Kelly- first student 

1. Review the impact of the IRS recognition of the federal tax status of marriages recognized in certain states by domestic partners of the opposite sex.

The IRS website stated that registered domestic partners may not file a federal return using a married filing separately or jointly filing status. Registered domestic partners are not married under state law. Therefore, these taxpayers are not married for federal tax purposes. Individuals of the same sex and opposite sex who are in registered domestic partnerships, civil unions, or other similar formal relationships that are not marriages under state law (IRS, 2022).

Five community property states—Arizona, Idaho, Louisiana, Texas, and Wisconsin—do not extend community property rights to domestic partners or same-sex couples who were married in another state. Four community property states—California, Nevada, New Mexico, and Washington—recognize same-sex marriages and apply that recognition to their community property laws. Some states recognize domestic partnerships and accept jointly filed tax returns but federal tax law does not recognize state domestic partnerships. Nevada and Washington have no personal income tax; however, like their counterparts in California, same-sex couples in Nevada and Washington must evaluate their finances according to community property law when preparing their federal tax returns (Expert, 2022).

1. Review the impact of "common-law" marriages where they exist under state law (Sarah Scherer, 2020).

There are 8 states that have common-law marriages. Those states are Colorado, Iowa, Kansas, Montana, New Hampshire, South Carolina, Texas, and Utah.

Colorado states: Common law marriage contracted on or after Sept. 1, 2006, is valid if, at the time the marriage was entered into, both parties are 18 years or older, and the marriage is not prohibited by other law (Colo. Stat. §14-2-109.5)

Iowa states: Common law marriage for purposes of the Support of Dependents Chapter (Iowa Code §252A.3) Otherwise it is not explicitly prohibited (Iowa Code §595.1A)

Kansas states: Common law marriage will be recognized if the parties are 18 or older and for purposes of the Divorce and Maintenance Article, proof of common law marriage is allowed as evidence of the marriage of the parties (Kan. Stat. §23-2502; Kan. Stat. §23-2714)

Montana states: Not strictly prohibited, they are not invalidated by the Marriage Chapter (Mont. Stat. §40-1-403)

New Hampshire states Common Law Marriage: "persons cohabiting and acknowledging each other as husband and wife, and generally reputed to be such, for the period of 3 years, and until the decease of one of them, shall after that be deemed to have been legally married." (N.H. Stat. §457:39)

South Carolina states: allows for marriages without a valid license (S.C. Stat. §20-1-360)

Texas states: Common Law Marriage in specific circumstances (Tex. Family Law §1.101; Tex. Family Law §2.401-2.402)

Utah states Utah Stat. §30-1-4.5. This law means the Validity of marriage is not solemnized (Utah State Legislature 2021).

1. Discuss the definition of a durable power of attorney and how it is used for asset management in the event of a disability for the avoidance of a guardianship.

A durable power of attorney is a power of attorney that is not terminated by a disability or incapacity of a person. Currently, all states recognize some form of a durable power attorney. “The vast majority of such states have either enacted in total the durable power of attorney provisions of the Uniform Probate Code (UPC) or drafted their own statutes in conformity with the provisions of the Uniform Power of Attorney Act. The Uniform Power of Attorney further defines “durable” as meaning “not terminated by the principal’s incapacity. Many states, such as Pennsylvania, provide that unless the document specifically states otherwise, all powers of attorney shall be durable. This is consistent with the Uniform Power of Attorney Act” (Leimberg 2017).

“When the principal is elderly and there is a significant chance that the individual will be incapacitated, the use of a broadly drawn durable power of attorney may negate the necessity of petitioning the local court for appointment of a guardian of the client’s property, or a conservator, to handle the principal’s assets. However, the combination of a funded revocable trust and durable power of attorney will be a more powerful and comprehensive means of addressing this situation” (Leimberg 2017). Since no one can predict future health challenges or other issues having a power of attorney should be created for every adult. 

1. Identify the uses of a family-limited partnership.

A Family Limited Partnership (FLP) is a limited liability entity created under state law. Family limited partnerships are so named because ownership of partnership interests typically is limited to members of the same family unit. Ownership of an FLP is governed by state laws. Most states have adopted a Uniform Limited Partnership Act or ULPA. There may be slight differences in partnership rules from one state to another but generally, there is a high degree of uniformity.

“Upon formation, family members contribute property in return for an ownership interest in the capital and profits of the FLP. The partners designate a general partner (or general partners) who will be given management responsibility and who will assume personal liability for debts and other liabilities that are not satisfied from the assets of the FLP. Conversely, in return for giving up their rights of management and control over the assets of the FLP, the personal liability of the limited partners generally is limited to the amount of capital that they contribute. Although an underlying purpose of most FLPs is to manage family assets and to plan for the transfer of such assets from parents to children, many parents are not willing to part with control over their assets when the FLP is created. In some cases, the parents simply desire to continue managing their property, and in other cases, the children lack the maturity or business skills required to manage the assets. In the latter case, an FLP usually provides the parents with the time and opportunity to educate their children about managing and investing their assets and involve them in the process and thus provide an important non-tax reason for their creation” (Leimberg 2017).

References:

Chapter 186 (Ed.). (2021). Utah State Legislature. Utah code section 30-1-4.5. Retrieved December 8, 2022, from https://le.utah.gov/xcode/Title30/Chapter1/30-1-S4.5.html?v=C30-1-S4.5_1800010118000101

Expert, a T. T. (2022, December 9). Tax tips for registered domestic partners and unmarried same-sex couples in Community Property States. TurboTax. Retrieved December 10, 2022, from https://turbotax.intuit.com/tax-tips/marriage/tax-tips-for-registered-domestic-partners-and-unmarried-same-sex-couples-i...

IRS (Ed.). (2022, September 29). Answers to frequently asked questions for registered domestic partners and individuals in civil unions. Internal Revenue Service. Retrieved December 8, 2022, from https://www.irs.gov/newsroom/answers-to-frequently-asked-questions-for-registered-domestic-partners-and-individuals-in-c...

Leimberg, S. R. (2017). Tools & Techniques of Estate Planning, 18th Edition. The National Underwriter Company.

Chapter 56, 44

Sarah Scherer, A. M. (2020, March 11). Common law marriage by State. NCLS. Retrieved December 9, 2022, from https://www.ncsl.org/research/human-services/common-law-marriage.aspx

SECOND STUDENT - Eric 

Review the impact of the IRS recognition of the federal tax status of marriages recognized in certain states by domestic partners of opposite sex.

Domestic partners are not recognized for federal tax purposes. States such as California, Nevada, New Mexico, and Washington recognize domestic partnerships and will allow filing a joint tax return. Even though those states recognize domestic partnerships and allow joint filing, federal tax laws do not. They are unable to file jointly or as the head of the household.

2. Review the impact of "common-law" marriages where they exist under state law.

Common law marriage is handled differently in each state that legally recognizes it. Under the law, members of common-law marriage can file tax returns as married and require no marriage license. For example, in Texas, common law marriage may be proved by evidence that the couple agreed to be married. After the agreement, they lived together in Texas as husband and wife and represented to others that they were married. In New Hampshire, common-law marriage persons cohabiting and acknowledging each other as husband and wife, and generally reputed to be such, for the period of 3 years, and until the decease of one of them, shall thereafter be deemed to have been legally married." (NCLS, 2020). If states recognize common-law marriage, they can also file federal taxes.

3. Discuss the definition of a durable power of attorney and how it is used for asset management in the event of a disability for avoidance of a guardianship.

A durable power of attorney is a power of attorney that is not terminated by subsequent disability or incapacity of the principal. (UMGC, 2016). It protects the principal and their assets if the member ever becomes incapacitated and plans for the what-ifs. It establishes legal guardianship, enabling the attorney-in-fact to do what the principal would be able to do if present. The attorney-in-fact power is only limited to what the principal desires. The agent can distribute assets, make a gift, open and close accounts, and sell or purchase a home. Again it is based on the level of access the principal desires.

4. Identify the uses of a family limited partnership.

A family-limited partnership can be used in many ways, such as retaining ownership of assets within the family. Under this agreement, the family/partners have the right of first refusal for a transfer of partnership. Another use of FLP is the ease of distribution of assets at death among family members without having to remove assets. For example, upon the death of a parent, assets remain in the partnership, and interests are transferred to the heirs keeping the partnership's operations intact. It is a way of also protecting assets from creditors of the partners.

Additionally, FLP allows a parent to maintain control of assets or a business interest without owning a majority share. For example, the parents can own one percent of the business, and the children and grandchildren can own the other 99 percent, but the parent maintains control as a general partner. There are many other ways an FLP can be used, and these are just a few.