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December 2009 Archives

Just because you live with someone for 7 years DOES NOT create a common law marriage

I have lost count of the number of times that people who are not lawyers have said to me, and with certainty that they are correct, that if a man and a woman have lived together for 7 years or more, then they are common law married.  ATTENTION!  THIS IS FALSE!There is no such 7 year rule that exists anywhere in the United States.  In most states, common law marriage is not recognized at all.  According to the National Conference of State Legislatures, only 9 states now recognize common law marriages formed within their borders: Alabama, Colorado, Kansas, Rhode Island, South Carolina, Iowa, Montana, Oklahoma, and Texas plus the District of Columbia.  There are 5 states that have grandfather clauses recognizing common law marriages that were formed before a certain date: Georgia, Idaho, Ohio, Oklahoma and Pennsylvania.  In Pennsylvania, where I practice law, common law marriages can only be recognized as valid if formed before January 1, 2005.  New Hampshire only recognizes common law marriages for probate purposes.  Utah only recognizes common law marriages which have been validated by a court or administrative order.So how does one get into a common law marriage, assuming one is in a state that recognizes it in some way.  It requires more than the mere fact of a couple living together.  There must also be a mutual agreement and intent to be married such as by the two people at some point saying to each other that they are married AND, they must also present themselves to the outside world and conduct themselves as a married couple.  Such acts would include introducing each other to others as their husband/wife; filing tax returns as a married couple; establishing joint ownership of property, bank accounts and other assets; using the same last name.  It is not required that a couple do all of these things.  Rather, if a court is determining this, it would look at all the circumstances and facts as a whole.Now while a common law marriage can be created without a wedding, to end it requires a divorce just as with a marriage begun with a formal wedding ceremony.In my experience, the issue of whether a common law marriage exists or existed is most likely to come up in one of two contexts: divorce or death.In a divorce, there are rights to distribution of marital property which can award one spouse assets even if his or her name is not on the title due to the broad powers given to the courts in such matters.  If there is no marriage certificate, before one can obtain the rights inherent in a divorce, it would be required to prove that a marriage existed in the first place.In the case of a death, spouses have certain rights of inheritance.  If a person dies with no Will, in Pennsylvania, the spouse will be entitled to at least one-half of the estate or more depending upon whether the deceased had children.  If the deceased made a will but left the spouse nothing, the spouse can elect against the Will and claim one-third of the estate.  In the absence of a ceremonial wedding, there could be a dispute as to whether a common law marriage existed.It should be no surprise that judges strongly dislike common law marriage.  It creates disputes and ambiguity and adds to the court's docket.  In Pennsylvania, for years, judges were urging the legislature to abolish common law marriage.  Finally, in 2004, the legislature passed, and Governor Rendell signed, a bill that provided that beginning on January 1, 2005, no new common law marriages could be formed in Pennsylvania.  Those that existed before that date could still be recognized so the courts will still have to deal with such cases for some time.

Mark Twain was wrong - new land is being made - but who owns it?

Mark Twain once said, "Buy land, they're not making it anymore."  In most places where people live, the land itself seems to be unchanging - at least within the span of one or a number of human lifetimes but the Earth is constantly changing.  In some places, it changes quite rapidly and land can appear or disappear right before your very eyes.My law firm partner who has a home on the Jersey shore tells me that in some places, the construction of jetties causes sand to accumulate over time and beaches will appear where there had been water before.  So who owns this beach.  At Barnegat Light where this happened years ago, beach formed and then a pine forest naturally grew.  It is now a public park.In Hawaii, an interesting case is going on about when new beach naturally forms above the high-water line.  Picture an indentation of water into the land that over time, naturally forms a new beach.  In Hawaii, the common law had been that if the beach expanded naturally, the adjacent private owners gained that ground and if the beach naturally eroded, they lost it.  In 2003, Hawaii enacted a new law that says that such new beach belongs to the state.  According to a recent article in the Honolulu Star-Bulletin, a class action by private owners was filed.  In the case Maunalua Bay Beach Ohana 28 et al. v. State of Hawaii, the trial judge ruled in 2006 that this law constituted a government taking of private land and that the state was required to compensate the private owners.  The State of Hawaii appealed and a ruling is pending.Sometimes, the creation of new land is even more dramatic as is happening right now on Hawaii's Big Island where the Kilauea volcano has been erupting continuously for 25 years.  According to this San Francisco Chronicle article, the volcano has not only covered 45 square miles of the island with lava but the island has actually grown by 568 acres in that time.  So when the island of Hawaii grows, who owns the new land - the public or adjacent owners.  According to this article from the Hawaii Volcano Observatory, this newly formed land belongs to the State of Hawaii.How this came about is described in the landmark 1977 opinion of the Hawaii Supreme Court in the case of State of Hawaii by Kobayashi v. Zimring.   The development of the law in Hawaii is made more interesting since it was once an independent kingdom.    As the Court quoted in its opinion:It was long ago acknowledged that the people of Hawaii are the original owners of all Hawaiian land. The Constitution of 1840, promulgated by King Kamehameha III, states:
KAMEHAMEHA I, was the founder of the kingdom, and to him belonged all the land from one end of the Islands to the other, though it was not his own private property. It belonged to the chiefs and the people in common, of whom Kamehameha I, was the head, and had the management of the landed property.
Under pressure from foreign residents who wanted to claim ownership of land, a process began in 1846 that led to private land ownership in Hawaii which the  court opinion describes.  In the Zimring case, there was a 1955 lava flow which extended land out into what had been ocean.  To get to the heart of the issue, the Zimrings claimed that their rights as owners included access to the sea and ownership of the lava extension was necessary to preserve that right.  The problem the Court had with that concept was that to give them ownership of the lava extension would have been a windfall to a private owner.  The Court ruled that such new land belongs to all the people and that the state government is the people's trustee.  The Zimrings, of course, would have free access to the sea.

Death and taxes are unavoidable but what about taxing death?

In 1789, Benjamin Franklin wrote, "'In this world nothing can be said to be certain, except death and taxes."  Experience has shown that to be the case but what about the taxation of death?  The practice of taxing transfer of assets upon the death of the owner is first known to have been practiced 2700 years ago in Egypt according to an article from the Heritage Foundation.  In America, a federal Stamp Act requiring purchase of stamps when probating wills existed from 1797 until 1804.  Federal taxation of estates was used sporadically in times of war or other crisis.The debate over whether it is right to tax assets at death has gone on since the early days of this nation.  Opponents of death taxes argue that people paid taxes on this money while they were alive and it would be double taxation to tax it again.  Proponents argue that such taxes are important to prevent wealth being locked up dynastically and that there is no absolute right to inherit wealth one did not earn.  Warren Buffett, one of the wealthiest men in the world, holds this view and he believes that America should be a meritocracy and not a nation dominated by inherited wealth.  The modern estate tax that we have, according to the Heritage Foundation, began in 1916 with the Revenue Act (which also introduced the income tax we have today) because World War I and other conflicts had reduced the trade tariffs upon which the government previously relied.  At the time, the estate tax was intended only to affect super-wealthy Americans.  There was an exemption on taxation on the first $50,000.00.  That may not seem like a lot but adjusted for inflation, $50,000 in 1916 would be over $11 million in 21st century dollars.The exemption amount did increase over the years but only occasionally and it did not keep pace with inflation.  By 2001, with the exemption at $1 million (with certain planning techniques like estate credit bypass trusts, it could be effectively $2 million for a couple), it was in inflation-adjusted terms worth only a fraction of its original value and was impacting a lot of people in the middle class.  If one had a paid-up home, an IRA or 401(k) and a life insurance policy (yes, life insurance counts as part of the estate if you have kept the power to choose the beneficiary which most people do), many people who during their lifetimes would not be considered super wealthy were being subjected to estate tax.In 2001, there was a push by the Bush Administration to eliminate the estate tax.  A compromise in Congress was reached in which the exemption amounts would rise significantly until 2010 when there would be no estate tax at all.  Then, to keep the total cost of the tax cuts down, it was provided that on January 1, 2011, the whole thing would "sunset" and the exemptions and rates would go back to the 2001 levels.  The expectation has been that Congress would do something to avoid a big tax increase with the return of the 2001 levels with a $1 million exemption ($2 million for a couple) with taxes on estates larger than that taxed at 55 percent or more.This uncertainty has required me and other lawyers to become more creative in anticipating what might or might not happen with estate tax laws.  There were also bizarre and morbid considerations that came up - at one conference I attended, the question came up about whether a lawyer had a professional obligation to advise terminally ill clients on life support of the tax advantages of discontinuing life support so they would die in 2010 rather than in 2011 when the tax would return to the old levels.With 2010, a mid-term election year approaching,  neither Democrats nor Republicans in Congress want a return to dramatically higher estate taxes.  The House of Representatives this week passed, by a vote of 225-200, a compromise bill that would freeze the estate tax at its 2009 exemption of $3.5 million per person ($7 million for a couple) with the starting tax rate on larger estates at 45 percent.  One problem that I have not seen this addressing is future inflation.  Without indexing of the exemption (as occurs with income tax exemptions and rates), eventually, the estate tax will once again impact people in the middle class unless dramatic new legislation is passed.  The current bill now moves to the Senate.
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