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By Grace S. Yung, CFP
If you and your partner have been together for a certain period of time, it is possible that in a “common-law marriage” state such as Texas, you are already considered to be a married couple—even if you haven’t officially said “I do”—provided that you meet the parameters for a common-law marriage.
Over the past several years, marriage and marriage equality have often been in the headlines. Yet, for both same-sex and opposite-sex couples, there can be conflicting information on what constitutes having “tied the knot” when it comes to common-law marriage. Additionally, not all U.S. states are considered “common-law” states, and those that are can have differing criteria in terms of when or if a couple is legally married.
Defining Common-Law Marriage
Throughout the years, there have been various myths about what makes a common-law marriage “official.” For example, many people believe that if two partners reside together for at least seven years, they are automatically considered to be married. This, however, is not the case. In fact, in most of the states where common-law marriage is recognized, you and your partner may only need to live together for one year—as long as certain other factors are also in place.
For instance, in Texas—a common-law marriage state—there are three specific criteria that must be met by you and your partner. While the criteria may differ from one common-law state to another, in the state of Texas, these include the following:
• Holding yourselves out to be a married couple.
• Agreeing to be a married couple.
• Living together with your partner.
Once a common-law marriage has been formed, the couple is treated legally in the same manner that a “traditional” married couple is treated. According to Mary Galligan, a board-certified estate-planning attorney here in Houston, this includes having to go through the process of filing for divorce if a couple no longer wishes to be married.
In addition to Texas, there are several other states that recognize common-law marriage. These include (in 2017):
• District of Columbia
• Rhode Island
• South Carolina
Note: while Alabama has been a common-law marriage state in the past, the state will no longer recognize common-law marriages that are entered into after January 1, 2017. However, common-law marriages that were entered into prior to that date will still be recognized. Likewise, several other states will recognize a common-law marriage, provided that it was created prior to a certain time. These are:
• Idaho (if created prior to January 1, 1996)
• Ohio (if created prior to October 10, 1991)
• Pennsylvania (if created before January 1, 1991)
• Florida (if created prior to January 1, 1968)
• Indiana (if created prior to January 1, 1958)
In addition, New Hampshire currently only recognizes common-law marriage for inheritance purposes.
Advantages and Drawbacks of Being Married through Common Law
While the LGBT community has accomplished some substantial milestones when it comes to marriage equality, there can actually be both advantages and drawbacks to consider prior to moving forward as a married couple. The same holds true for common-law marriage.
Certainly on the plus side, there are a number of financial-related advantages, such as the inheritance of property and other assets without the need to pay estate tax—or even income tax—when certain types of assets are transferred to one’s spouse.
On the drawback side, though, issues could come up if the relatives of a deceased partner oppose the survivor’s claim of being a spouse. In this case, a surviving common-law spouse may have to prove that the marriage was much more than just a casual relationship.
In addition, if common-law spouses opt to end their relationship, it isn’t as simple as just “moving on.” Rather, a formal divorce must take place, just like when a “traditional” marriage breaks up.
Common-Law Marriage and Same-Sex Couples
In October 2015, following the Supreme Court’s Obergefell v. Hodges decision, which legalized same-sex marriage, and the Windsor v. U.S. decision, which struck down Section 3 of the Defense of Marriage Act (DOMA), the Internal Revenue Service (IRS) and the U.S. Treasury Department released their final regulations amending the definition of “marriage” and “husband and wife.”
These final regulations set forth that, for federal tax purposes, the terms “spouse,” “husband,” and “wife” are defined as an individual lawfully married to another individual. However, the IRS declined to adopt certain suggestions, including, “That regulations clarify that common-law marriages of same-sex couples will be recognized for federal tax purposes.”
In addition, while the statutes of certain states that recognize common-law marriages only do so for opposite-sex couples, the U.S. Treasury Department and the IRS opined that “the Supreme Court’s holdings, coupled with prior IRS guidance, make clear that common-law marriages are valid, lawful marriages for federal tax purposes.” In addition, while these agencies acknowledged that some U.S. states had laws “on the books” that prohibit same-sex marriage—including some states that allow common-law marriage—”since the government was ‘unaware’ of any state enforcing those statutes or otherwise prohibiting same-sex couples from entering into common-law marriages,” the Treasury and the IRS declined to make any further clarifications on this issue.
Taking the Next Step
Even without an actual ceremony, it is possible that you and your partner could still be considered a married couple based on common law. Because all situations are different, though, it is highly recommended that you consult with a legal professional in your state so that you know exactly where you stand.
It is also important to keep in mind that laws and regulations can change at any time, so what is valid today may or may not be valid in the future. With that in mind, it is essential that you frequently review your financial, legal, and other key plans on a regular basis.
Working in conjunction with professionals who are well-versed in legal and financial issues as they pertain to the LGBT community can be beneficial and can help you to ensure that your intended plans are still on track.
Personal finance-related questions may be emailed to [email protected].
Grace S. Yung, CFP, is a certified financial planner practitioner with experience in helping domestic partners plan their finances since 1994. She is a principal at Midtown Financial LLC in Houston and was recognized as a “Five-Star Wealth Manager” in the 2014 September issue of Texas Monthly.