U.S. Conflict of Laws Involving International Estates and Marital Property: A Critical Analysis of Estate of Charania v. Shulman

• Author: Jeffrey Schoenblum
• Position: Centennial Professor of Law, Vanderbilt University Law School
• Pages: 2119-2153

2119

U.S. Conflict of Laws Involving

International Estates and Marital

Property: A Critical Analysis of Estate of

Charania v. Shulman

Jeffrey Schoenblum*

ABSTRACT: A number of states, as well as foreign jurisdictions, impose a

community property regime. Under this regime, regardless of the title to

property, each spouse is deemed to own a fifty percent interest in assets. When

a spouse dies owning property in his own name, the tendency is to treat him

as the owner of the asset in full for purposes of the power to dispose of the asset

and for transfer tax purposes. However, if the property is community property,

then the decedent’s power to dispose of it, and the portion of the property subject

to taxation, is only fifty percent. In light of the foregoing, a critical conflict of

laws question must be confronted: Which jurisdiction’s laws should determine

whether the property is community property? In the United States, the conflict

of laws issue is not too problematic because all the states essentially follow the

same choice of law principle in deciding which state’s law is determinative.

However, when foreign jurisdictions are involved, the question of which law

determines spousal property rights can become incredibly complicated. In large

part, this is because foreign jurisdictions may apply very different conflict of

laws principles than those adhered to in the United States when it comes to

the question of marital property rights. Compounding the problem is the

dearth of case law addressing the matter. A 2010 decision by the First Circuit

Court of Appeals, Estate of Charania v. Shulman, does address the matter.

However, it does so in an opinion that is noteworthy for its striking analytical

flaws. This Article delves into the opinion, which is starting to garner ill-

deserved precedential value. The Article reveals the opinion’s deep flaws and

proposes a far more restrained and workable approach for mediating the

different conflict of laws approaches that are often at play when an

international estate is at issue.

* Centennial Professor of Law, Vanderbi lt University Law School.

2120 IOWA LAW REVIEW [Vol. 103:2119

I. INTRODUCTION ........................................................................... 2120

II. THE UNDERLYING FACTS OF CHARANIA ....................................... 2124

III. THE TROUBLING FLAWS IN THE FIRST CIRCUIT’S

CONFLICT-OF-LAWS ANALYSIS ..................................................... 2127

A. WHY THE CHOICE OF THE “WHOLE LAW” SHOULD NOT

HAVE BEEN APPLIED BY THE COURT ....................................... 2127

B. UNITED KINGDOM LAW IS NOT ENGLISH LAW ......................... 2130

C. THE HAPHAZARD APPLICATION OF THE “RENVOI”

THEORY BY THE FIRST CIRCUIT .............................................. 2133

D. UGANDAN LAW IS NOT IDENTICAL TO ENGLISH LAW ............... 2136

E. THE APPLICATION OF STRICT IMMUTABILITY TO EXILES .......... 2143

F. ERIE, FEDERAL QUESTIONS, AND THE PROPER CHOICE

OF LAW BY A FEDERAL COURT ................................................. 2144

G. THE SIGNIFICANCE OF COMMISSIONER V. ESTATE OF

BOSCH .......................................................................... 2148

IV. CONCLUSION .............................................................................. 2152

I. INTRODUCTION

In the United States, people routinely move from one state to another

and also own property in more than one state. They marry and, while married,

acquire title to property in their individual names, or alternatively, in some

form of title by which his or her spouse also obtains an ownership interest.

Under the laws of some states, the spouse automatically acquires a 50%

interest simply on account of being married to the individual acquiring the

property.1 Even if title is taken exclusively in the individual’s name, the

spouse’s legal rights under the law are not impaired. These states maintain a

community-property system, as opposed to the vast majority of states that

maintain a separate-property system.

But suppose the couple moves from the community-property state to a

state that has a separate-property regime. Are the spouse’s previously acquired

rights forfeited? Or have they been forever vested?2 Likewise, suppose the

property was originally acquired by one spouse individually in a separate-

property state that does not recognize community property. If the couple then

moves to a community-property state, does the spouse immediately acquire

1. These wou ld be the community-property states: Arizona, California, Idaho, Louisiana,

Nevada, New Mexico, Texas, Washington, and Wisconsin. See ROBERT H. SITKOFF & JESSE

DUKEMINIER, WILLS, TRUSTS, AND ESTATES 520 n.1 (10th ed. 2017). “Alaska, South Dakota, and

Tennessee offer a community-property option.” Id.

2. For consideration of this topic, see 1 JEFFREY A. SCHOENBLUM, MULTISTATE AND

MULTINATIONAL ESTATE PLANNING § 10.21[C]–[D] (2010).

2018] U.S. CONFLICT OF LAWS 2121

rights in the property? Or does the original characterization of the property

as separately owned remain in force?3

The answers to these questions are important for probate and estate

administration, as well as federal estate tax law. In particular, upon the death

of an individual, a critical question needs to be answered: What assets

constitute the individual’s estate both for non-tax and federal estate tax

purposes? More precisely, in terms of the topic this Article explores: What

portion of the assets titled in the name of the decedent actually belongs to the

surviving spouse on account of community-property laws? To the extent that

the surviving spouse is found to own a portion of such property, that

ownership will not only reduce what the devisees or heirs of the decedent

receive, but it will also reduce the amount includible in the decedent’s gross

estate for federal estate tax purposes, thereby reducing the decedent’s federal

estate tax liability.

To determine whether the surviving spouse has an ownership interest in

a particular asset titled exclusively in the decedent’s name, the law of some

jurisdiction will have to be consulted. But which one? For nearly 200 years,

the prevailing doctrine in the United States has been “partial mutability.”

Under this conflict-of-laws rule, the right of a spouse in a movable asset

acquired during marriage is determined by the law of the state in which the

spouses had their marital domicile at the time of the acquisition of the asset.4

Thus, if the spouses change their marital domicile during the marriage, it is

entirely possible that different movable assets will be governed by different

laws. This conflict-of-laws rule is widely known as “partial mutability” because

the law of the original marital domicile does not remain the governing law as

to assets acquired after a change in marital domicile has taken place.5 In other

words, there is “mutability.” However, it is only “partial” because with respect

to rights acquired at a particular marital domicile, they are not mutable and

are not lost simply by moving to a new marital domicile that does not

recognize those spousal rights.6

3. Note tha t even if spouses are moving from one co mmunity-property jurisdiction to

another, those jurisdictions may have different community-property rules, s o that it will still be

necessary to determine which jurisdiction’s law is controlling in determining what rights the

spouse has. Id. § 10.21[D].

4. See Saul v. His Creditors, 5 Mart. (n.s.) 569, 603–08 (La. 1827). The holding was

endorsed by Joseph Story, who stated the rule as follows: “[W]here there is no such express

nuptial contract, the law of the matrimonial domicil is to preva il, as to the antecedent property;

but the property acquired after the removal is to be governed by the law of the actual domicil.”

JOSEPH STORY, COMMENTARIES ON THE CONFLICT OF LAWS, FOREIGN AND DOMESTIC, IN REGARD TO

CONTRACTS, RIGHTS, AND REMEDIES, AND ESPECIALLY IN REGARD TO MARRIAGES, DIVORCES, WILLS,

SUCCESSIONS, AND JUDGMENTS 284–85 (4th ed. 1852); see HAROLD MARSH, JR., MARITAL PROPERTY

IN CONFLICT OF LAWS 108–09 (1952).

5. See, e.g., MARSH, supra note 4, at 108 (explaining the shift in which law governs d epending

on when and where assets are acquir ed); SCHOENBLUM, supra note 2, § 10.21[C] (explaining how

different laws may govern different assets depending on time and place of acquisition).

6. MARSH, supra note 4, at 108–10.