emotional and financial drain of litigation.

Verified Authority on California Trust Administration

• Mandatory Notification (Probate Code § 16061.7): California Probate Code § 16061.7
  The first critical step in administration. This statute requires the trustee to notify all heirs and beneficiaries within 60 days of death. It starts the 120-day clock for any contests, limiting the trustee’s liability.
• Trustee’s Duty to Account (Probate Code § 16062): California Probate Code § 16062
  Defines the requirement for annual and final accountings. Trustees must report all receipts, disbursements, and changes in asset value to beneficiaries to ensure transparency and avoid surcharges.
• Primary Residence Succession (AB 2016): California Probate Code § 13151 (Petition for Succession)
  Effective April 1, 2025, this statute is a “rescue” tool for administration. If a home (up to $750,000) was left out of the trust, the trustee can petition for this order rather than opening a full probate.
• Property Tax Reassessment (Prop 19): California State Board of Equalization (Prop 19)
  Trustees must understand these rules before signing a deed to a beneficiary. Distributing real estate without filing the Parent-Child Exclusion claim can accidentally double or triple the property taxes for the heirs.
• Estate Tax Exemption (OBBBA): IRS Estate Tax Guidelines
  Reflects the OBBBA permanent increase to a $15 million per person exemption (effective Jan 1, 2026). Trustees must evaluate if an IRS Form 706 is necessary to preserve “portability” of the unused exemption for a surviving spouse.
• Digital Asset Access (RUFADAA): California Probate Code § 870 (RUFADAA)
  Without explicit authority under this statute, a trustee may be blocked from accessing the decedent’s online banking, email, or cryptocurrency accounts, stalling the administration process.