July 14, 2011

Palimony - Marvin v. Marvin

The number of unmarried individuals living together, cohabitants, has increased tremendously over the years. In an analysis of the 2010 U.S. Census, Pew Research found that the number of unmarried cohabitants doubled since the 1990s. While the law in general affords cohabitants certain protections, domestic violence protection for example, estate planning law does not look very favorably upon unmarried cohabitants. The principal reason for this is because California's intestate succession laws pertain only to married couples and blood relatives. Prob C §§ 6401-6402. For reference, intestate succession is where a person passes away without a will and their estate is distributed to their next of kin.

The term synonymous with the “inheritance” of an unmarried cohabitant from the another cohabitant is “palimony.” The term palimony is derived from the seminal case on this issue, Marvin v Marvin (1976) 18 C3d 660. 

The phrase "palimony" was coined by the girlfriend’s attorney in the case, Marvin Mitchelson. Yes, everybody in the case had the name “Marvin” apparently. In Marvin, actor Lee Marvin’s former live-in girlfriend, Michelle Marvin, claimed that she and Lee had “entered into an oral agreement that while the parties lived together they would combine their efforts and earnings and would share equally any and all property accumulated as a result of their efforts whether individual or combined.” She essentially asked for her community property rights in Lee’s earnings, namely ½ of the earnings Lee accumulated during their relationship. The California Supreme Court rejected Michelle’s community property claim because the couple was not married. Instead, the California Supreme Court said that Michelle needed to prove the existence of an enforceable contract to assert such a claim against Lee and the term “palimony” was born.

Consequently, palimony actions have been utilized in estate planning cases. Thus, in light of Marvin, unmarried cohabitants may provide for one another upon their death in a number of ways whether by will or trust, and due to Marvin, via contract. However, the key is that the couple take affirmative estate planning steps because the default rule, intestate succession, does not apply to unmarried cohabitants since they are not married. 

The following illustration provides a glimpse of what could happen to the estate of an unmarried cohabitant. Of note, these characters are completely fiction. Each individual was the creation of my imagination which, at best, is very limited.

Cory and Cynthia were an unmarried cohabitating couple who resided in Sonora, CA, the county seat of Tuolumne County. Cory and Cynthia jointly purchased the home they lived in. The couples’ bank accounts were exclusively held in the sole name of each. Cory had a 401(k) retirement account from his former employer, a local lumber mill. Cynthia was a semi-retired florist who also had a 401(k) retirement account. To preoccupy his time, Cory opened a small sandwich shop, C’s Sandwiches. Cynthia worked occasionally at the sandwich shop.

One day, Cory was tragically killed in a hot air balloon accident. When Cory passed away, he did so without ever having written a will or trust. Cory’s heirs were his brother Bob and sister Sally.  Thus, any property that fell under California’s intestate succession laws would not be distributed to Cynthia because she was not Cory’s next of kin. Rather, such property would be distributed equally to Bob and Sally.

Though the couple lacked a will or trust, the couple had made estate planning decisions prior to Cory’s passing. For example, the home the couple had purchased was held in joint tenancy. Thereby, Cynthia would be entitled to Cory’s 50% interest in the home regardless of the fact that she was not next of kin. Furthermore, Cory’s 50% interest that would pass to Cynthia would not be the subject of probate administration. Grothe v Cortlandt Corp. (1992) 11 CA4th 1313. Cynthia would merely have to file an affidavit of death of a joint tenant with the Tuolumne County Clerk Recorder in order to claim full ownership of the home. As for Cory’s 401(k) retirement account, Cory designated Cynthia as the beneficiary of this account. This allowed Cynthia to inherit Cory’s account regardless of the fact that she was not next of kin and she could do this transfer outside of probate administration as well. See Prob C § 5000. Next there was Cory’s bank account, which listed Cynthia as the pay-on-death beneficiary. Again, this P.O.D. clause granted Cynthia the ability to inherit Cory’s property regardless of their lack of familial relationship and could be done outside of the probate court. Prob C § 5000.

Finally, as for the sandwich shop, Cynthia claimed that she and Cory were partners in the business and as such, she should be entitled to 50% of the business. Cynthia asserted this claim through a Marvin action in Tuolumne County Superior Court, much to the dismay of Bob and Sally, the intestate heirs to the sandwich shop. Her evidence was that Cory had orally told her that they were partners and they equally shared the sandwich shop’s profits. Bob and Sally argued that Cynthia was merely an employee, rather than a partner and thus C’s Sandwiches was theirs, not Cynthia’s. Their evidence was the fact that no fictitious business name statement had been filed and the conduct of the parties did not indicate a partnership, in that Cory performed all the labor and bookkeeping while Cynthia worked only sporadically. Moreover, Bob and Sally disputed the veracity of Cory’s statement that he and Cynthia were partners in the business. Ultimately, the judge decided that Cynthia had presented a colorable Marvin action claim, but only after Cynthia had expended thousands of dollars in legal fees and spent months litigating this matter.