Family Matters: The Premarital and Postmarital Agreement- consider it when tying the knot or thereafter

Legal and tax considerations of pre and postmarital agreements?
(Part V)

I. Common Law Marriage.

A right at common law to marry exists unless state law affirmatively changes the right. Common-law marriage can be contracted in eleven U.S. states: Alabama, Colorado, Iowa, Kansas, Montana, New Hampshire, Oklahoma, Rhode Island, South Carolina, Texas, Utah, and the District of Columbia. The requirements for a common-law marriage to be validly contracted differ in the eleven states which still permit them. A common-law marriage is recognized for federal tax purposes if it is recognized by the state where the parties currently live or in the state where the common-law marriage began. If the marriage is recognized under the law and customs of the state in which the marriage takes place, the marriage is valid. Whether a state will recognize a common-law marriage from another state varies by state. For instance, in Virginia a marriage’s validity is determined by the law of the state where the marriage took place, unless the result would be repugnant to Virginia public policy. Virginia does recognize a common-law marriage that is valid under the laws of the jurisdiction where the common-law relationship was created. If a couple runs the risk of being married at common law, they should consider a pre or post martial agreement.

II. Same-Sex Marriages.

A. Same-sex marriage is legally recognized nationwide in Argentina, Belgium, Canada, Denmark, Iceland, the Netherlands, Norway, Portugal, South Africa, Spain, and Sweden. In Mexico, same-sex marriages are only performed in Mexico City, but these marriages are recognized by all Mexican states and by the Mexican federal government. Israel does not recognize same-sex marriages performed on its territory, but recognizes same-sex marriages performed in foreign jurisdictions. In Brazil, the state of Alagoas performs same-sex marriages. Also, in other states, a same-sex couple may convert their civil union into marriage with the approval of a state judge. If approved, that marriage is recognized in all the national territory. As of 2012, proposals exist to introduce same-sex marriage in at least ten other countries.

B. In the United States, the federal government will recognize same-sex marriages validly conducted under the laws of a state that recognizes same-sex marriage (i.e., California, Connecticut, the District of Columbia, Delaware, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, New York, Rhode Island, Vermont, and Washington).

C. In California, Registered Domestic Partners (“RDPs”) may also enter into a pre-nuptial agreement. Pre-nuptial agreements for Domestic Partners can have added complexities because the federal tax treatment of Domestic Partners differs from that of married couples. It should be noted, if state law extends full community property treatment to RDPs, each partner must report one-half of the combined income derived from community property on his federal income tax return. This applies whether received in the form of compensation for personal services or income from property. California, Nevada, and Washington apply full community property rights to RDPs.

D. The Defense of Marriage Act (“DOMA”) denies federal benefits to same-sex married spouses, including the right for a U.S. citizen to petition for an immediate relative visa for their spouses. When DOMA was enacted in 1996, Congress defined “spouse” under all federal statutes to refer to only a husband or wife of a person of the opposite sex. The Immigration and Nationality Act (“INA”) does not contain an explicit definition of spouse, however, because immigration is a matter of federal law, the definitions set forth in DOMA apply to the U.S. Citizenship and Immigration Services. However, it has been announced that the Department of Justice will not defend DOMA in certain cases and a U.S. district court has declared the law unconstitutional. Most recently in United States v. Windsor the United States Supreme Court ruled that section 3 of DOMA is unconstitutional. Section 3 requires that for purposes of federal enactments, marriage is limited to the union of one man and one woman and the word spouse is defined as someone of the opposite-sex who is a husband or wife. As a result of Windsor, the provisions of the Internal Revenue Code as well as other federal laws will be applied in the same manner to married same-sex couples as they are to married opposite-sex couples–at least for those married same-sex couples residing in states that recognize their marriages. It is unclear whether the provisions will also apply to married same-sex couples who are residing in a state where the marriage is not recognized. Thus, to the extent that same-sex couples’ marriages are recognized at the federal level, it appears that married same-sex couples will have the same federal tax treatment as married opposite-sex couples. Recently, the Congressional Research Service issued a report entitled “The Potential Federal Tax Implications of United States v. Windsor (Striking section 3 of the Defense of Marriage Act (DOMA)): Selected Issues. While Windsor is significant by providing federal benefits to same sex couples, it also may have some adverse tax implications e.g., expose the couple to the “marriage penalty”, i.e., having a higher tax liability when filing taxes as a married couple than their combined tax liability when filing as two single taxpayers. Other married same-sex couples may benefit from a “marriage bonus” when they have a lower tax liability when filing as a couple than their combined tax liability when filing individually. In Windsor, where a same-sex couple married in Canada, the Court held that the decedent’s estate was entitled to the marital deduction for assets passing to her surviving spouse.

D. Couples entering a same-sex marriage or a civil union should consider a premarital agreement to address the same issues as opposite-sex couples.

III. Divorce

Foreign divorces are generally recognized under the discretionary principle of comity. However, “no State is bound by comity to give effect in its courts to the divorce laws of another State repugnant to its own laws and public policy.”

Domicile and residency in the foreign country at the time of the divorce and service of process, or adequate notice, are often important factors considered by state courts in determining whether to award comity to foreign divorces.

A. For example, in the context of immigration laws, the Fourth Circuit has recognized that “[t]he domicile of the parties has long been recognized as the primary, if not the exclusive, basis for the judicial power to grant divorce.”

B. It is also important that the foreign country recognize the divorce as valid. Accordingly, whether a state court will recognize a foreign divorce requires a facts-and-circumstances analysis that will depend upon the domicile of the parties, the jurisdiction of the foreign court, and the procedures utilized by the foreign jurisdiction to award the divorce.

C. Generally, “the talaq, while a valid means of divorce in Pakistan and Iran, is not recognized in the U.S. when said by a Muslim to his non-Muslim wife. . . . The talaq when said to a Muslim woman and confirmed by a foreign government is usually recognized.”

1. Rev. Rul. 58-66.2. Kleinfield v. Veruki, 372 S.E.2d 407, 409 (Va. Ct. App. Sept. 20, 1988).3. Farah v. Farah, 429 S.E.2d 626, 629 (Va. Ct. App. May 11, 1993) (finding that a Muslim “proxy” marriage celebrated in England was invalid because the parties never “created a common-law marriage by entering into a relationship as husband and wife in any jurisdiction that recognizes common-law marriages”); see also Kelderhaus v. Kelderhaus, 467 S.E.2d 303, 305 (Va. Ct. App. Feb. 27, 1996).4. 8 U.S.C. 1101(a)(35).5. United States v. Windsor, 570 U.S. ___(2013); No. 12-307 (U.S. June 26, 2013). Available at http://www.supremecourt.gov/opinions/12pdf/12-307_6j37.pdf.6. July 18, 2013 by Margot L. Crandall-Hollick, Molly F. Sherlock, and Carol A. Pettit.7. McFarland v. McFarland, 19 S.E.2d 77, 82 (Va. Sup. Ct. Mar. 2, 1942). 8. See Va. Prac. Family Law section 6.2 (2011-12 ed.); see also 27C C.J.S. Divorce section 1215 (“A state may not recognize a quick divorce obtained by its citizens on overnight trips to foreign countries where the attitudes and philosophies of the courts, as well as the concepts of substantive and procedural due process, are entirely unknown and probably inconsistent with our own.”)9. Jahed v. Acri, 468 F.3d 230, 235-36 (4th Cir. 2006) (quoting Matter of Luna, 18 I. & N. Dec. 385, 386 (BIA 1983)).10. In Islam, when a man initiates a divorce the procedure is called talaq, when a woman initiates a divorce it is called khula.11. Kristen Cherry, Marriage and Divorce Law in Pakistan and Iran:  The Problem of Recognition, 9 Tulsa J. Comp. & Int’l L. 319, 349-50 (Fall 2001).