On November 20, 2019, California attorney Jeffrey T. Makoff presented to the Sacramento Estate Planning Council on the topic: “Welcome to the Post-Marriage World: How to Plan for a Generation That Says ‘I Don’t.’”
Jeff started with evidence that marriage rates have declined sharply from the Silent Generation (those born from the mid-1920s to the mid-1940s) to the Millennials (those born from about 1981 to 1996).
California’s elaborate Family Code establishes property rights between married persons, resting on the concept of “community property.” But what happens when unmarried folks start or run businesses together, or make other financial deals, during an intimate relationship? Jeff explored the complexities associated with the legal relationship between partners who are neither married nor registered domestic partners.
Disputes between unmarried partners may arise during their lifetimes or upon the death of either partner. Accordingly, this is an important and ascendant area of California civil and probate litigation.
Jeff is a trial and appellate lawyer with Valle Makoff LLP, based in San Francisco. He received a law degree from Hastings College of the Law and a Bachelor of Arts Degree from UCLA. Jeff and Roxanne Makoff are co-authors of a chapter on “Fiduciary Duties in Family Businesses and Transactions” in the CEB practice book Understanding Fiduciary Duties in California Business Entities. We thank Jeff for offering his insights below.
What was the California Supreme Court’s innovation in the Marvin v. Marvin case?
Marvin, a landmark opinion issued in 1976, subjects financial deals and business relationships between intimate partners to the same commercial law principles that apply to non-intimate persons. It requires courts not to diminish the financial rights of unmarried intimate partners merely because there is a personal aspect of the relationship.
Before Marvin, California courts struggled with how to analyze relationships that had an intimate or “domestic” component, combining a business relationship with non-financial conduct. A claim by an intimate partner was often described as a “palimony” claim. The term “palimony” is out-of-favor because it mocks what may be legitimate financial rights.
The Marvin case involved heterosexual parties, Michelle and Lee Marvin, who lived together and used the same last name. There is nothing about Marvin that mandates cohabitation, heterosexuality or holding oneself out as a spouse. Marvin fundamentally asks: “Did these parties create a contract (usually oral or implied in fact), a business partnership, a trust, or other commercial rights and duties?” Parties who ultimately get married, then divorced, may have Marvin claims that arose prior to the marriage and which need to be resolved in a non-family case. In many Marvin cases, common business torts such as fraud and conversion are also alleged.
You say we are at the end of the “Marvin Stigma.” What do you mean?
For the first 30 years after Marvin, claims by intimate partners continued to be viewed with skepticism as if Marvin was an unusual or exceptional case. Parties who opted-out of marriage were seen as parties who intended not to create financial rights arising out of the relationship (especially on break-up). Many family law firms did not handle (or understand well) the civil commercial claims that underlie Marvin.
In the past 15 years, Marvin claims have gained enormous credibility as an increasing number of civil litigators see the claims as not much different than other business cases. In my experience, the biggest difference between Marvin claims and claims between non-intimate persons involves how to prove the claims factually – not the applicable law (which by and large is general commercial law). In Marvin cases, there is often the question whether an act was done as part of “a deal,” “a gift,” or some combination. Between non-intimate businesspersons, a gift is rarely inferred. When you have a relationship in which many gifts are given of goods, services, time, support, and so on, it can be complex to parse the couple’s intentions.
What law, generally speaking, applies to unmarried partners in California?
Unless the couple are registered domestic partners, or it is an issue of child support, the financial relationship between unmarried intimate partners is governed by general law. There is no code similar to the California Family Code. Statutes and common law of all types will apply. Contract, partnership, property, probate and tort law apply. Federal law may apply, as where a couple collaborates on a copyrightable work. Labor law may apply. Complicated issues of federal and state tax law may arise.
What kinds of claims do unmarried people now make against each other when they break up?
The most common claims are breach of oral or implied-in-fact contract. Torts are often included, especially fraud, negligent misrepresentation and conversion. Frequent equitable claims are promissory estoppel, constructive trust and sometimes injunctions (typically to avoid dissipation of a disputed asset during the case). A claim may be brought for breach/dissolution of a general partnership in certain cases. A very common allegation is that the parties engaged in a “pooling” of assets and that, at the termination of the relationship, a true-up must occur consistent with “the deal.” Such allegations are often consistent with a general partnership.
What is a “non-marital property agreement” and how can it help avoid or reduce conflict?
Marvin claims typically are unliquidated, meaning that there is no clear direction on who gets what, leading often to disagreements and litigation. The best protection against disputes is a binding written contract between the parties. Marvin recognizes that an express contract between unmarried intimate partners is enforceable. A written agreement provides certainty, at least as to the issues it covers. Parties are free to make a written deal on specific assets or their whole economic relationship, including provisions that contemplate break up or death, releases and promises not to assert estate claims that are inconsistent with the agreement.
What is the role of estate planning attorneys and other professional advisors with respect to avoiding or mitigating claims between unmarried partners?
Estate planners, family lawyers, corporate lawyers and civil litigators need to figure out who will handle non-marital property agreements. Right now many family lawyers do not handle them, or are not sufficiently familiar with contract law to do complex deals well. Many estate planners erroneously believe all family lawyers handle them. Corporate transactional lawyers often will not touch them, as intimate relationships are outside their comfort zone. Civil litigators are not planners and may be unable to identify all key issues.
Financial advisors may be in the best position to identify the need for an agreement, but drafting the agreement requires legal competency, perhaps with the advisor’s input. It is critical for financial advisors who do “joint planning” for unmarried couples to recognize that such planning may be used as evidence of “pooling” of wealth (e.g. a net worth statement that combines the assets and liabilities of both parties). Joint planning virtually always should involve an analysis of agreements the parties have (or could be argued to exist) and whether a written contract is prudent.
Jeffrey Galvin is an attorney with Downey Brand LLP, based in Sacramento. He litigates trust and estate cases in Northern California, including disputes involving trust and probate administration, contests of trusts and wills, and financial elder abuse claims..