A same-sex couple’s guide to homeownership

by Jamie Wetherbe

Following the California Supreme Court’s ruling in June, same-sex couples across the state are celebrating the right to have wedding bells in their future—or at least until Proposition 8, an initiative that would eliminate the right of same-sex couples to wed, appears on the statewide ballot in November.

But how does same-sex marriage translate to homeownership? Do married gay couples have the same rights as their straight counterparts? The short answer is “no,” but for the most part, this is uncharted legal territory—neither the California nor the federal courts have looked at the issue in detail.

There are no clear-cut rules, as each couple will have different circumstances, but if you’re looking to make a home-sweet-home together, here are some things to consider to protect yourself and your partner.

Holding property as joint tenants with rights of survivorship is often the most advantageous arrangement and, in California, you don’t need to be married to do so.

“Generally, this means the property doesn’t go through probate, and your partner is going to receive your property on your death without a complicated probate proceeding,” says Brian Chase, a senior staff attorney at Lambda Legal’s Los Angeles office. “But that might not be the best solution based on a couple’s circumstances, so it’s best to get individualized advice [rather] than [trying] to craft a one-size-fits-all solution,” he adds.

How about adding your partner’s name to your mortgage? If your partner has bad credit—married or not—this is probably not the way to go, as it will likely raise your interest rate. But you can add your partner’s name to the title, whether you’re married, domestic partners or just two adults, depending on the terms of your mortgage. “If you’ve got a good mortgage broker, they should be able to talk that through with you,” says Chase, adding that California law requires mortgage brokers to treat married and registered same-sex couples equally.

Still, there’s a catch: “As a general rule, when you’re a [heterosexual] married couple and you put your husband or wife on the title of the house where you’re living, the court isn’t going to treat that as a taxable event,” Chase explains.

Since the federal government doesn’t recognize same-sex marriages, however, adding a same-sex spouse to the title could mean hefty IRS gift taxes that straight married couples don’t face. “I would argue strongly that you shouldn’t, but it’s an issue people should discuss with their attorneys … so they don’t make a big transfer of assets that can come back and bite them,” Chase explains.

While married couples in California can file jointly on their state return, the IRS requires same-sex couples to file separately, “so domestic partners and same-sex married couples in California have had to prepare mock federal returns—as if the federal government recognized same-sex marriage—and plug that number into their California returns and do separate federal returns for filing with the federal government,” says Chase.

Have a headache yet? Now for the business of breakups.

If you hold property jointly and you can’t decide how to deal with this property sans lawyers, “then the court will treat it like the delusion of any sort of business partnership, where the partners might own property jointly,” says Chase.

If you’re married and you break up, “the court’s going to look at what kind of agreement you had with your partner, who paid for what, and they might try to unravel whose funds were used to purchase something in particular,” says Chase.

Still, whether you’re married, registered domestic partners or unmarried, there is one simple rule: “Everybody should have a will,” says Chase. “That’s the one clear-cut answer I can give you on all of this. If you have the means to do so, it’s important to consult with a probate attorney. But even a will from a do-it-yourself will kit is better than no will at all.”

Without a will, complicated—and costly—probate proceedings can ensue to deal with the estate. And even with a will, gay couples might be subject to change in ownership taxes straight couples often avoid. (Again, it’s best to speak with an expert.)

If same-sex couples lose the right to marry, “We think that there’s a very strong argument for couples who get married before November, [that] they’ll [still] be married even if Prop. 8 were to pass,” says Chase. “But there’s no way to know for sure what the courts would do.”

Bottom line: Relationships are complicated—personally and financially—especially when the government is involved. Same-sex couples should seek personal advice from financial advisors and lawyers before crossing the threshold together. So much for romance.

For more on homeownership and estate planning, visit the Human Rights Campaign (hrc.org), the National Gay and Lesbian Task Force Foundation (thetaskforce.org) and Nolo (nolo.com).