Labor, Luck, and Love: Reconsidering the Sanctity of Separate Property

"Marriage is a proclamation that one need not battle alone the vicissitudes that life can bring, but can rely on a partner to share the burdens of living in what sometimes seems a capricious and indifferent universe."[dagger] I. INTRODUCTION 1623 II. TRADITIONAL JUSTIFICATION FOR THE CURRENT SYSTEM: THE PARTNERSHIP THEORY OF MARRIAGE 1631 A. The Marital Property Rule 1631 B. The Separate Property Rule 1636 III. RECONSIDERING THE SANCTITY OF SEPARATE PROPERTY 1637 A. Theoretical Inconsistencies 1637 B. Deviations in Practice 1640 C. Existing Proposals 1645 IV. BEYOND THE. LABOR-CENTERED PARADIGM 1649 A. Marriage as Merger of Risk and Reward 1649 B. Added Benefits 1658 C. Potential Objections 1660 V. CONCLUSION 1664 I. INTRODUCTION Most jurisdictions' current family law systems embody the principle that marriage turns separate individuals into economic partners. If marriage ends, the fruits of both spouses' labor - the earnings accumulated by either spouse during marriage - are classified as marital property subject to division at divorce. Assets acquired before marriage and gifts or inheritances received during marriage, on the other hand, generally belong to each spouse separately. The classification of these assets as sacrosanct separate property means that they are sheltered from division at divorce. Thus, labor-generated property presumptively belongs to spouses as a unit, while premarital and luck-generated (gifted or inherited) property belongs to spouses as separate individuals. Why the difference? Earnings from labor are marital property because marriage is considered a joint venture to which each spouse contributes a combination of effort, sacrifice, and mutual support. Regardless of the relative market value of spouses' contributions, the law grants each spouse a right to the economic fruits of the marriage under the theory that spouses' monetary and nonmonetary contributions are of equal importance to the marriage. This arrangement also guarantees that homemakers are indirectly compensated for their nonwage labor without subjecting them to uncomfortable investigations into the market value of their contributions. Unlike spouses' marital earnings, property acquired before marriage and gifts and inheritances received during marriage are regarded as external to the marital economic partnership. Property acquired before marriage cannot be said to be a product of spouses' joint venture because the labor expended to produce it preceded their union. Gifts and inheritances received during marriage, the theory goes, likewise cannot be said to be a product of the spouses' collective efforts. By definition, gifts and inheritances are not compensation for labor; they result from donors' altruistic impulses to give without expecting anything in return. Gifts and inheritances in particular are also kept separate from the joint marital pot out of respect for donors' intentions. The notion that assets should be treated differently based on whether they came into the marriage through spouses' labor permeates most scholarly, statutory, and judicial discussions of marital property law. But with the exception of recent proposals by the American Law Institute (ALI) and by Carolyn Frantz and Hanoch Dagan, this labor-centered marital property rule has gone largely unquestioned. Indeed, some commentators take the labor-based classification paradigm as too self-evident to justify.1 In reality, the theory and its application are riddled with inconsistencies. First, the labor-centered rule naively assumes that spouses with unequal separate holdings will be equally invested in the marriage as a joint venture. …