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
SUMMARY

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... (see full summary)

 
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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 CIRCUITS
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.

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