I was reading post on a Florida domestic partnership law blog which brought to mind the fact that I have represented several bankruptcy debtors who are part of same-sex couples. These debtors typically are living together in some form of domestic partnership. Because Florida does not recognize same sex marriages these couples have to find their own paths to estate planning and debt planning.
Estate planning in domestic partnerships often causes unforseen financial losses when one of the partners has to file bankruptcy. Many same sex couples implement a simplified estate plan which relies on joint ownership with rights of survivorship. The couples living in domestic partnerships will open joint bank account, own real estate jointly, and even own automobiles as joint tenants. Their goal is to make sure the surviving joint tenant acquires ownership upon the death of one partner without the necessity of going through an expensive probate.
If one of the partners files bankruptcy their share of any non-exempt property owned jointly with their domestic partner becomes part of the bankruptcy estate. The bankruptcy code gives the Chapter 7 trustee the right to partition jointly owned non-exempt property and liquidate the property at auction. The non-debtor partner is entitled to half the liquidation proceeds, and money received at trustee sale is usually much less than market value.
The bankruptcy law assumes that money in any joint financial account is equally contributed. If the non-debtor partner contributed most of the money to a joint account, the bankruptcy debtor has the burden to prove the disproportionate contribution.
The best practice is for domestic partners to separate their debts and their assets unless each partner is debt free and is not subject to being involved in civil litigation