The Family as an Economic Unit

Thomas P. Gallanis, The Flexible Family in Three Dimensions, 28 Law & Ineq. 291 (2010), available on SSRN.

No small amount of ink has been spilled on the problems created by the clash between law’s dated vision of the traditional family and the social realities of the diverse and complicated modern family.  This piece, written for a University of Minnesota symposium, Family Values: Law and the Modern American Family, is a refreshingly concise essay that makes normative claims about how law should respond to most significant change in the family form: the dramatic rise in nonmarital cohabitation among not only heterosexual couples, but also couples of the same-sex and adults who share a care, but not a romantic, bond.  Gallanis answers the question “to what extent should there be room in our law for a family outside marriage” with three claims: (1) non-marital cohabitation merits recognition and support in law; (2) given American mobility, relationship statuses should be universally portable across state lines; and (3) the law should do more to protect family units–however constituted–against third parties, as opposed to worrying only about their obligations to one another.  It is this last point that gives rise to the third dimension alluded to in the title.

Gallanis begins by traversing some familiar ground on the treatment of non-marital cohabitants and same-sex couples. Although courts began in the 1970s to recognize contractual economic claims by one cohabitant against the other, those “Marvin rights” have turned out to provide very anemic protection to the weaker or more dependent party.  Slightly later, some states moved to create quasi-marital, status-based rights for cohabitants, a shift endorsed by the American Law Institute’s Principles of the Law of Family Dissolution.  And later still, same-sex couples got in on the action, earning status-based rights in various American and foreign jurisdictions, with great variation by jurisdiction in the particular status available and the rights and obligations accompanying it.

After laying out the landscape, Gallanis argues that the best normative approach is a “menu of multiple options,” which would allow partners to “tailor the level of recognition and protection to their particular needs and wishes.”  He allows that “[m]arriage could still be the highest and strongest relationship,” but it need not occupy the entire spectrum of legitimate adult relationships. He invokes statutes in several European countries for comparison, some of which not only allow same-sex couples equal access to all forms of family recognition, but also allow opposite-sex couples to choose from a menu that includes marriage as well as other less demanding statuses.  Gallanis argues that non-romantic duos should be able to seek legal recognition as well.  Two elderly sisters who cohabit and care for each other should be able to seek something like the Medieval French “affrairement,” which treated them as a cognizable family unit.

In the second part of the article, Gallanis briefly makes the claim that family structures “should be portable across state lines for parties who change their state of domicile.” He cites the high mobility rates of Americans to justify greater interstate recognition of same-sex relationship statuses–a privilege that most heterosexual families, regardless of form, already enjoy. As he correctly notes, arrangements like civil unions, domestic partnerships, and same-sex marriages are “either not portable at all beyond the relevant state’s borders or portable only to a limited number of destinations,” which “creates substantial difficulties for couples changing their domicile.”  All this is true, of course, and the many layers of complication for couples with a status that is not portable–either across state lines or into the federal law realm–are just beginning to reveal themselves.  Because marital status is the basis for so many legal determinations–everything from eligibility for Medicaid to hospital visitation rights to estate tax exemptions–a system in which large numbers of people become married or unmarried simply by traveling, moving, or having a legal issue governed by federal law is bound to crumble eventually.

Gallanis’s final claim relates to the rights of a family unit as against outsiders.  Marriage, he explains, “offers a range of such three-dimensional legal protections for the spouses and their property.”  These protections include the right to hold property as tenants by the entirety, which provides “impenetrable asset protection”; estate tax benefits provided by the unlimited marital deduction, along with varied other state and federal tax benefits; and provisions designed to protect the spouse of a Medicaid recipient.  The federal Defense of Marriage Act prevents the extension of any federal rights to same-sex married couples, and many state laws and constitutional provisions prevent it on the state level.  Thus, unmarried cohabitants and same-sex couples, even those in formally recognized relationships, generally lack this third dimension–the right to be treated as an entity vis-à-vis third parties.

This section highlights an important point that can get lost in controversies over the modern family form: the family is, in addition to whatever else it might be, an economic unit. Although we no longer invoke Blackstone’s notion of husband and wife as one flesh, we cling in many respects to the notion of a married couple as an economic entity, inviolable by outsiders.  Yet, despite the notable victories of the same-sex marriage movement (full marriage equality in five states plus the District of Columbia and marriage-equivalent statuses in at least seven others), the right to economic unity remains elusive due in large part to DOMA, which prevents equal treatment in the realm of tax, pensions, and many forms of governmental financial assistance.

The conception of the family as an economic, as well as a social unit, comes not only from family law, but even more so from the law of inheritance and tax.  Families prosper or fail in large part based on whether the family, as a unit, has earned money or successfully held onto money that is inherited or received as a gift.  Parents support their children; grown children sometimes support their aging and disabled parents.  Lifetime transfers between adult partners or spouses and between parents and children can be the key to opportunity and success; the lack thereof can squelch opportunity.  Transfers at death generally go to family members, especially spouses.  The government props up families through programs like Medicaid, Social Security, and welfare; it provides economic support as well through various provisions of the tax code.   Thus, although it is fashionable to treat family law and the laws of inheritance and tax as completely unrelated subjects, Gallanis’s piece is a reminder of how interconnected they are.  For the “flexible family” to thrive, it must be recognized in these diverse legal frameworks, as well as from state to state and by the federal government.