updated 10/1/2006 5:04:51 PM ET 2006-10-01T21:04:51

Surprising a spouse with a new car or extravagant piece of jewelry is an expensive way to express affection, but at least there aren't tax consequences.

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But gay couples, technically, should file a gift tax return — gifts worth more than $12,000 come with tax consequences — so one could imagine the results if an individual decides to retitle a home or a bank account, giving half to his or her domestic partner. These issues, which don't exist for the legally wed, are just the tip of the iceberg, and underscore the importance of careful financial planning, whether you're filing your income taxes or planning for retirement — regardless of where you live. The same issues apply to unmarried heterosexual couples, as well.

Same-sex couples need to keep in mind that even though domestic partnerships or civil unions are recognized by some states — California, Vermont, Connecticut, New Jersey, Maine and Hawaii, while marriage is allowed in Massachusetts — you remain strangers in the eyes of the federal government. In fact, one financial planner points out that there are about 1,049 federal laws that benefit those allowed to take an official trip down the aisle.

"Any rights you would want to have as a married couple, you need to re-create in a legal document," says Todd G. Sears, a senior financial adviser who founded the LGBT (lesbian, gay, bisexual and transgender) financial services team at Merrill Lynch & Co.

That will require a lot of paper. Some of the documents needed, and the terminology, will vary from state to state, but here's a basic list that same-sex partners should have:

Wills and/or revocable living trusts and pour-over wills: Without a will or revocable trust, you risk having your assets pass to family members instead of your partner; it also allows you to name a guardian for minor children. A revocable living trust — where assets are titled to the trust and your trustee distributes your assets per your wishes after your death — is considered more difficult to contest. A living trust also keeps your affairs private because it avoids probate, unlike a will, which becomes part of the public record. A living trust should be used with a pour-over will, which will cause any assets left out to "pour over" into the trust after you die.

Advance health-care directive; health-care authorization proxy; durable power of attorney for health care: Generally speaking, these documents appoint an agent — your partner — to make medical decisions on your behalf, should you become incapacitated. They also will allow visitation, which can be denied unless you're a spouse or family member. Sears also recommends giving your partner Health Insurance Portability and Accountability Act authorization, a document that will authorize your insurer to release medical information to your partner.

Durable power of attorney for finances: This document designates an agent, whether it's your partner or an adviser who will keep your partner's interests in mind, to make financial decisions if you're incapacitated, says Philip J. Hoskins, an attorney in Los Angeles.

Domestic partner agreement: Much like a prenuptial agreement for married couples, this document — also called a living-together or property-sharing agreement — spells out who gets what in the event of a split or death. "There is no such thing as gay alimony," says Merrill's Sears.

Parenting agreements: Same-sex couples should visit with an attorney if they have or are planning to have children, because every situation is unique. Depending on your circumstances and where you live, you might consider joint-custody agreements or second-parent adoption. If you're thinking of adopting internationally, one planner says to wait to document your partnership (such as getting married in Massachusetts) because attitudes in other countries toward gay unions may impede the process.

Beneficiaries: Be sure to review your beneficiary designations on retirement accounts, stock options, life insurance and any other assets.

Domestic partner registration: In certain states, couples can register as domestic partners and they will be afforded state spousal rights, such as the right to inherit without a will. But even if you can and do register, experts advise documenting everything, no matter what your status.

"Whatever you do, put it (all) in writing, even if you register as domestic partners," says Hoskins. "Don't leave things to chance. Otherwise, you are stuck with what the state tells you you're stuck with."

Copyright 2006 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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