Marriage And Divorce

<div class="Section1">The rules governing common law marriage vary by state, and only a handful of states currently recognize common law marriage. However, common law marriage is recognized as marriage for federal tax purposes. Individuals in a common law marriage may be treated as being legally married for federal tax purposes if they live together in a state that recognizes common law marriage, or if they live in a state where the common law marriage began.</div><br /> <div class="Section1"><br /> <br /> Currently, common law marriage is recognized only in Alabama, Colorado, the District of Columbia, Iowa, Kansas, Montana, New Hampshire (only for inheritance purposes), Oklahoma, Rhode Island, South Carolina, Texas and Utah. In certain other states, such as Pennsylvania, Georgia and Ohio, a common law marriage may be recognized if it was entered into before the date on which common law marriage was abolished by the state.<br /> <br /> To enter into a common law marriage, a couple must hold themselves out to the public as being “married”. Factors to be considered in making this determination include whether the couple uses the same last name, whether the community believes the couple are married and whether the couple files a joint tax return. One factor that a court may consider in determining whether a common law marriage is the length of time that a couple has lived together, holding themselves out as married. No specific length of time applies; the time period must only be “significant”.<br /> <br /> </div>

<div class="Section1">Legally married couples are permitted to pool their $19,000 (in 2025) annual gift tax exclusion so that each couple is able to make annual tax-free gifts of up to $38,000 per donee.<a href="#_ftn1" name="_ftnref1">¹</a> If a gift is treated as a split gift for gift tax purposes, it will also be treated as a split gift for generation skipping transfer (GST) tax purposes.<a href="#_ftn2" name="_ftnref2">²</a></div><br /> <div class="refs"><br /> <br /> <hr align="left" size="1" width="33%" /><br /> <br /> <a href="#_ftnref1" name="_ftn1">1</a>.  IRC § 2513; Treas. Reg. § 25.2513-1.<br /> <br /> <a href="#_ftnref2" name="_ftn2">2</a>.  IRC § 2652(a)(2).<br /> <br /> </div>

<div class="Section1">Generally, a postnuptial agreement is an agreement entered into between two spouses who plan to continue their marriage&mdash;meaning that a postnuptial agreement is not the same as a separation agreement or a property settlement agreement. Postnuptial agreements are also referred to as reconciliation agreements, because they are commonly entered into after the spouses have experienced a period of marital discord that has alerted the parties to the possibility of future separation or divorce.<div class="Section1"><br /> <br /> Like a prenuptial agreement, postnuptial agreements commonly deal with the financial consequences of a separation or divorce, or the death of one spouse. As a result, and because of the relationship between the parties, the rules governing prenuptial agreements ( Q <a href="javascript:void(0)" class="accordion-cross-reference" id="9092">9092</a> to Q <a href="javascript:void(0)" class="accordion-cross-reference" id="9093">9093</a>) will govern postnuptial agreement disputes in many states.<br /> <br /> </div></div><br />

<div class="Section1"><em>Editor’s Note:</em> The tax treatment of alimony was fundamentally altered by the 2017 tax reform legislation. For tax years beginning after 2018, alimony payments are not deductible by the payor spouse and are not included in the income of the recipient spouse.</div><br /> <div class="Section1"><br /> <br /> Prior to 2019, alimony and separate maintenance payments generally were taxable to the recipient and deductible from gross income by the payor (even if the payor did not itemize).<a href="#_ftn1" name="_ftnref1">¹</a> Alimony payments were deductible regardless of whether the payment was made from taxable income (i.e., the deduction was still allowed even if the payor used savings in order to make the payment).<br /> <br /> The individuals could agree in the written divorce instrument or separation agreement that the alimony payments would be excludable by the recipient and nondeductible by the payor, and<a href="#_ftn2" name="_ftnref2">²</a> a state court could also order this treatment.<br /> <br /> Payments of arrearages from prior years were taxed to a cash basis taxpayer in the year of receipt.<a href="#_ftn3" name="_ftnref3">³</a> Furthermore, the Tenth Circuit Court of Appeals has held that an alimony arrearage paid to the estate of a former spouse was taxable as income in respect of a decedent.<a href="#_ftn4" name="_ftnref4">⁴</a><br /> <br /> </div><br /> <div class="refs"><br /> <br /> <hr align="left" size="1" width="33%" /><br /> <br /> <a href="#_ftnref1" name="_ftn1">1</a>.  IRC §§ 71(a), 215(a).<br /> <br /> <a href="#_ftnref2" name="_ftn2">2</a>.  Treas. Reg. § 1.71-1T(b); <em>Tucker v. Comm.,</em> TC Summ. Op. 2013-94.<br /> <br /> <a href="#_ftnref3" name="_ftn3">3</a>.  <em>Coleman v. Comm.</em>, TC Memo 1988-442.<br /> <br /> <a href="#_ftnref4" name="_ftn4">4</a>.  <em>Kitch v. Comm.</em>, 103 F. 3d 104, 97-1 USTC ¶ 50,124 (10th Cir. 1996).<br /> <br /> </div>

<div class="Section1">Federal estate tax rules have evolved in recent years to make it easier for legally married couples to avoid transfer taxes when passing wealth from one spouse to another spouse after death. Both same-sex and opposite-sex couples are now able to take advantage of these special rules.<div class="Section1"><br /> <br /> For example, the $13.99 million (in 2025) exemption is portable between spouses if an election is made on a properly filed estate tax return, meaning that legally married couples can now shield a combined $27.98 million from estate taxes without having to engage in complex and expensive estate planning to determine which spouse should technically own marital assets.<br /> <br /> Because same-sex married couples are now entitled to this federal tax treatment, these couples should be advised to review their estate planning documents to take into account the fact that these taxpayers are now entitled to both the portability election (<em><em>see</em></em> Q <a href="javascript:void(0)" class="accordion-cross-reference" id="9108">9108</a>) and the marital deduction.<br /> <br /> </div><div class="refs"><br /> <br /> <hr align="left" size="1" width="33%"><br /> <br /> <a href="#_ftnref1" name="_ftn1">1</a>.&nbsp; Del. Code. Ann. Tit. 12, &sect;&nbsp;3570(4).<br /> <br /> <a href="#_ftnref2" name="_ftn2">2</a>.&nbsp; Del. Code. Ann. Tit. 12, &sect;&nbsp;3570(8).<br /> <br /> </div></div><br />

<div class="Section1">A surviving spouse is entitled to roll over IRA funds that are inherited from a deceased spouse into his or her own account, delaying required minimum distributions (and the associated tax liability) until the surviving spouse reaches age 73 (72 in 2020-2022 and 70 ½ prior to 2020).</div><br /> <div class="Section1"><br /> <br /> A non-spousal beneficiary, on the other hand, is not entitled to delay distributions and must typically empty the inherited IRA within a 10-year period under post-SECURE Act law (prior to 2020, a non-spouse beneficiary could typically take distributions over his or her life expectancy (or a five-year period, whichever method was elected)). “Eligible designated beneficiaries” may continue to use the life expectancy or five-year methods post-SECURE Act.<br /> <br /> Any minimum distribution that was required to be made to the deceased owner, but had not been made before the owner’s death, must be made to the surviving spouse in the year of death, but in all other respects, required distributions after the owner’s death are determined as if the surviving spouse were the owner.<a href="#_ftn1" name="_ftnref1">¹</a><br /> <br /> </div><br /> <div class="refs"><br /> <br /> <hr align="left" size="1" width="33%" /><br /> <br /> <a href="#_ftnref1" name="_ftn1">1</a>.  Treas. Reg. § 1.408-8, A-5(a).<br /> <br /> </div>

<div class="Section1">Two unmarried partners may own property jointly as a joint tenancy with a right of survivorship, meaning generally that each individual is a co-owner of the property and that upon the first partner’s death, the survivor retains his or her right to the property.<a href="#_ftn1" name="_ftnref1">¹</a> While this can be a beneficial estate planning strategy for unmarried taxpayers, gift tax liability can arise when one party contributes more of the purchase price than the other. The amount of the taxable gift in such a situation generally equals the value of the gift that exceeds the contributing party’s unused gift tax annual exclusion amount $19,000 in 2025.<a href="#_ftn2" name="_ftnref2">²</a> This assumes that no legally binding obligation to support exists between the parties, as often exists in the case of a domestic partnership or civil union.</div><br /> <div class="Section1"><br /> <br /> Further, the property may be included entirely in the deceased partner’s estate upon his or her death unless the surviving partner is able to show that he or she contributed to the purchase price of the asset.<a href="#_ftn3" name="_ftnref3">³</a> On the other hand, a legally married couple is able to take advantage of both the marital deduction and portability options when jointly owned property is involved.<br /> <br /> </div><br /> <div class="refs"><br /> <br /> <hr align="left" size="1" width="33%" /><br /> <br /> <a href="#_ftnref1" name="_ftn1">1</a>.  IRC § 2040.<br /> <br /> <a href="#_ftnref2" name="_ftn2">2</a>.  IRC § 2503; Treas Reg. § 25.2511-1(h)(5).<br /> <br /> <a href="#_ftnref3" name="_ftn3">3</a>.  <em><em>See</em></em> Treas. Reg. § 20.2040-1(a)(2).<br /> <br /> </div>

<div class="Section1">As with prenuptial agreements ( Q <a href="javascript:void(0)" class="accordion-cross-reference" id="9092">9092</a> to Q <a href="javascript:void(0)" class="accordion-cross-reference" id="9093">9093</a>), a common challenge to a valid postnuptial agreement is that the agreement is unenforceable because it is against public policy, and whether the agreement will be enforced depends upon both the terms of the agreement and the applicable state law. For example, a spouse&rsquo;s agreement in a postnuptial agreement to never bring a lawsuit against her spouse for any reason whatsoever was deemed to be against public policy and, therefore, the provision was unenforceable.<a href="#_ftn1" name="_ftnref1">¹</a><div class="Section1"><br /> <br /> However, provisions providing for property division have generally been held enforceable absent unconscionable terms,<a href="#_ftn2" name="_ftnref2">²</a> and provisions providing for forfeiture of equitable property division rights have been upheld if the waiving spouse engaged in certain specified behaviors (i.e., infidelity, substance abuse or financial irresponsibility).<a href="#_ftn3" name="_ftnref3">³</a><br /> <br /> <em><em>See</em></em> Q <a href="javascript:void(0)" class="accordion-cross-reference" id="9094">9094</a> for a discussion of separation agreements.<br /> <br /> </div><div class="refs"><br /> <br /> <hr align="left" size="1" width="33%"><br /> <br /> <a href="#_ftnref1" name="_ftn1">1</a>.&nbsp; <em>Towles v. Towles</em>, 256 S.C. 307 (1971).<br /> <br /> <a href="#_ftnref2" name="_ftn2">2</a>.&nbsp; <em><em>See, e.g.</em></em>, <em>Gilley v. Gilley,</em> 778 S.W.2d 862 (Tenn. Ct. App.&nbsp;1989).<br /> <br /> <a href="#_ftnref3" name="_ftn3">3</a>.&nbsp; <em>Laudig v. Laudig, 425 Pa. Super. 228,</em> 624 A.2d 651 (1993).<br /> <br /> </div></div><br />

<div class="Section1">Domestic partner benefits are benefits that an employer voluntarily offers to an employee&rsquo;s unmarried partner. An employee&rsquo;s domestic partner may be of the same sex or the opposite sex. An employer determines the scope of its plan&rsquo;s definition of domestic partner.<div class="Section1"><br /> <br /> Employers may offer a range of domestic partnership benefits, such as family, bereavement, sick leave, and relocation benefits. In general, most people mean employer-provided health insurance coverage when they speak of domestic partnership benefits.<br /> <br /> An employee is taxed on the value of employer-provided health benefits for his or her domestic partner unless the domestic partner qualifies as the employee&rsquo;s dependent under IRC Section&nbsp;151. The tax is determined by assessing the fair market value of the coverage provided to the domestic partner. This amount then is reported on the employee&rsquo;s W-2 form and is subjected to Social Security (FICA) and federal income tax withholding.<br /> <br /> Any amount received by a domestic partner as payment or reimbursement of plan benefits will not be included in the income of the employee or the domestic partner to the extent that the coverage provided to the domestic partner was paid for by the employee&rsquo;s plan contributions or the fair market value of the coverage was included in the employee&rsquo;s income under IRC Section&nbsp;104(a)(3).<a href="#_ftn1" name="_ftnref1">¹</a><br /> <br /> Coverage of domestic partners, whether or not they qualify as dependents, under an employer-provided health plan will not otherwise affect the ability of employees to exclude amounts paid, directly or indirectly, by a plan to reimburse employees for expenses incurred for medical care of the employees, their spouses, and dependents.<br /> <br /> Same-sex couples who are legally married in any state are treated as spouses for all federal law purposes (including employment-related retirement benefits, <em><em>see</em></em> Q <a href="javascript:void(0)" class="accordion-cross-reference" id="9104">9104</a>), regardless of where they live.<a href="#_ftn2" name="_ftnref2">²</a> As a result, many domestic partners have chosen to legally marry, and, therefore, some expect that fewer employers will offer domestic partner benefits in the future.<br /> <br /> </div><div class="refs"><br /> <br /> <hr align="left" size="1" width="33%"><br /> <br /> <a href="#_ftnref1" name="_ftn1">1</a>.&nbsp; Let. Ruls. 200846001, 9850011, 9717018, 9603011. <em><em>See also</em></em> Let. Ruls. 9109060, 9034048. <em><em>See also</em></em> Field Service Advice 199911012.<br /> <br /> <a href="#_ftnref2" name="_ftn2">2</a>.&nbsp; <em>United States v. Windsor</em>, 570 U.S. 744, 133 S. Ct. 2675, 186 L. Ed. 2d 808 (2013); <em>Obergefell v. Hodges,</em> 576 U.S. 644, 135 S. Ct. 2584 (2015); Notice 2014-19, 2014-17 IRB 979.<br /> <br /> </div></div><br />

<div class="Section1">Married couples have the right to file both joint federal and state income tax returns, rather than two separate returns, for the current tax year, as well as for all other open years. In the case of same-sex couples who had filed separate federal returns for simplicity because they lived in a state that did not recognize same-sex marriage, amending a past year&rsquo;s return could lead to higher refunds in some cases.<div class="Section1"><br /> <br /> In some cases, however, choosing to marry and file a joint return can actually increase tax liability. Unmarried couples (regardless of sex) generally have the opportunity to file two single (or two head-of-household) tax returns without worrying about the &ldquo;marriage penalty&rdquo; for filing separately that applies to a legally married couple.<br /> <br /> As a result of the Supreme Court&rsquo;s ruling in <em>Obergefell v. Hodges</em>, same-sex couples now must make the same cost-benefit analysis that applies to opposite-sex couples in determining whether to file jointly. A single taxpayer crosses the earnings threshold into the 37 percent tax bracket when he or she earns more than about $500,000 for the year (this amount is adjusted annually for inflation)&mdash;meaning that two single taxpayers could live together and earn approximately $1 million before entering into the highest income tax bracket. Two married people, on the other hand, become subject to the 37 percent rate when they have combined earnings of only approximately $600,000 (as adjusted for inflation) for the year.<br /> <br /> The investment income tax will also apply to a married couple earning a combined $250,000 (while two unmarried taxpayers can earn $400,000 before crossing the threshold). <em><em>See</em></em> Q <a href="javascript:void(0)" class="accordion-cross-reference" id="8635">8635</a> to Q <a href="javascript:void(0)" class="accordion-cross-reference" id="8656">8656</a> for a discussion of the investment income tax.<br /> <br /> </div></div><br />