NJ Tax Court confirms necessity to follow procedures to get tax benefits under Domestic Partnership Act

On May 28, 2014 the NJ tax Court  decided the case of Claudette Lugano v NJ Division of Taxation.http://caselaw.findlaw.com/nj-tax-court/1668800.html . Ms. Lugano and the decedent, Mr. Lovi, had neither married nor registered as domestic partners, and inheritance tax was imposed on her receipt of his retirement plan benefits upon his death. The Court held, among other things, that the failure to either marry or register was fatal to the claim for exemption from the inheritance tax. A similar decision was issued in Estate of Frappoli v. Director, Division of Taxationon on June 5th. http://www.njlawarchive.com/20140606102512629069187/

There is no “common law marriage” in New Jersey. Certain estate tax exemptions at the death of one member of a couple are only available when the couple had either been married or registered as couples under other NJ laws.  When it comes to NJ estate and inheritance taxes, there is no tax on the transfer of wealth at death to a spouse or to a member of a couple who had actually registered as Domestic Partners http://www.state.nj.us/treasury/taxation/domparttax.shtmlor or as a civil union. http://www.state.nj.us/treasury/taxation/civilunionact.shtml.

When the State enacted its Civil Union law in 2007 in response to the decision in  Lewis vs. Harris, 188 N.J. 415 (2006), providing identical benefits to same sex committed couples as to married couples, the Domestic Partnership Law remained available to same sex couples and heterosexual couples who were 62 years of age and olderhttp://www.state.nj.us/treasury/pensions/civil-unions.shtml. . The statute required the couple to sign a specific form of Affidavit of Domestic Partnership and file it with the local registrar, who then files it with the State.

Evidently the couples in the Lugano and Frappoli cases never availed themselves of either mechanism. They may have had their reasons for not doing so, but ultimately the court held that failure to register the relationship was fatal to her claim for tax exemption.

 

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