Some states have unintentionally created a tax shelter by allowing heterosexual couples to enter domestic partnerships and civil unions.  Choosing an alternative to marriage may give them the state-wide benefits of marriage, like medical decision power and inheritance rights, but avoid the federal marriage tax penalty that comes when married people earn similar incomes.  The down side is that they cannot avail themselves to the marriage bonus when one makes significantly more than the other, but they then have the option of choosing marriage.  The laws vary markedly by state, but they usually either permit marriage alternatives for same-sex couples only, also permit them for heterosexual couples, or allow opposite-sex marriage alternatives only to people over the age of 62.

See Howard Gleckman, “Are Domestic Partnerships a Way for Heterosexual Couples to Avoid the Marriage Tax Penalty?,” Forbes (June 5, 2014)

Posted by David Staggs, Associate Editor, Wealth Strategies Journal