I just finished doing a webinar for ABA Section on Real Property Trusts and Estates focusing on issues raised by the Supreme Court’s ruling in the same-sex marriage case, Obergefell v Hodges. George Karibjanian of Boca Raton was my co-panelist. He raised some interesting questions about retroactivity. I thought them worth sharing.
- I have for years warned couples married in California in 2008 but living in Texas that they probably have been acquiring community property whether they knew it or not because the Texas DOMA was likely to fall. That seemed pretty clear after Windsor was decided, and even more clear since October 6, 2014 when the Supreme Court denied cert in a number of successful marriage equality cases. If you are a couple like this and have been residing in a community property nonrecognition state that just became a recognition state (e.g., Wisconsin as of that October 6 denial of cert) and if you don’t want to own that property as community, you probably ought to consider transmuting into the separate property of one spouse. Fortunately there will be no gift tax because the marriage is recognized and there is an unlimited marital deduction.
- George raises the same issue regarding Tenancy by the Entirety (TBE). In some states any property jointly titled during marriage (even though not titled as TBE property) is presumptively TBE property. So spouses in Florida who acquired joint property before Florida recognized their marriages might actually own that property as TBE (which gives them super protection from creditors).
- George’s other hypo: A and B get married in Vermont while living in Texas. After marriage and while still living in Texas, A starts a business that becomes very successful. After an IPO, he ends up with stock that is worth $80M. Now A and B want to dissolve their relationship. The year is 2013 and they can’t get a divorce in Texas because Texas won’t recognize their marriage.
[Short aside: A Dallas same-sex couple did get a divorce before 2013 but the AG intervened and appealed to the Dallas Court of Appeals which ruled the divorce invalid because the state did not recognize the marriage in the first place; that case then went to the Texas Supreme Court, but was dismissed this June as moot because one of the spouses had died. I’m still not sure about the status of the surviving spouse – is he a surviving spouse or not? The Dallas Court said no marriage and no divorce, but federal law recognizes the marriage. I don’t think federal law can grant a divorce. This one is a puzzler. In other words, I don’t think the case was really moot. After all, Obergefell’s spouse had died and the U.S. Supreme Court did not think his case was moot.]
OK, back to George’s hypo: In 2014, A and B get a divorce in Vermont which has a statute saying if you married here and can’t get divorced in your home state, the state of Vermont will divorce you even though you do not meet the residency requirements for divorce. Under the Vermont statute the parties agree that A will pay B $500,000 and says nothing about the stock in A’s business.
Now that the Obergefell opinion has effectively ruled that the Texas DOMA is unconstitutional, doesn’t that mean that the stock was in fact community property and B is entitled to his half? I think so.
But what about res judicata and that Vermont decree of divorce? Well, under Texas law if the divorce decree fails to distribute any community property, the spouses become tenants in common as to that property at the moment of divorce. B’s claim to half of that community property is valid. The Vermont final judgment did not resolve the issue of ownership of the stock so res judicata does not apply. See Yeo v. Yeo, 581 S.W.2d 734 (Tex. App. 1979)(retirement benefits were community property and were not divided by husband and wife at divorce; wife can sue husband for her community share of the benefits).