California Community Property

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Community Property

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In California, all property acquired during marriage is community property (CP) while property acquired before marriage or after permanent separation, or by gift or inheritance, is separate property (SP).

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Factors in Characterizing Community Property

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The characterization of an asset as CP or SP depends on three factors: 1) the source of the item; 2) actions of the parties that may have altered the character of the item, and 3) any statutory presumptions affecting the item.

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Quasi Community Property

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Quasi community property (QCP) is property acquired by either spouse that would have been CP had the spouses been domiciled in California at the time of acquisition.

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Presumptions of Community Property

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The form of title will rebut the general presumption that all property acquired during marriage is community property. However, the Cal. Fam. Code provides that all property held by the spouses in joint form is presumptively CP for the purposes of distribution at divorce or legal separation.

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Anti-Lucas Statute

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Under the anti-Lucas statutes, a spouse who deeds SP into jointly titled property is entitled to have a right of reimbursement for the fair market value.

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Education/Training in Community Property

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Education and training during marriage are not treated as CP. Instead, upon divorce, the Cal. Fam. Code creates an equitable right of reimbursement, including interest, when community funds are used to pay for education or training and the education or training substantially enhances the earning capacity of a spouse.
Recently, courts have even permitted right to reimbursement not only for tuition, but living expenses and books.

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Equitable Defenses: Rebuttable Presumption that the Community has Benefited from Spouses Education & Training

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Reimbursement may be reduced or modified if the community has already substantially benefited from the education or training. There is a rebuttable presumption that the community has already benefited if more than 10 years has elapsed between the contributions and the initiation of the divorce action.

Courts will also look to a spouse’s education or training to see that it has lessened the need for spousal support

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Pereira & Van Camp

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When one spouse brings a separate property business into the marriage and devotes community labor to the management of the business, the community obtains an interest in that business.

When community funds or labor enhance the value of separate property, the community is entitled to an interest

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Pereira

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Under Pereira accounting method, in which the increase in value of a business is due to the managing spouse’s labor, the separate property investment is given a reasonable rate of return and the remainder is deemed community property.
Any increase in the value of business is attributed to the managing spouses labor, Pereira should be applied

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Van Camp

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Under the Van Camp accounting method, where the increase in the value of the business is not due to the managing spouse’s services, but the character of the business, the community receives a fair market salary less any family expenses already paid and the remainder is separate property.
The theory being that the community has already received compensation through the business spouse’s salary drawn from the business

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Rights of a Putative Spouse

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A putative spouse is one that has a good faith belief that she & he are legally married

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Quasi-Marital Property

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In California, a putative spouse is treated as a legal spouse and all property acquired during the putative marriage is quasi-marital property and all property before that relationship began is SP.

The characterization of an asset as quasi-marital or separate depends on three factors: 1) the source of the item; the actions of the parties that may have altered the character of the item; and 3) any statutory presumptions affecting them.

All earnings during a putative marriage are considered QMP regardless of how the earnings are held.

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Married Woman’s Special Presumption

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Under MWSP, property acquired by a married woman prior to 1/1/1975 by an instrument in writing is presumed to be her separate property unless a different intention is expressed in the instrument

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Rebuttal of Married Woman's Special Presumption

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The H can REBUT the presumption by proving through direct tracing that the funds. However merely tracing the purchase funds cannot defeat a married woman’s presumption because tracing does not tend to overcome the underlying evidentiary presumption of a gift. The H rebuttal must additionally counter the title implication that he made a gift to his wife. H will rebut that he did not agree to the form of title.

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Oral Transmutations

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Prior to January 1, 1985, the court treated oral transmutations as valid. However, oral transmutations after 1/1/1985 must be in a writing signed or accepted by a spouse whose interest is adversely affected.

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Gift Presumptions

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A gift is presumed when one spouse uses community funds to improve the other spouse’s separate estate/property.
The gift presumption may be overcome only by evidence of an agreement to reimburse.

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Tracing: Commingled Accounts

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The probate code refuses to make any gift presumption from the form of title held on a commingled bank account and allows full tracing of separate funds unless the parties have agreed otherwise.

Two methods of tracing can be used, the spouse can 1) show that community funds in the account have already been exhausted by payment of family expenses from the account. 2) or the spouse can show that there were sufficient separate funds available at all times and that he intended to keep his SP assets, separate from the community funds.

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Debts Incurred by One Spouse

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A debt is incurred at the time the obligation to pay arises. If a spouse uses CP to pay for his debts, the non-debtor spouse may have a right to recover ½ of the amount from the debtor-spouse or seek a void of the transaction

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Child Support Payments

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spouse’s child support obligations from prior relationships are treated as debts incurred before marriage. Where a debt is incurred before marriage, all of the QMP and the debtor’s SP are liable for the debt, but not the other spouse’s SP.

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Quasi Marital Property and Debt

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QMP earnings of the non-debtor spouse are not liable for the debtor’s premarital obligations so long as those earnings are held in a deposit account in which the debtor spouse has no right to withdrawal and those earnings are not commingled with other QMP.

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Necessaries & Debt

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Necessaries are the living expenses that are appropriate to the person’s station in life and the resources of the parties, and typically include food, clothing, shelter, and medical expenses.

When one spouse incurs a debt for necessaries during marriage, the other spouse may be personally liable for the debt; therefore, the non debtor spouse’s separate property may be reached to satisfy the debt, as well as the CP and QCP.

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Life Insurance Policy Proceeds

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The life insurance policy proceeds purchased during marriage and the premiums paid from X earnings is CP. At death, where CP is used to pay all the premiums on a life insurance policy, the proceeds are CP regardless of the named beneficiary

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Pensions

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California treats retirement pensions as CP to the extent that the right to benefits was earned during marriage. If the earnings applied to the pension were earned prior to the marriage, the pension itself will be that spouses SP. Even if pension is characterized as CP/QCP, a spouse would not be entitled to an interest in the other’s pension once permanent separation occurs

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Community Personal Property

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Each spouse has equal management and control of community property. However, furnishings, etc. cannot be sold or encumbered by one spouse without the other spouse’s written consent. The non-consenting spouse may void such a transfer in its entirety and need not return the purchaser’s consideration.

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Order of Tort Recovery

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If the tortuous conduct occurred while the spouse was performing an activity for the benefit of the community, the spouse’s liability will first be taken from community property and then from the tortfeasor-spouse’s property.