Domestic Partnership vs. Marriage

James Klaffer is a senior director of High-Net-Worth Tax Planning at Northwestern Mutual.

First comes love, then comes marriage? Not necessarily. Times are changing, and more couples are choosing not to get married. In fact, two in five Gen Z-ers and millennials think marriage is an outdated tradition, according to a 2023 survey from Thriving Center of Psychology.

Entering into a domestic partnership is one alternative. This arrangement is recognized in certain states and has its own pros and cons. Whether you choose to get married, become domestic partners or simply live together, tending to your finances is crucial. Here are the financial implications of domestic partnership vs. marriage.

What constitutes a domestic partner?

A domestic partnership is generally defined as two people who aren’t married or joined by a civil union but live together and share a domestic life. It can be an option for same-sex couples or opposite-sex couples. Domestic partnerships can grant important legal rights to unmarried couples, but rights and eligibility requirements will depend on your state.

Domestic partnership vs. marriage

Do domestic partnerships have the same legal rights as marriage? Not quite. Let’s start by talking about the key differences.

Keep in mind that some financial tools don’t follow the instructions in a will. Instead, these tools involve a beneficiary, which is the person who will benefit financially. For example, your life insurance beneficiary gets the death proceeds regardless of a will or marriage status. So it’s important to keep your beneficiary updated to accurately reflect your wishes.

Where are domestic partnerships recognized?

As noted above, domestic partnership rules can vary between states—and even counties. That can present unique financial planning challenges for couples. Different levels of domestic partnership rights are currently available in these states:

• California

• District of Columbia

• Maine

• Maryland

• Nevada

• New Jersey

• Oregon

• Washington

• Wisconsin

How does being in a domestic partnership affect taxes?

Married couples generally have more tax advantages. That includes:

• The ability to file a joint tax return—this allows you to file a combined return and unlocks a larger standard deduction and possibly more income taxed at lower tax rates.

• A larger gift tax exclusion amount—each partner can give financial gifts up to the federal limit. In 2025, that’s $19,000. But married couples can give up to $38,000 without having to file a gift tax return.

However, there are some tax benefits of being in a domestic partnership. Having to file individual tax returns can help couples avoid the “marriage tax penalty.” This is when a couple’s joint income pushes them into a higher tax bracket or phaseouts for certain credits and deductions.

How do domestic partnerships impact credit and debt?

Married couples generally have joint liability on shared debts. That includes mortgages, credit cards and other accounts that are in both of their names—and appear on both of their credit reports. In this way, one partner’s debt can affect the other partner’s credit score, for better or worse. That can be a good thing if each partner is paying their bills on time and keeping their balances on the lower side.

Are domestic partners liable for debt? The short answer is no. Domestic partners have no automatic shared liability for debts. That can make it easier to protect your individual credit. However, it’s worth noting that domestic partners can apply together for certain debts, like mortgages.

How does life insurance work for domestic partners?

Domestic partners have an insurable interest in one another. That means they can take out a life insurance policy on each other. For policies that are sponsored by an employer, you may have to provide more documentation to name a domestic partner as a beneficiary. Married couples, on the other hand, typically have automatic access to spousal benefits.

What about health insurance?

Spouses generally have access to their partner’s health insurance policy, which can help them secure coverage at an affordable price. If you’re in a domestic partnership, insurance works a little differently. Whether you can use your partner’s health plan will depend on the insurer and policy.

Social Security and retirement planning for domestic partners

Can domestic partners collect Social Security benefits on their partner’s record? Unfortunately, this isn’t guaranteed. Depending on your state, there may be cases in which domestic partnerships are treated the same way as marriages for Social Security purposes—but it can be complicated. That includes survivor benefits.

When it comes to saving for retirement, domestic partners can’t contribute to spousal IRAs. However, they can be the beneficiaries of inherited IRAs.

Domestic partnerships and estate planning

Domestic partners have unique estate planning needs. If you’re married and your spouse passes away without a will, chances are you’ll automatically inherit some or all of their assets. But probate can be more complicated for domestic partners since there’s no automatic inheritance. Instead, they must be explicitly named as a beneficiary in their partner’s will or trust. That can make the estate planning process longer, more complicated and more expensive.

So, is it better to be domestic partners or be married? Only you and your partner can answer that question. Each arrangement has its benefits and drawbacks. The right choice for you depends on your personal feelings and situation. Your Northwestern Mutual financial advisor can be a great resource who helps you weigh the pros and cons of each option.

This publication is not intended as legal or tax advice. Financial Representatives do not render tax advice. Consult with a tax professional for tax advice that is specific to your situation.