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Community Property (CP) in General
The CA CP system is based on the principle that the H and W contribute equally to the accumulation of wealth during marriage. Therefore, unless the couple makes an agreement to the contrary, all property acquired during marriage by the LABOR of either spouse is CP that is owned equally by both spouses.

The CP system applies to registered domestic partners (DP)--a status only available to same-sex couples and elderly opposite-sex couples receiving old-age Social Security benefits.

Questions to ask:

1) WHEN was the asset acquired?

2) HOW was the asset acquired? What is its source? Was it, for example, acquired by labor or gift?

3) Is there any LEGAL PRESUMPTION that may affect the character of the asset?

4) Did either or both spouses act in a way that may have CHANGED the asset's character? For example, did one make a gift of his interest to the other? Or did both spouses join together to alter the character of the asset?
CP: Source of Acquisition
All property acquired during marriage is CP except:

i) Property received by gift, bequest, devise, or descent;

ii) The rents, issues, and profits of SP;

iii) Property acquired in exchange for SP.
Tracing
Proof that an asset was acquired during marriage only raises a presumption that the asset is CP. The SP proponent may overcome the CP presumption that arises from acquisition during marriage by:

(i) showing that the property was acquired by gift or is the fruit of separate property; or

(ii) tracing the acquisition back to a SP source.
Personal Injury Recovery Against 3rd Party Tortfeasor
Recovery classified according to when the cause of action arose.

If the COA arises during marriage, CL treats any recovery or settlement as CP. A COA for personal injury arises when the injury is inflicted.

If the personal injury COA arises after permanent separation, it is the injured spouse's SP, but the injured spouse must reimburse the community or the other spouse's separate estate for any expenses paid on account of the injury.

At DIVORCE only, community estate personal injury damages shall be awarded ENTIRELY to the injured spouse unless the interests of justice (including economic need) require otherwise.

PI against the other spouse is ALWAYS the injured spouse's SP.
RETIREMENT PENSIONS
CA treats retirement pensions as CP to the extent that the right to benefits was earned during marriage (they represent community "savings").

Since 1976, CA has treated both VESTED and UNVESTED pensions as CP as long as the benefits were earned during marriage. With unvested pensions, a ct might divide the unvested pension when and if the benefits are received.
RETIREMENT PENSIONS: "Time Rule"
When a pension has mixed community-separate assets, cts use the "time rule" to apportion the separate and community interests. To determine community interest, multiply the present value of the pension (in the case of an immediate distribution) or the monthly benefits (in a "wait and see" distribution) by a fraction. The denominator of the fraction is the total number of pension contribution years; the numerator is the total number of contribution years during marriage.
CL MARRIAGE
Common Law marriage is still recognized in a minority of states. CL marriage is not recognized in CA, though CA will recognize a couple who is common-law married from another state because of the concept of “full faith and credit”

Determined by conduct:
o Children
o Bank accounts
o Property
o Living together
o Filing taxes as a married couple
o Do they acquire debt together (property)
QUASI-COMMUNITY PROPERTY (QCP)
Property that would have been community property if the parties had been CA domiciliaries at the time of acquisition.

• Property acquired out of state and is a way of bringing it into the system. Only triggered at death and divorce.

o Ex: property purchased while living in NY before you moved to CA. This property is QCP.
QUASI-MARITAL PROPERTY (QMP)
Applies to putative spouses. Putative spouses are spouses who think that they are legally married (and actually tried to get legally married) but for whatever reason they actually are not.

o Ex: messed up on the marriage license
o Ex: your old divorce wasn’t finalized or legal so you are not married to the second person because you are still married to the first.

• Putative spouses are treated like spouses for the most part.
SEPARATE PROPERTY (SP)
All property owned by a person before marriage

All property acquired by gift, devise, bequest, or descent

All property acquired by rent, issues, and profits of SP
COMMUNITY PROPERTY (CP)
Anything acquired during marriage except by gift, devise, bequest, or descent.

• Gift – lucrative title.
• Bequest – inheritance (cash), personal property
• Devise – inheritance of land/real property
• Descent

o Lucrative title: Gift is not from your labor
o Onerous title: property from your labor

Key point: date of acquisition; when you had a right to it.
• Ex: painting painted before marriage but sold after marriage.
CA History: "Equal Management & Control"
It wasn’t until 1975 that CA went to the system of “equal management and control”

o Up until 75, married women only had control over their own separate property. Pre-1975, most women didn’t have many assets.

o Stewart v. Stewart: Husband has credit issues; creditors rights followed management and control. A creditor could reach property an asset over which a person has management and control. Since a married woman only had management and control over her separate property, a creditor could only reach that, and not the husband’s property (which was generally substantially more).
Contractual Modification (PRENUP)
(You should be able to contract in or out of the system).

It just means that you can enter into a prenuptial agreement (before marriage) or a postnuptial agreement (after marriage) to divide up your interests.

o Ks cannot violate public policy though. So, this just means that you can’t contract in a way that would encourage divorce.

Refer to: In Re Marriage of Bonds
PRENUP: Unconscionability or Involuntariness
K is “unconscionable” at the time of execution, if (all 3 required):

(1) no fair, reasonable, and full disclosure
(2) No waiver of such disclosure; and
(3) no knowledge of financial obligations (and could not reasonably obtain)

Presumption of Involuntariness (for any of the following):

(a) Lack of Independent counsel of waiver of such
(b) <7 days between the K and execution
(c) No explanation of the K and language proficiency in writing
(d) duress, fraud, or undue influence; lack of capacity
(e) any other relevant factors
PRENUP: Oral Contracts
Pre-Jan 1, 1985 – oral and implied-in-fact Ks ok

o Oral agreements that change property agreements between spouses could be valid

Post-Jan 1, 1985 – writing required – Section 852

o If you want to change the transmutation of something, it has to be in writing.
• Exception: personal gifts that are not substantial in value under the circumstances of the marriage
• Type of “writing” required: express declaration of intent to transmutate (transfer property interest)

Must be more specific than a simple “Happy Birthday”
Married Woman's Special Presumption
Acquisitions before Jan. 1, 1975 by a married woman (except with husband) is presumptively her SP. (even though she was married if the title is only in her name).

1975 was when the Equal Management and control rights act was adopted. Before this, women only had management and control of her separate property. If she was married her husband must have known about it and wanted her to do it because she could not do it without husband’s ok. It must have been a gift to her as her separate property.

-- husband has to rebut it by clear and convincing evidence of lack of donative intent—it is not a gift. She bought this property without my approval
Special Title Presumption
• Applies only at death

• Presumption: title = ownership

• Contrary Bilateral Party intent required to rebut
o Clear and convincing standard

• Unilateral severance of JT. Civil Code Section 683.2 (?)
Special CP Presumption
Applies ONLY AT DIVORCE.

If you hold property in joint title at divorce it will be presumptively community property.

Enacted 1965—applied only to single family residence in JT form
1984—expanded to anything in JT from 1986—anything in Joint Ownership (tenancy in common, by the entirety, JT)

Since JT is a common law form of ownership but we are a CP system so at death right of survivorship is maintained but at divorce CP system applies. Without this JT would have been separate property.
Lucas Scenario
PROBLEM: When spouses take title in joint and equal form but contribute disproportionately to purchase price.

Lucas said that when a spouse contributes more $$, and then take title in a joint and equal form, this is equivalent to a spousal K to own the property equally. The SP contributor is PRESUMED TO HAVE MADE A GIFT.

This presumption can only be rebutted by a showing by the contributing party that there was an understanding or agreement between the parties that she would maintain a SP interest.

His/her subjective interest is immaterial. Must prove an understanding by both parties. Agreement can be written/oral and implicit/explicit.

If the presumption is rebutted, the contributor will own the percentage of the value of the home (based on what they put in), as well as their half of the CP.

Ex: W puts in $30 out of a total $100k for a home. Equity increases to $200k. If W rebuts the presumption, she will get her 30% of the equity ($60k), plus her half of the rest ($140/2 = $70k). Her total interest would be $130k.
Aufmuth Formula
SP = SP Contribution + % of Capital Appreciation

o Combination of reimbursement plus a percentage of the capital appreciation.
Joint Property Presumption (Sec 2581)
Under CA Fam. Code Sec. 2581, all property held by the spouses in joint form is presumptively community property for purposes of distribution at divorce or legal separation.

This presumption can only be overcome by a collateral WRITTEN agreement or a statement in the documentary evidence of title that the property is "separate property and not CP"

Sec. 2581 does not apply to termination by death

The context of sections 2581 and 2640, as well as under Lucas, DO NOT APPLY to jointly titled BANK ACCOUNTS. Jointly titled commingled bank accounts are governed by Probate Code Sec. 5305.
Joint Property Presumption: Reimbursement
If the jointly titled property is Sec. 2581 CP because there is no writing to the contrary, then at divorce the SP contributions to the acquisition of the property shall be reimbursed to the SP contributor WITHOUT INTEREST OR APPRECIATION (CA Fam Code 2640)

APPLIES TO IMPROVEMENTS (BUT: does not allow any reimbursement for payments made for interest on the loan or payments made for maintenance, insurance, or taxes on the property).
Section 2581 Retroactivity
Sections 2581 and 2640 may not constitutionally be applied to TRANSACTIONS that occurred before the effective dates of the statutes when such retroactive application would deprive a party of VESTED property rights. (Marriage of Heikes)

Sec. 2581 may only be applied retroactively when the retroactive application would not impair any vested rights. (Marriage of Buol)

EFFECTIVE DATES:

Jan. 1, 1984 (applies only to joint tenancies)
Jan 1, 1987 (applies to all other forms of joint and equal ownership)
TRACING Property Purchased from Commingled Fund
FAMILY EXPENSES: Available CP funds are presumed to have been used to pay for family expenses; thus, SP funds are only deemed to have been used when CP funds are exhausted.

GIFT: When SP funds are used to pay for family expenses, a gift to the community is presumed.

TRACING METHODS:

1) Exhaustion Method

2) Direct Tracing
TRACING Property Purchased from Commingled Fund: EXHAUSTION METHOD
The SP proponent may show that at the time he purchased the asset whose character is contested, the community funds in the account had already been exhausted by payment of family expenses. Therefore, the asset must have been purchased with his separate funds.
TRACING Property Purchased from Commingled Fund: DIRECT TRACING
The SP proponent may show that at the time the asset was purchased: (i) there were sufficient separate (as well as community) funds available, AND (ii) he intended to use those separate funds to purchase a separate property asset.

The SP proponent may not simply show (through accounting) that the total family expenses during marriage exceeded total community income during marriage and conclude, therefore, that all remaining funds and assets purchased from the commingled account are his SP.

If the SP proponent fails to perform one of the two permissible methods of tracing, the entire commingled account and the assets purchased from the account will be treated as CP.
Educational Loans
Educational loans (section 2641) are assigned to the “educated spouse” at divorce

• Community contributions to education or training that substantially enhance earning capacity are reimbursed with interest.

• Reimbursement reduction/modification if C has substantially benefited from the education/training

Rebuttable presumption if NO substantial benefit if <10 years

• Case: Todd v. Todd: Wife pays for H to go 2 ½ years of law school and then drops out. Court says NO because it didn’t substantially enhance his earning capacity.
• Must substantially enhance the spouse’s earning capacity

Rebuttable presumption of substantial benefit if +10 years.

• Amount you get reimbursed can be full or partial depending on how long you have been married.
Severance Pay
Cases are divided. Since severance pay replaces a workers earnings, it is sometimes considered CP.

Marriage of Wright: ct held that a permanently separated husband's severance pay was his SP because it replaced lost earnings that would have been the worker's SP.

CONTRAST: Marriage of Horn: ct held that post-separation NFL severance pay was CP because the right to lump-sum severance pay arose from a collective bargaining agreement and because the right was earned by employment during marriage.
Stock Options
Interest applied similar to the "time rule"

FORMULA:
The denominator of the fraction is the number of total years of employment until the exercise of the option, and the numerator is the number of such years during which the parties were married.
Goodwill
Goodwill is the difference between the total value of a business or professional practice and the value of its assembled physical assets. Goodwill is an intangible value that develops during the life of a business and includes, among other thins the reputation and habitual clientele of a business or practice.

To the extent that goodwill is earned during marriage, CA treats it as CP even when some proffessional goodwill cannot, by law, be sold or transferred, and even though much professional goodwill inheres in the particular practitioner and would not survive a sale.
Educational Loans: Right of Reimbursement
Sec. 2641 creates a right of reimbursement with interest to the community when community funds are:

(i) used either to pay for education or training or are used to repay a loan incurred for education or training; AND

(ii) the education or training substantially enhances the earning capacity of the educated party.

When such education loans are still outstanding at divorce, they shall be assigned solely to the educated spouse.
Education: What Expenses are Reimbursable?
Reimbursement may be reduced or modified by any of the following:

(i) The COMMUNITY HAS ALREADY SUBSTANTIALLY BENEFITED from the education or training. There is a rebuttable presumption affecting the burden of proof that if fewer than 10 years have elapsed between the contributions and the initiation of the divorce, the community has not substantially benefited. If more than 10 yrs have passed, a presumption arises that the community has substantially benefited.

(ii) The education or training is offset by COMMUNITY-FUNDED EDUCATION RECEIVED BY THE OTHER SPOUSE.

(iii) The education or training enables its recipient to engage in gainful employment that substantially REDUCES THE NEED THE RECIPIENT WOULD OTHERWISE HAVE FOR SPOUSAL SUPPORT.
LIFE INSURANCE: at Death
CA has traditionally treated life insurance proceeds as CP in proportion to the percentage of premiums paid by the community.

Ex: if community paid for 1/3 of the premiums and decedent's property funded 2/3, 1/3 of the proceeds is CP. CA applies the "time rule"

BUT, when the deceased spouse has a named beneficiary other than his SS, the deceased spouse is deemed to have thereby made a testamentary disposition to the named beneficiary of his one-half of the CP interest.

TERM LIFE:
• Maj: no present cash value
• Min: there is when the insured becomes uninsurable. → replacement value.
LIFE INSURANCE: at Divorce
WHOLE LIFE: To the extent that a policy has a current cash value, that cash value is CP in proportion to what the community paid to the premiums.

TERM (PURE) INSURANCE: Has no cash value. B/c the premium covers no more than the risk of death, cts have held that the policy has no value at divorce (Lorenz). But, another case (Gonzales) held that the amount of premiums paid by the community should be measured to equate to its interest in the policy.

HEALTH INSURANCE: no right to coverage after divorce, despite making payments.

PROPERTY INSURANCE: several cases have held that even though the CP was used to pay the premiums insuring one spouse's SP, insurance proceeds arising from casualty to that property nevertheless remain SP.
CP Presumption
Property acquired during marriage is CP.

Some cases say that POSSESSION during marriage gives rise to a presumption of acquisition during marriage, but other cases have required the CP proponent to demonstrate ACQUISITION during marriage. The possession formulation is likely applied in a long marriage; the acquisition formulation may be applied in a short marriage.

Exception: does not apply at death when divorce occurred 4+ years earlier.
Overcoming the CP Presumption
The SP proponent may overcome the CP presumption by showing any of the following facts:

1) Statutory Facts; i.e., it satisfies the statutory definition of SP because it was acquired by gift, bequest, devise, or decent, or was the rent or income from SP.

2) Parties took inconsistent written title in a manner which shows other intent

3) Parties otherwise agreed that property would not be CP

4) One party took title in form that evidences gift to the other (i.e., W bought H car for B'day and put title in his name alone)

5) Simple Tracing Permitted; BUT: note that tracing only estblishes an ownership interest when the asset is either UNTITLED or the form of title does not tend to show that he PARTIES AGREED to some other form of ownership.
Transmutation From SP to CP and vice versa -- Pre Jan. 1, 1985
Writing Requirement

Prior unwritten transmutations were recognized.

Contracts which were oral were okay if could be proven.

Also, implied in fact contracts were okay.
--Needed to show reliance.
Transmutation From SP to CP and vice versa -- Post Jan. 1, 1985
Act provides that agreements made before marriage affecting marital rights in property must be in writing and can be amended or revoked only by writing.

a. Writing must be an express declaration of intent to transmutate character of property from CP to SP or SP to CP.

i. Needs clear language so that both parties know intent is to change character.
ii. EX: saying something is a gift will not sufficient to express intent to transfer. Husband and wife buy with CP loose diamond and husband makes it a ring and gives to wife. Still CP and not SP because card not express.

Exception from Requirement:

a. Personal gifts that is NOT substantial in value under the circumstances of marriage.

Example: Diamond right for billionaire couple when lavish gifts are customary. No need for writing.
--Question of what is substantial is a question of fact.
Uniform Pre-Marital Agreement Act (Post Jan 1, 1986)
Analysis:

Start out with presumption that pre-marital agreements are enforceable.

The party challenging the pre-marital agreement has a burden to show at execution it was:

1. Involuntary; or

2. Unconscionable.
Uniform Pre-Marital Agreement Act (Post Jan 1, 1986): VOLUNTARINESS
1) Marital agreements must be entered into voluntarily by both parties.

2) Agreements are deemed involuntary when party not represented by counsel unless:

a) Party was advised to seek independent counsel and waived the right; or

b) Less than seven days between the contract and signing of it to review; or

c) No explanation of the contract and language proficiency in writing; or

d) Duress, fraud, or undue influence; lack of capacity; or

e) If unrepresented by counsel, was fully informed of basic effects of the agreement and the rights being given up and signed to it; or

f) Other factors relevant to court.
Uniform Pre-Marital Agreement Act (Post Jan 1, 1986): UNCONSCIONABILITY
Assessed by Judge:

1. Judging is made from the time the agreement was made and executed

a. So if poor when marry; that is when we look.

2. Conscionability is assessed by a judge using facts existing when the agreement was made.

Requirements For Unconcsionability:

1. Contract was unconscionable at time of execution if:

a. No fair, reasonable, and full disclosure;

b. No waiver of such disclosure; and

c. No knowledge (and could not reasonably obtain) of financial obligations.
Uniform Pre-Marital Agreement Act (Post Jan 1, 1986): VOLUNTARINESS (BarBri Definition)
A premarital agreement is not enforeable if the party against whom the enforcement is sought did not execute it voluntarily. An agreement will not be considered voluntary unless ALL of the following are found:

1) The party against whom enforcement is sought was REPRESENTED BY INDEPENDENT COUNSEL when she signed the agreement or, after being advised to seek independent counsel, EXPRESSLY WAIVED such representation in a separate writing;

2) AT LEAST 7 DAYS before it was signed, the agreement was presented to the party against whom enforcement is sought and that party was advised to seek independent legal counsel;

3) If unrepresented by legal counsel, the party against whom enforcement is sought was FULLY INFORMED, in writing prior to the signing of the agreement, of the terms of the agreement adn the rights she was giving up by signing the agreement, and was PROFICIENT IN THE LANGUAGE of the explanation of the agreement;

4) The agreement and the other require writings were NOT EXECUTED UNDER FRAUD, DURESS, OR UNDUE INFLUENCE; and

5) Any other factors the court deems relevant.
Post-Marital Agreements
Post-nuptial agreements are presumed valid unless party challenging can prove unfair advantage.

i. Evidence of unfair advantage shifts burden of proof to spouse seeking to enforce post marital agreement.

Rebuttal of Unfair Advantage Requirements

i. Voluntary agreement;
ii. Knowledge of facts and understanding of legal consequences; and
iii. Preponderance of the evidence standard to rebut the presumption.
Living Separate and Apart
Objective Intent Required

All that is required is that one spouse has no intent to resume marital relations.

This intent is measured by an objective point of view.

Classification of Asset -- If facts show acquisition by H and W after separation but before divorce, an asset could be either separate property or community property because community funds were used as consideration.
Rebutting GIFT Presumption
Requirements:

1. Contrary Intent:
a. Presumption can be rebutted with clear and convincing evidence of contrary bilateral intent.
--If before 1985 oral transmutation is okay.

2. Writing
a. If there is no writing, it is community property and no reimbursal.
--Must be specific intent.
--Proportionate Ownership Interest

Use Aufmuth Formula
People Within Community Property System (Must classify on Exam!)
On exam you need to define status.

--Same Sex Couples

--Legally Married Couples

--Putative Spouses

--Meretricious Partners

--Single persons are NOT in CP system
SAME-SEX COUPLES
Full Faith and Credit: Not all acts of sister state must be given full faith and credit to acts of other states.

Defense of Marriage Act (1996): Federal legislation recognizes marriage as between men and women.

Mini-Domas: After Defense of Marriage Act, many states made their own laws defining marriage as between men and women.

Domestic Partners: More used on west coast. California -- If same sex couple in California is registered domestic partners, they are in community property stem and are entitled to all same rights, benefits, and duties as married couples (State benefits; not federal benefits, meaning: No social security). Includes probate rights as applied to legally marry.

Putative Domestic Partners: No putative registered domestic partner is old law. The putative spouse doctrine does not extend to domestic partners.
--Modern Trend (Split in CA): Elias says that you can have putative domestic partners. But still must attempt to comply with formalities – register with Secretary of State as domestic partners but gets lost or something.

Civil Unions: More used on east coast. California -- If same sex couple in California is registered civil unions from other states, they are in community property stem. They are entitled to all same rights, benefits and duties as married couples (State benefits; not federal benefits. Includes probate rights as applied to legally married.

Marriage Cases and Prop 8: No Fundamental Right to Same Sex Marriage. CA does not recognize same sex marriage; but recognized those marriage in the 8 month window before Prop 8 passes.
--There is no fundamental right because the definition of marriage as recognized by law is between man and women. Sexual Orientation Not Suspect Class.
a. Immutable trait
b. Trait/characteristic not relevant to ability to contribute to society; and
c. No history of social or legal stigma
--Rational Basis Test
a. Burden on Challenger
b. Is there a rational basis between the law and legitimate state interest?
--Because there are no fundamental rights – there needs no higher test.
LEGALLY MARRIED COUPLES
Are in the community property system.

Must have:
1. Capacity and Consent
2. License and Solemnization
PUTATIVE SPOUSES
Are in community property system.

Two Requirements:
1. At least one party must have a reasonable good faith belief they are married; and
2. Must have attempted to comply with formal requirements in jurisdiction.

Because they are not legally married, we cannot call their property CP. Instead we call it Quasi Marital Property. Treated same as CP at divorce.

Division at Death:

1. Surviving Spouse for Intestate Succession (What happens to SP)
a. A surviving putative spouse is entitled to succeed to share of the decadents separate property.
--Putative spouse should be treated as an actual spouse in terms of intestate succession (Except when there is a legal spouse).

2. Legal Spouse v. Putative Spouse

a. Estoppel Divorce
i. If you think you’re divorced, first spouse should be stopped from getting anything as intestate succession.

b. Family Allowance
--Personal Injury Awards
--A putative takes everything except when there is a legal spouse.
--If there is no legal spouse, the money is QMP then half already goes to putative spouse. From legal spouse perspective, the money is separate property because it was acquired when separate and apart and she gets it.
--When a just distribution of an estate among the parties is not provided by any statute, equity should be used to resolve the issue of distribution.
--Half should go to putative; and half should go to spouse.
MERETRICIOUS PARTNERS
Not in community property system.

Old Rule: If you were living in sin you came to court with unclean hands and you cannot ask court to enforce agreements between partners.

New Rule: Marvin recognizes that male and female can agree between themselves and all they would have is their rights in contract as to property ownership or division.
--So long as agreement does not rest upon illicit sexual meretricious consideration, the parties may order their economic affairs as they chose.
--Does not establish a claim for palimony; does not exist in California.
Commingled Funds
One or both spouses commingle community and separate funds in a single account.

1. At death or divorce, the owner of separate funds may attempt to trace these funds to claims a separate property interest in the funds or in an asset purchased.

--Party seeking to establish separate property has burden of uncommingling the funds.
Commingled Funds: General CP Presumption
Meaning: Stands for proposition that where community property and separate funds are commingled the entire fund will be characterized as CP, unless SP owners can specifically identify which particular funds are SP.

Two Permissible Forms of Tracing:

1. Direct Tracing
--Separate property proponent may show that at the time the asset was purchased:
i. There were sufficient separate (and community) funds available; and
ii. He intended to use those separate funds to purchase a separate property asset.

2. Indirect Tracking – Recapitulative Accounting
--The separate property proponent can show that at the time of acquisition the asset whose character is contested, the community funds in the account had already been exhausted by payment to family expenses. Therefore, the funds used must have been separate funds.

Family Expenses Presumption -- Family Expenses Paid by Community Funds
1. Available community funds are presumed to have been used to pay family expenses. Thus, separate funds are deemed to have been used to meet family expenses only when community funds are exhausted. These payments are presumed first.

Gift Presumed When Separate funds Used to Pay Expenses
1. Separate estate has no right of reimbursement when community funds are later deposited. Can be overcome with agreement for reimbursement.

DeMinimis Principle
--When adding a deminis amount, you will lose your discreet classification and it will merge into the majority.

Record Keeping
--Party seeking to challenge community property presumption has the burden to show record keeping to trace to separate funds.

Intent
--Party seeking to challenge community property presumption must show that there was an intent to use separate property at time when family expenses are paid.
--Where there is no withdrawal from account, the initial classification of the property that has been commingled governs.
--If there have been withdrawal, look to intent of the spouse making the withdrawal.
When Community Funds or Labor Enhance Value of Separate Property
Pereira/Van Camp accounting methods applied when a business is SP to begin with (started with SP money or BEFORE marriage).

1. One spouse may bring a separate property business into a marriage and devote community labor to the management of business.
--At divorce or death, the business may have appreciated in value or assets purchased with business profits. Two tests used to determine character of business and assets:

i. Van Camp Accounting
ii. Pereira Accounting
Van Camp Accounting
Used When: Value of business or success is due to market and other external factors. Not value based on labor. Used when character of SP is cause for growth (like parking lot).
--Tends to maximize SP.

Formulas:

CP = (Fair and Reasonably Salary)(Years) – Salary Paid.

SP = FMV at time of trial less CP
Pereira Accounting
Used When: Appreciated value of business is attributed to time, labor, skill of worker spouse.
--Primarily used when management skill of spouse caused increase.
--Essentially this is reimbursement of initial investment less interest.
--Tends to maximize CP.

Formulas:

SP = ((initial investment)(fair rate of return)(# of years married)) + (initial investment)
--Fair rate of return = 10%

CP = FMV at time of trial less SP
Apportionment of Business Profits of Separate Property At Separation
Reverse methods apply when a CP business (started with CP money) has been enhanced by one spouse's efforts BETWEEN SEPARATION AND DIVORCE (which covers only a small period of time).

If after permanent separation the managing spouse continues to work in an appreciating CP business, the value must be apportioned to CP and SP.
--CP business continues after the couples live separate and apart.

Valued with two tests:

1) Reverse Pereira:

CP = FMV at time of separation + ((rate of return)(initial investment)(years of marriage))

SP = FMV at time of trial less CP

2) Reverse Van Camp:

SP = ((Reasonable Salary)(Years of Separation)) – salary already paid.

CP = FMV at time of trial less SP
Apportionment of Business Profits of CP Business at Divorce
The property is Community Property and will be divided in equity
Installment Acquisitions
California Apportionment Theory:

1. Nothing is owned until it is finally paid off.
a. When payments are made over time and title does not vest until a specified sum has been received by seller, each item of consideration paid by installment is treated in forming the co-tenancy.
--When one spouse contributes separate funds to property before marriage and after marriage contributes community funds, the community is entitled to pro-rata share.

2. Not inception of Right
a. Inception of right says that the first payment defines character of property; nothing thereafter.
Credit Acquisitions
There is CP presumption for credit acquisitions; must trace to source of credit.
--Many consumer purchases are made on credit and at divorce those assets can increase in value with little payment of credit.

To rebut this presumption of CP, must trace to see how the loan was conditioned.
Classification of Credit Acquisitions
Classification of the Loan Proceeds:

a. Did lender rely primarily on SP in extending loan? (Gudelj)
--If the lender relied primarily on SP assets to extend loan, you can say loan proceeds are in fact separate property (Recent CA Ct decision)

b. Did the lender rely solely on SP in extending loan? (Grinius)
--Loan proceeds during marriage are presumptively community property.
--Will be overcome if lender says the loan was primarily conditioned on SP of spouse. Difficult to do because credit at marriage is a combination of spouse.

SP asset with CP Contribution (Moore/Marsden):

a. Amounts paid by community for interest, taxes, and insurance are not figured in when calculating the community interest in property that was purchased by one spouse as SP; but to which community made payments.
--In Moore situation you want to give CP contributions an ownership interest.
--Reverse of Lucas (CP asset with SP contributions)

--Aufmuth Formula:
SP = CP Contributions + (% Capital Appreciation)
SP % = ((SP Down Payment + Loan)-(CP Principal Payments))/ (Purchase Price)

Alternate Approach:
CP = CP Principal Payments/Contributions + % capital appreciation
% Capital Appreciations is calculated by = total CP contributions/purchase price.

Example: So if there was 50,000 contributions and purchase price is 100,000. I would get back the initial 50k and then the percentage of appreciation (another 50k).

§ 2640 Right of Reimbursement for SP Contributions
a. Reimbursement from properties acquired with the refinanced loan okay but limited to the % of the SP contribution to the equity at time of re-finance.
Improvements
Improvements are anything that increases value of the property.
Improvements: 4 Scenarios
1. Separate Property Used to Improve Other Spouses Separate Property

2. Separate Property Used to Improve Community Property

3. Use Community Property Funds to Improve Own Separate Property

4. Community Property Interests used to Improver Other Spouse Separate Property
Improvements: Separate Property Used to Improve Other Spouses Separate Property
Separate contributions to the acquisition of other spouse separate property equals reimbursements.

There is a presumption of separate property because other party knew the source was separate property.
Improvements: Separate Property Used to Improve Community Property
Pre-1984:

Use of separate funds is a presumed gift.

Post-1984:

Statutory right of reimbursement (Anti-Lucas laws).

--Writing is required if there is a transmutation.
Improvements: Use Community Property Funds to Improve Own Separate Property
Pre-1975:

Presumed gift when W used CP to improve W CP because of management and control belonging to H.
--Husband can rebut with contrary intent by clear and convincing standard.

Post 1975:

Reimbursement or enhanced added value; whichever is greater.
Improvements: Community Property Interests used to Improver Other Spouse Separate Property
Old Rule:

It is presumed gift.

New Rule:

When a spouse contributes community funds to improvements of their spouses separate land, the contributing spouse is entitled to reimbursement.
Personal Injury Awards: Classification at Time of Injury
The cause of action date is what is used to classify the award; not the date of judgment.

If you’re married when cause of action arose the judgment is considered community property
Personal Injury Awards: Classification at Divorce
1) At divorce tort monies will be awarded to the injured spouse.

--If funds used to purchase a home or asset, then the injured spouse will get the asset if it can be proven funds from tort recovery used.

--If the money is not able to be traced; it is gone and it will all be community property.

2) Unless the interest of justice require otherwise.

--Non-injured spouse will have burden to prove special circumstances to rely on the tort recovery.

--Reliance on the funds on part of spouse like quitting job. (Christopher Reeve wife).
--But, at least one half will always be assigned to the injured spouse.

California follows Unitary Approach
Personal Injury Awards: Classification at Death
At death, the statute is silent and we hold the tort recovery as CP at death.

--If the non-injured spouse dies first and wills all money to sister, this can deprive the injured spouse of monies. Works in reverse too
Personal Injury Awards: Bad Faith
Forfeiture of CP interest in:

1. Retirement and pension; and

2. Attempted murder?
Personal Injury Awards: Interspousal Torts
When one spouse is liable for death or injury to person or property, California Family Code provides order of satisfaction. (Must determine if tort benefits community)

1. Activity for Benefit of Community – CP First
a. If the liability of the spouse is based on an act or omission that occurred while the married person was performing an activity for benefit of community, the liability is satisfied:

i. 1st – from CP;
ii. 2nd – SP of Tortfeaser spouse
iii. NEVER the non-tortfeaser spouse.

2. Activity Not for Benefit of Community – SP of Tortfeaser spouse First
a. If the liability of the spouse is not based on an act while performed for benefit of community, the liability is satisfied:

i. 1st – SP of torfeaser spouse; and
ii. 2nd – CP
iii. NEVER the non-tortfeaser spouse.
Employment Benefits
Replacement Analysis –Generally

--Apportionment, valuation, division.

Whether vested or not they are within CP System and are divisible at divorce.
Retirement Benefits
Retirement benefits are CP if earned during the course of marriage.

1. Immaterial that benefits are received after marriage is over.

2. California treats it as community savings for old age.
--Ignores replacement analysis.
Retirement Benefits: Defined Contribution Plan
An account is kept for each employee participant and periodic contributions are paid into the account.

a. Contributions come from payroll deductions.

b. Whether community or separate depends on marital status at time of acquisition (apportionment).
Retirement Benefits: Defined Benefit Plan
Participant earns the right to specified benefits after a certain amount of time on the job.

a. No contributions made by the employer or employee; specified benefits must be paid out on maturation.

b. Character of benefits not dependent on status; but other factors.
Retirement Benefits: Matured vs. Vested
Matured – all conditions precedent have been satisfied

Vested – benefit will survive discharge/termination of employment

--Pension vests when an employee completes minimum employment period necessary to qualify him for a pension when reaches retirement age. Once vested, employee can leave job and collect pension at retirement.

--CP as long as right to benefit earned during marriage.
Retirement Benefits: Apportionment
Time Rule v. Contributions:

1. Time Rule:
a. Many pensions are a mixture of community and separate assets.
b. Courts typically will apply time rule to determine valuation of assets.
--Community Share = (# of yrs pension earned while married)/(# of yrs pension earned).

Division:
1. Cash Out v. Division in Kind (at maturity)

a. Cash Out
--If the couple is younger; they will want the present cash value.

b. Division in Kind
--If you have older people near retirement, you will want to ask for division in kind.
--At retirement the company will cut two checks one to each spouse.
Grounds for Divorce
CA: No fault divorce

1. Irreconcilable Differences
2. Incurable Insanity
Post-Dissolution: Grounds to Set Aside a Judgment
1. Actual Fraud (1 yr from discovery)

2. Perjury (1 yr from discovery)

3. Duress (2 yrs)

4. Mental Incapacity (2 yrs)

5. Mistake (1 yr)

6. Disclosure (1 yr from discovery)
Retirement Benefits: Enhanced Benefits (post separation/divorce)
A non employee spouse who owns a CP interest in an employee spouse's retirement benefits under a defined benefit retirement plan owns a community property interest in the retirement benefits as enhanced.

1. This will happen if retirement spouse employee takes deal from employer to leave early; this means spouse can come back for more if there is more.
Retirement Benefits: Profit Sharing/Stock Options
A form of compensation; to the extent the options are earned during the course of the marriage, community has a right to share in their value.

Example: H works for Disney in 1990. In 94 given right to exercise stock in 1998. Permanent separation in 96. Is this compensation for past work (90-94) or future (94-98)?

Both. Time Rule applies.

# of years married /# of years earned →6/8 = 75% CP.
Retirement Benefits: Severance Pay & Vacation
SEVERANCE PAY: There is no fixed rule; courts will look to facts and circumstances to determine how to characterize severance pay.

VACATION: No set rule; appellate courts don’t want to deal with it.
Retirement Benefits: Disability Benefits
1. If the insured spouse does not become disabled during the last policy term before the parties separation, the community will have no interest in benefits produced from renewal because:
--Renewal premium will not be paid with CP funds; and
--There will be no intent to provide community retirement income.

2. Can be apportioned
--If benefits occur prior to dissolution, apportionment of payments
Management & Control (Responsibilities and Standard of Care): Pre-1975
1. Only H had management and control over CP.
--H cannot make testamentary limitation on W ½ interest.
--1951 W had management and control over earnings and personal injury recoveries unless commingled or invested in real property.

2. Duty of Loyalty; Not Duty of Care
--A managing spouse will have breached his duty of full disclosure to the non-managing spouse, if there is evidence that the non-managing spouse sought information about investment assets and the managing spouse failed to provide such information.
--There is no duty of care.

3. Each spouse has management and control over own SP.
Management & Control (Responsibilities and Standard of Care): Post-1975
1. Equal Management and Control Over CP
--Either spouse alone could buy, sell, spend, encumber, all CP. This is limited to lifetime of spouse; each spouse retains testamentary control.

Exceptions:
a. Real Property
--Both spouses must agree to convey, sell, encumber, or lease community property more than one year.
--Non-consenting spouse retains power to void the transaction when CP is titled in one spouse and misrepresented.
--Transfers to BPV are presumed valid.

2. Duty of Loyalty and Duty of Care
--Each spouse must act in good faith; Good faith requires full accounting when requested and getting consent of non-manager before committing acts.
--If there is no good faith (Fraud exists). Accused spouse is solely responsible for any unpaid attorney fees.
--Loss of ½ of accused interest by forfeiture.
--Negligence is not actionable.

3. Each spouse has management and control over own SP.
Management & Control (Responsibilities and Standard of Care): Gift
Written Consent Needed to Gift, Transfer or Cell CP.

Exception:

a. CP Business Personal Property
--Spouse managing a CP business is given primary management and control. Spouse has right to make day to day decisions regarding business.
--Limited when managing spouse wants to sell, lease or dispose of personal property in business; must give other spouse written notice.

b. Real Property
--Both spouses must join decisions to transfer, encumber, or lease real property. Must be in writing.

Waiver and Estoppel Can Apply
a. Spouses don’t engage in formal contracts whenever they do something and if they find out about and don’t say anything there can be waiver.
Recapture (Return of CP): Definition
Non-transferring spouse going after CP property that was gifted away to a third party.

Recapture is the lassoing of the entire asset and bringing it back into community estate.
--If there is to be a willing, it must be mutual writing.
Recapture (Return of CP): Entire CP is Recaptured During Marriage
(Spreckles): If nobody is dead or divorced (marriage is intact) the entire asset can be recaptured.
--It is as if the transaction had never occurred.
--This means that the third party purchaser must be brought back to status quo ante. (pay them back)

When the marriage is intact you have to recapture the entire thing because CP is an undivided interest in asset.
Recapture (Return of CP): Only Innocent Spouse’s ½ CP is Recaptured After Divorce or Death
The non-transferring spouse, in death or divorce, has the right to recapture ½ of the CP.

--This is because purpose of CP is to allow you control over half of property.
Recapture (Return of CP): Right to Recapture Survives Death of Innocent Spouse
1. Void and Voidable Transfer
--The transfer is voidable because it is at the election of the non-transferring spouse. Must be done within statutory period.
--During lifetime of the spouse, the non-consenting spouse can void the entire transaction. If not voided during the donor spouse lifetime, it is treated as a valid testamentary transfer of spouses interest.
--At death of donor, the non-transferring spouse can recapture only their ½ interest.

2. Ratification, Waiver, Estoppel, Laches may Apply

3. Survivors Election (Disfavored)

a. Item theory
--Surviving spouse is entitled to ½ of each and every item of CP.
--Unless she consents, her CP interests are not satisfied by ½ of everything in aggregate.
--This is what we use in CA.

b. Election Required When Decedent Tries to Pass Survivors Half Interest
--Election is required when the decedent will attempt to pass the survivors interest in CP.
--In such cases, the survivor must agree to either asset CP rights or what is in the will.

Example: H leaves Blackacre to Brother. Leaves Whiteacre to W.
Hypothecation of CP
Both Spouses Must Join in Hypothecation of CP.

Hypothecation:
--Borrowing against an asset.
--Lien is a cloud on the property to indicate that something is owned on it.
--One spouse cannot borrow against asset because it means that one spouse can unilaterally dissipate the state.
--While you cannot hypothecate community property, it will not remove the debt from the property.

Exception for when unilateral hypothecation allowed:
--attorneys fees for divorce, annulment, or legal separation
Post Judgment Lien Against CP
A creditor who previously forfeited a security interest in community real estate is placed in the position of any other unsecured creditor entitled to seek a judgment against a debtor spouse and to enforce its money judgment against the community property estate.

--When you sue for the debt when the lien is removed, you get a judgment which makes you a judgment creditor from the court and when you record it you get a lien on the property.

--This gives notice to the non-debiting spouse when you sue against the community property.

--While the community is subject to payment for the debt, the innocent spouse can seek reimbursement from the husband
Reimbursement to Innocent Spouse
One Spouse May Seek Reimbursement from the Other for:

a. Child support or Spousal Support Claims Arise from Prior Relationship
--Right to reimbursement exists but only if your spouse at time of paying had separate property funds available to make the payments.

b. Separate Property Applied to Debts Incurred by Other Spouse for Necessaries
--If one spouse SP used to pay for another spouse necessaries and CP available or debtor spouse had SP available to make payment, CP or SP can be reimbursed.

c. Educational Debts
--Right to reimbursement for education expense and loans.
--If there are loans and you default; the spouses wages can be used to pay creditor debt.

d. Pre-marital debts
--Are the responsibility of community property.
--You can go after spouse for reimbursal
CREDITORS RIGHTS: Pre-1985
Debt liability followed management and control (M&C)

--Pre-1975 the wife’s creditors could only reach her SP because that all she had M&C over.
--No CP for wife debt, but okay for H debt to attack CP.

Post 1975 creditors of each spouse could reach all CP because each spouse had M&C over all CP.
CREDITORS RIGHTS: Post-1985
All CP and Debtors SP are subject to debtors creditors

Premarital Debts:
--CP is liable for all debts of either spouse, even those incurred before marriage.

Exception:
--Creditors cannot reach SP or non-debtor spouse if kept separate and not commingled.
--Will not change classification of property (because earnings are CP) but if in separate accounts cannot be garnered by creditor.
CREDITORS RIGHTS: Post-1985 Exceptions
1) Agency -- If one spouse acts as an agent for other spouse in incurring debt, their SP is not responsible. Creditor can go after non-agent spouses SP but not debtor unless acted as principal.

2) Third Party Tort Liability -- General rules related to tortfeaser spouses benefiting community.
--Property received by non-debtor spouse in a marital dissolution is not liable for a debt incurred by the persons spouse during or before the marriage.

3) Inter-Spousal Torts -- You can go after the tortfeaser spouses CP and then go after their ½ of CP.

4) Necessaries of Life -- SP of non-debtor spouse is liable. If CP is used or SP of non-debtor spouse, there is a right to reimbursement.
--Necessaries of Life Differ From Marriage to Marriage. (Think Sun Bonds case).

5) Contractual Debts -- If by execution of a MSA, a community property business becomes SP of another spouse, a creditor seeking to enforce a business debt incurred thereafter will be restricted to satisfaction from the SP of the debtor spouse.

6) Spousal and Child Support Obligations -- Community is not entitled for reimbursement for payments of spousal and child support for payments of former spouse unless SP of debtor spouse was available at time payment made.
Division at Divorce: MSA (Marital Settlement Agreement)
Exception to Equitable Division. Married parties can agree as to who get what in the division of assets.

Two Ways to Enforce MSA:

1. Approval by Court
--If approved by the court, you have to go back to court and sue for breach of damages.
--Beneficial if important to keep terms of settlement confidential and not in public record.
--Drawback is that you will have to sue to enforce breach.

2. Incorporation into Judgment
--All rights and remedies are available to you as if you’re creditor.
--You can garnish wages in case of breach or go after bank account.

Modification of MSA:

1. Changes in Circumstances -- Comes up when there is a change in circumstances warranting a change in:

i. Spousal Support (Exception: To prevent modification there must be language that is specific and explicit to preclude it).

ii. Child Support -- Always modifiable; cannot be waived by parents.

iv. Mediation Privilege

v. No Presumption of Undue Influence for MSA reached through mediation.
Division at Divorce: Bifurcation
Issues can be broken up for purposes of trial.

This means that you can determine issues of status and separation of assets at later dates.

--In CA soonest status can be changed from married to divorced is 6 months. Some people will want status resolved ASAP and other issues later.
Mandatory Equal Division of CP at Divorce: EXCEPTIONS
1. Personal injury settlement monies (Repeat from Above) -- So long as they are not commingled, award will be given to the injured spouse. If commingled, out of luck.

2. Debts; educational loans -- Pre-Marital debts are assigned to debtor spouse.
--Liabilities and debts arising during marriage are equally divided.
--You can do uneven distribution of community debts when they exceed value of assets.
--Spousal and child support can be reimbursed as long as spouse had SP at time.
--Necessaries of life can be subject to SP.

3. Deferred sale of family home.

4. Less than $5k CP estate -- There can be unequal division of assets when the estate totals less than 5k.

5. Single Asset Proviso
Mandatory Equal Division of CP at Divorce: EXCEPTIONS -- Division of Family Home
Family Code allows 1 spouse to make temporary use of family residence.
--Less than 5 years is okay.
--Family court must specific finding of fact why it has deferred sale of family home.

Factors include:
i. Age
ii. Hardship
iii. Financial ability to care for property
iv. Financial ability of spouse leaving to care
v. Number of kids
vi. Connection of family to home.

What if you stay longer, what do you do to outhouse?
i. Pay them out;
ii. Partition; or
iii. Promissory note – must include finite terms.
Grounds for Divorce
California is a pure no-fault state. (Minority jx)

This is relevant because in states where there is fault it can be grounds for non-equitable division.

Grounds in CA include:

a. Irreconcilable differences;

b. Incurable insanity.

All assets, therefore, divided equally
Division of Debt: Equitable Division Except When...
1. Debts exceed assets.

2. Debts are pre-marital

3. Educational loans

4. Debts incurred during marriage; but not for benefit of community

5. Debts for non-necessaries incurred after separation

6. Debts incurred after separation
Post Dissolution Remedies: Grounds to Set Aside Judgments -- FRAUD
OLD RULE:

Extrinsic Evidence -- You could set aside a judgment when extrinsic fraud exists.
a. Extrinsic fraud is culpable behavior of or extrinsic mistake.
b. To check if extrinsic fraud exists:
--One spouse has been fraudulently presented or denied opportunity to participate in proceeding. (concealed asset)
--The party not given chance to give claim or defense.
c. Person claiming extrinsic fraud has burden to prove they would have gotten a better result.

Intrinsic Evidence -- Intrinsic fraud is that you had an opportunity to participate; but chose not to.

NEW RULE:

Where the defrauded party was kept in ignorance or in some other manner fraudulently prevented from fully participating in the proceeding.
--Motion must be brought within 1 year after complaining party did or should have discovered fraud.
Post Dissolution Remedies: Grounds to Set Aside Judgments -- OTHER GROUNDS
1. Fraud (see other card)

2. Perjury -- Perjury is misrepresentation in the required declarations of disclosure.
--Claim must be made within 1 year from discovery.

3. Duress -- A motion for duress must be brought within two years after date of entry of judgment.

4. Mental Incapacity --Must be brought within 2 years.

5. Mistake --A stipulation made at proceeding which was made in error must be claimed with 2 years to set aside.

6. Disclosure -- 1 year from discovery.
Concealment of Assets
Consequences:

1. Forfeiture of CP interest;
2. Attorney fees; and costs.

Also, potential criminal liability.
Omitted Assets
Continuing Jurisdiction -- No res judicata; can be used to reopen judgment because never accounted for.

Equitable defenses may apply.

Legal Malpractice:
1. Only when research is was not adequately done and there is a decision made by attorney and suggested to client.
--Does not arise when law changes following decision and research was done with relevant law at time.

Example: when in doubt of whether an asset is CP and research in error by attorney says SP.
Tax Consideration
At the time of divorce, the court will take into consideration actual tax consequences but potential consequences are not taken into consideration because they could have been avoided.

If Husband rolls over ½ CP to new home but wife hold on to $ and is assessed taxes on it; she is responsible and not husband because could have been avoided
DIVISION @ DEATH: Testamentary Control
Each spouse only has testamentary control over what the spouse owns.

1. At death you own your half of CP and your SP.

If you give away more than this you are forcing an election

Survivor's Election: this is when the survivor has a choice to stand on rights or take what the testator left.
DIVISION @ DEATH: Distribution
California follows an item theory.

The surviving spouse is entitled to ½ of every item of CP. Unless she consent otherwise to aggregate theory (1/2 of entire estate in toto).
DIVISION @ DEATH: Intestate Succession
1) Decedent Spouse’s ½ CP and ½ QCP – go to surviving spouse.

2) Decedent spouse SP
--All to surviving spouse if there are no issue, parents, siblings, or issue of siblings.
--½ to surviving spouse if there is 1 child or issue of that child or parent or issue of parents.
--1/3 to surviving spouse if there is +1 child or issue of children.
DIVISION @ DEATH: Allocation of Debts
A debt that would have attached to CP during life gets attached to CP at death.

Allocation of debts follow the allocation of debts that would have happened if the person stayed alive.

We impose a one year statute of limitations for debts against decedents.
--This makes sense because we want to close up the estate efficiently
Treatment of QCP at DEATH
For every asset of QCP, there is an acquiring spouse and a non-acquiring spouse, and QCP is treated like the acquiring spouse's SP during marriage. When one spouse dies, he does not have any rights to the surviving spouse's SP. Thus, when a non-acquiring spouse dies, he has no rights to the acquiring spouse's QCP.
Basic CP Essay INTRO

Paragraph 1
"California is a community property state. All property acquired during the course of a marriage is presumed to be community property. All property acquired before marriage or after permanent separation is presumed to be separate property. In addition, any property acquired by gift, bequest, devise or descent is presumed to be separate property."
Conveyance of CP Realty to 3rd Party
Both spouses must jointly execute a written instrument in order to validly convey CP realty.

However, when CP that is titled in one spouse's name only is transferred to a BFP, there is a presumption of validity. A BFP is a purchaser who pays valuable consideration and takes the property without notice that the seller is married.
Basic CP Essay INTRO

Paragraph 2
"In order to determine the character of any asset, courts will trace back to the source of funds used to acquire the asset. A mere change in form of an asset does not change its characterization. With these basic principles in mind, we can now turn to the specific items of property involved in this instance."
U.S. Savings Bonds
Unless fraud or breach of trust is involved, U.S. Savings Bonds are characterized as SP because federal law preempts community property law and the named beneficiary of a savings bond defeats the community's interest.
Distribution of CP at DIVORCE
"The basic rule at divorce is to divide each community asset equally in kind. Thus, each spouse is given one-half of each community asset."
Whole Life Insurance
Whole life insurance has a current cash value because it represents a form of savings that exists apart from a pure insurance component of a policy. Upon death of an insured spouse, the 3rd party beneficiary and the surviving spouse each get one-half of the whole life insurance proceeds if the policy was paid with CP funds. If the policy was paid for with CP and SP funds, courts employ the buy-in rule to apportion the CP ownership interest in the policy.
Distribution of CP at DEATH
If the spouse dies with a will, the spouse is entitled to dispose of all of his or her separate property and one-half of the community property.

If the spouse dies withotu a will, the community property is awarded entirely to the surviving spouse. Between 1/3 and all of the decedent's separate property will be awarded to the surviving spouse depending on whether there are issue or parents surviving.
Term Life Insurance
Term life insurance has no cash value, and the premium covers no more than the risk of death. Thus, the characterization of the final payment will determine whether the proceeds are SP or CP.
QCP: At DEATH and DIVORCE
"At DEATH, the surviving spouse has a 1/2 interest in the QCP titled int eh decedent's name. The decedent does not have an interest in the QCP titled in the survivor's name."

"At DIVORCE, QCP is treated exactly like CP."
Reverse Pereira
Under the Reverse Pereira method of accounting, if the business generates additional revenue after permanent separation because of the LABOR, TIME, AND SKILL of the managing spouse, the MANAGING SPOUSE is entitled to that benefit -- no the community.

Under that method, the community receives the VALUE OF THE BUSINESS at the time of separation plus a REASONABLE RATE OF RETURN. The residual becomes the SP of the managing spouse.
Reverse Van Camp
Under the Reverse Van Camp accounting method, if the business generates additional revenue after permanent separation because of its character or outside market conditions, the COMMUNITY is entitled to that benefit, as opposed to the managing spouse (because it is still a community business).

Under this method, a REASONABLE SALARY for the managing spouse (after permanent separation) is calculated, LIVING EXPENSES FOR THAT SPOUSE are then deducted, and the remainder from that equation is the managing spouse's SP. The rest of the business goes back to the COMMUNITY.