Community Property States Research Articles

Book Reviews

Book Reviews

Geographic Income Tax Marriage Equality: A Proposal to Expand the Double Basis Step-Up

Surviving spouses in community property states enjoy a significant, but unintended, income tax advantage over surviving spouses in other states. The advantage, known as “the double basis step-up,” generally eliminates capital gains for surviving spouses in community property states. This geographic inequality incentivizes inefficient behaviors for legislatures and taxpayers in common law property states seeking to obtain the benefits of the double basis step-up. Furthermore, taxpayer strategies to obtain a double basis step-up exacerbate wealth inequality, as they are most likely to be implemented by individuals with not only the motive but also the wherewithal to obtain sophisticated tax advice. This article proposes a novel approach to eliminate the geographic inequality of the current double basis step-up rule by decoupling double basis step-up eligibility from state-law defined “community property.” Specifically, this article proposes granting a double basis step-up for every surviving spouse’s “marital property,” using a nationwide definition. Expanding the double basis step-up in this manner would create geographic equality and reduce behavioral inefficiency without impairing tax administration. Furthermore, this proposal could be incorporated into existing basis step-up rules, which have proved to be very persistent despite frequent objections, making it an especially pragmatic solution.

Rights of Creditors to Collect Marital Debts after Divorce in Community Property Jurisdictions

Rights of Creditors to Collect Marital Debts after Divorce in Community Property Jurisdictions

The Illusion of Equality: The Failure of the Community Property Reform to Achieve Management Equality

This Article argues that equal management does not exist in any important sense, and that the true goal of the equal management laws was never equality. Community property laws can no longer be honestly described as “a vehicle to ensure the devotion of the couple’s resources to this unique partnership’s purpose: the well-being and future prosperity of the family the couple creates” unless the wife and children are not considered a part of that family. Today, wives in community property states have no better rights than wives in separate property states. In some cases, their economic position may even be worse.Part I describes the various allocative systems identified by sociologists and provides empirical support for the importance of egalitarian management. Part II describes the historical development of the two legally sanctioned management regimes in the United States: the separate property regime and the community property regime. Part II also examines how spouses actually managed their money in the pre-1970s era. Part III argues that equality was not achieved in fact or in law. First, Part III relies on quantitative and qualitative research to demonstrate that equality was not achieved in fact. Then, Part III examines the history of the reform era and argues that equality was not the primary goal of the legal reforms. Part IV elaborates on this thesis and examines how the laws in effect today perpetuate inequality.

The Optimal Basis Increase Trust: Exploiting Opportunities to Maximize Basis, Lessen Income Taxes and Improve Asset Protection for Married Couples after ATRA (Or: Why You'll Learn to Love the Delaware Tax Trap)

In Part I, the author describes the main income tax problems with the current design of most AB trusts in light of portability and the new tax environment – and problems with more simplified estate plans. Part II describes potential solutions to the basis issue, including the use of various marital trusts (and the key differences between them), and why these may also be inadequate. Part III explores how general and limited powers of appointment and the Delaware Tax Trap can achieve better tax basis adjustments than either outright bequests or typical marital or bypass trust planning. The paper refers to any trust using these techniques as an Optimal Basis Increase Trust (OBIT). Part IV discusses how these techniques accommodate disclaimer based planning (or disclaimers from lack of planning). Part V discusses how married couples can achieve a double step up at first death without living in a community property state and how to benefit from upstream planning for basis increases.Part VI discusses new asset protection opportunities opened up by the increased gift tax exclusion. Part VII discusses the tremendous value of applying OBIT techniques to pre-existing irrevocable trusts. Lastly, Part VIII discusses various methods to ensure better ongoing income tax treatment of irrevocable trusts – not just neutralizing the negatives of trust income taxation, but exploiting loopholes and efficiencies unavailable to individuals, including how a taxpayer might get an above the line deduction for gifting to their children. These techniques include using trust provisions to make income taxable to a beneficiary, lifetime powers of appointment, regulations that permit capital gains to be taxed to a beneficiary and charitable deductions available to trusts.These techniques taken together are referred to as an Optimal Basis Increase and Income Tax Efficiency Trust.

Marriage, Domestic Partnerships, Civil Union: The Developing Tax Landscape, Through Time: Using the Law to Support LGBT Relationships, Washington State Bar Association Qlaw Section CLE, Seattle, Washington

This working paper focuses mainly on recent changes in the IRS's position regarding how domestic partners in community property states report income for federal income tax purposes. Other topics include ERISA preemption and estate planning issues for the transgender client.

The Uniform Probate Code’s Elective Share: Time for a Reassessment (With an Addendum Reporting on Post-Publication Amendments)

This Article reproduces in a slightly revised format an Article under the same title (37 U. Mich. J. L. Reform 1 (2003)), and adds an Addendum that accounts for subsequent amendments to the UPC’s elective share. As reported in the Addendum, the Uniform Law Commission adopted many of the changes recommended in the original Article.The elective share is a statutory provision common to most probate codes in non-community-property states. The elective share protects a decedent’s surviving spouse against disinheritance. Traditional elective share law typically grants a surviving spouse a right to elect one-third of the deceased spouse’s estate, increased in some states to one-half, but the theory behind the traditional elective share amount has not until recently been carefully scrutinized. A one-third fraction can only be explained as a carryover from common law dower, but whatever the cause in early English law for choosing that fraction, there is no justification for continuing to use that fraction today.There are two plausible theories for elective share law today. One is the marital sharing theory. Under that theory, marriage is viewed as an economic partnership, a view that implies a goal of equalizing the marital assets. The other plausible theory is the support theory, that the elective share is a means of continuing the decedent’s duty of support beyond the grave. The traditional elective share statute implements neither theory. A fixed fraction of the decedent’s estate, whether it be one-third or one-half, is not coordinated with the partnership or support theories. Regarding the partnership theory, one-third or one-half of the decedent’s estate might be significantly less than the amount necessary to equalize the marital assets when those assets are disproportionately titled in the decedent’s name and considerably in excess of the amount necessary to do so when those assets are already titled equally or are disproportionately titled in the survivor’s name. Regarding the support theory, one-third or one-half might be significantly less than the amount necessary to satisfy the survivor’s support needs in a smaller estate and considerably in excess of those needs in a larger estate.Other relevant areas of the law of marriage are based on and coordinated with both the partnership and support theories. In the community property states, property law implements the partnership theory during the marriage. Family law implements both the partnership and support theories – the partnership theory upon divorce through the equitable distribution regimes and the support theory through the duty of support during the marriage and the right to alimony upon divorce. Traditional elective share law is the odd one out. The 1990 UPC represented the first effort to bring elective share law broadly into line with the partnership theory of marriage. That theory suggests that, if the surviving spouse so elects, the survivor is entitled to force a transfer of the decedent’s assets sufficient to equalize the marital assets. In determining which portion of a decedent’s estate is marital, the 1990 UPC uses an approximation system. The 1990 UPC, however, suffered from problems of presentation. It presented the approximation system in a rather indirect and opaque form. The original Article recommended changes that would cure that defect in presentation. The primary benefit of the recommended changes was to make the statute, as revised, present the approximation system in a clear and transparent form. As reported in the Addendum, the Uniform Law Commission revised the UPC elective share in 2008 so that it now presents the elective share in a more direct and hence more understandable form than it was in its earlier formulation.

Everything is Bigger in Texas Except the Community Property Estate - Must Texas Remain a Divorce Haven for the Rich?

This article compares significant community property rules applied in the eight traditional community property states. I show that, perhaps surprisingly, there is significant disagreement among the states regarding the approaches to apply in various common situations to determine the size of the community property estate. The starkest contrast is between Texas and California. In all the situations discussed, California has adopted the rule that expands the size of the community estate, while Texas applies the rule that leads to a smaller estate. The other community property states fall somewhere in the middle, sometimes following the rule applied in Texas and sometimes adopting the rule applied in California. The difference between the approaches followed in Texas and those accepted in California can have substantial impact on the size of the community estate. So, although one can say that all eight states are “community property states,” there are substantial differences among the state laws.In addition to highlighting the differences between Texas community property principles and those adopted in other states, the article also notes certain other aspects of Texas family law that make it more difficult for a Texas divorce court to provide adequate support for a spouse who otherwise will not have adequate resources after divorce. For all these reasons, I conclude that Texas is now a divorce haven for the rich.

Gender Choices, Business Valuation, & State Specific Variables in the Division of Marital Assets

The value of a closely held company may represent a significant component of a marital estate. Business valuation services play an increasingly crucial role in determining the value of a closely held family business and often facilitate a divorce settlement by providing an appraisal estimate in the absence of an actual sale as a basis to distributing marital assets. The results of the current study investigate the family court’s decision in cases where the marital estate includes a closely held company. The decision was influenced by two factors: state law (community property versus equitable distribution) and the owner of the business (the husband alone or either the wife alone or as co-owner). Cases in equitable distribution states were over four times more likely to result in a decision for the wife than cases in community property states, and cases in which the wife was either the sole owner or co-owner of the business, the court was over four times more likely to render a decision for the wife.

Human Capital Accumulation and the Expansion of Women's Property Rights

Most U.S. states passed married women's property and earnings acts between 1850 and 1920. These acts gave married women the right to own and control their separate property, and to own their market earnings. We examine the acts' effects on investment by families in girls' human capital. Standard approaches to the economics of property rights imply that, as married women gain the right to their earnings and to own and control property, the incentive to invest in women's and girls' human capital will rise. This will be observed through increases in the rates of girls' schooling relative to boys'. We posit that a state's passage of a married women's property act and earnings act will lead to an increase in women's (girls') school attendance relative to boys. We use state level census data on school attendance to test for these effects, examining the difference in schooling rates for girls and boys. Our empirical analysis indicates that this expansion of women's economic rights resulted in higher rates of relative school attendance by girls, and that the effects of earnings acts are larger than those of the property acts. We also find that the effect of strengthening married women's property rights is substantially stronger in common law states than in community property states. These findings are robust to several ways of controlling for the possible endogeneity of changes in women's property rights.

Relitigating Seaborn: Taxing the Community Income of California Registered Domestic Partners

In this article, professor Cain asserts: The California Domestic Partners Rights and Responsibilities Act (AB 205), passed in 2003, extended significant spousal rights and liabilities to registered domestic partners. All of those rights and liabilities became effective January 1, 2005. Most domestic partners are same-sex couples who do not have the right to marry in California. At least three other states (Massachusetts, Vermont, and Connecticut) similarly recognize either marriages or marital-like relationships between same-sex partners. California is unique, however, as it is the only community property state to grant spousal-like status to same-sex partners. As of January 1, 2005, registered domestic partners are subject to the same community property regime that covers California spouses. In 1930 the Supreme Court ruled in Poe v. Seaborn that community earnings were to be split for federal income tax purposes. There is a serious debate in the tax community about whether or not Seaborn should be applied to California registered domestic partners. The IRS recently opined in a chief counsel advisory that Seaborn does not apply. Prof. Cain disagrees with the IRS and takes the position that, whether or not Seaborn is good tax policy, it is a solid 75-year-old precedent that should be applied to registered domestic partners. She further predicts that California taxpayers will likely have to litigate the issue to establish the correct tax reporting rule.

How to avoid being swept away by the rising tide of malpractice litigation

How to avoid being swept away by the rising tide of malpractice litigation

Putative Spouses In Texas Courts

This paper will introduce the putative spouse doctrine as it existed in Texas from the very first case in 1846, discuss the doctrine as it presently stands, and clarify the doctrine's application in future cases. Part II of this article introduces the doctrine and discusses its historical development. Part III addresses the current doctrine and its application to various situations, such as divorce and probate. Part IV compares Texas's treatment of putative spouses with the treatment accorded such spouses in the other community property states. Part V concludes and suggests expansion and codification of the doctrine.

Daughters-in-Law and Stress in Two-Generation Farm Families

Most family business owners wish to pass the business to their offspring (Berkowitz & Hedlund, 1979; Bratton, 1976; Ward, 1987), but their success rate is low. For example, Beckhard and Dyer (1983) found that approximately 70% of the family firms they studied were either liquidated or sold after the retirement or death of their founders (also see Birley, 1986). Although economic factors take a toll, the most important reason for intergenerational transfer failure appears to be family dynamics (Dyer, 1986; Rosenblatt, deMik, Anderson, & Johnson, 1985; Ward, 1987). The process is problematic (e.g., Magnuson-Martinson & Bauer, 1986), and all family members report it as stressful (Keating & Munro, 1989; Marotz-Baden, 1988; Rosenblatt & Albert, 1990; Salamon & Markan, 1984; Swogger, 1991; Weigel & Weigel, 1987). Unresolved conflict can break up the family business and attenuate familial support. Thus, it is important for family practitioners to understand succession dynamics in order to help members of family-owned businesses to successfully orchestrate the transfer of assets from one generation to the next in a way that preserves both the business and the family. An important, but often overlooked, person in these family dynamics is the daughter-in-law. This article suggests and tests an explanation of why her stress level is higher than that of other adult family members. The retiring/giving and receiving generations look at the transfer through different lenses (e.g., Keating & Little, 1991; Marotz-Baden, 1986; Rosenblatt et al., 1985; Weigel & Ballard-Reisch, 1991). What is stressful for one generation is not necessarily stressful for the other. Farm family business research suggests that the involved family members face different amounts of stress, with daughters-in-law experiencing the most stress (Marotz-Baden, 1988; Wilson, Marotz-Baden, & Holloway, 1991; Weigel & Weigel, 1987). Unfortunately, reasons for their differential distress have not been studied. Thus, practitioners working with intergenerational business families may focus on fathers and sons, as they are apt to be the most involved in the day-to-day business operations, overlooking daughters-in-law, who may be the most emotionally distressed extended family members. While unresolved tension between fathers and sons may jeopardize the intergenerational continuity of the family business and even result in strained extended family relationships, daughters-in-law's unresolved tension has more dire consequences. In addition to the break-up of her marriage and the subsequent consequences for her children, a divorce, especially in a community property state, may force the family business into bankruptcy. Such action can deprive all members of the extended family of a viable source of income. Thus, practitioners should keep in mind that a daughter-in-law's happiness can greatly influence the emotional and the financial well-being of all members of a small, intergenerational family business. It is important to recognize her roles in the family and in the family business. This article focuses on daughters-in-law in family arm businesses. It describes daughters-in-law in the context of the North American farm family, reviews research documenting their stress, and then tests whether their higher stress levels are related to daughters-in-law's lack of integration into both the extended family and the family business systems. The hypothesized relationship between stress and lack of integration into the extended family system is based on the assumption that the daughter-in-law will want to be integrated into the extended family, as the marriage contract is in some ways a contract between kin groups (Levy, 1966). A second hypothesis is that her stress level will be high if she wants to be integrated into the family business and perceives that she is not. LITERATURE REVIEW Traditionally agrarian communities have been overwhelmingly patriarchal and residentially patrilocal, with the land most commonly passing from one generation of sons to the next. …

Distribution of pension benefits on divorce: Some unresolved analytical issues

Distribution of pension benefits on divorce: Some unresolved analytical issues

Income from Separate Property: Towards a Theoretical Foundation

This article addresses an important area of historical disagreement among the community property states: the characterization of the rents, issues, and profits (income) from separate property brought into or acquired during marriage.' Of the nine community property states, five characterize the income derived from separate property as separate property.2 The other four states characterize such income as community property.3 Although there have been scattered discussions of this issue throughout the community property case law and literature over the years, I have searched the literature in vain for a comprehensive treatment of the question.4 Certainly there has not been one in recent years. The issue is important because of the prevalence of separate property in marriages. Two societal phenomena are combining to cause increasingly more separate property to be brought into marriages. First, more persons are

ROSEN'S MARRIAGE TAX COMPUTATIONS: WHAT DO THEY MEAN?

Previous articleNext article No AccessNOTES AND COMMENTSROSEN'S MARRIAGE TAX COMPUTATIONS: WHAT DO THEY MEAN?MICHAEL J. McINTYREMICHAEL J. McINTYRE Search for more articles by this author PDFPDF PLUS Add to favoritesDownload CitationTrack CitationsPermissionsReprints Share onFacebookTwitterLinkedInRedditEmail SectionsMoreDetailsFiguresReferencesCited by National Tax Journal Volume 41, Number 2June 1988 Published for: The National Tax Association Article DOIhttps://doi.org/10.1086/NTJ41788726 Views: 2Total views on this site © 1988 National Tax Association. All rights reserved.PDF download Crossref reports no articles citing this article.

Community Property in Czechoslovakia and the Soviet Union as Compared With Other Community Property States

Community Property in Czechoslovakia and the Soviet Union as Compared With Other Community Property States

Federal Estate Tax: Determination of Marital Deduction in Community Property State When Surviving Spouse Elects to Take under Decedent's Will

Federal Estate Tax: Determination of Marital Deduction in Community Property State When Surviving Spouse Elects to Take under Decedent's Will

The Marital Deduction and Equalization under the Federal Estate and Gift Taxes between Common Law and Community Property States

The Marital Deduction and Equalization under the Federal Estate and Gift Taxes between Common Law and Community Property States