Community Property

Front 1

Community property

Back 1

Property (real or personal), wherever situated, acquired by either one of the spouses during the marriage is presumed to the community property while domiciled in CA

Front 2

Separate property

Back 2

1. Property acquired before the marriage, or after permanent separation/ divorce
2. Property acquired at any time by gift, devise, or bequest
3.Rent, income, and profit of separate property

Front 3

What are the tracing exceptions?

Back 3

1.Family expenses presumption
2. Commingled funds
3.Married woman's special presumption

Front 4

What are the legal capacity requirements for a marriage?

Back 4

Neither may have a prior subsisting marriage, they must not be too genetically related, and other defects (nonage, fraud, coercion, sexual incapacity, lack of consent) apply

Front 5

What are the formalities that must be complied with for a legal marriage?

Back 5

Must have license; and witnessed ceremony; and recorded w/county clerk

Front 6

What is the married woman's special presumption?

Back 6

Property taken in the name of a married woman prior to 1975 is presumed to be her separate property.

Front 7

What is the joint tenancy presumption?

Back 7

If its titled as joint tenancy don't start telling us it is community property unless there was an understanding that is was community property

Front 8

What are the pre-1985 transmutation rules?

Back 8

Transmutations were liberally allowed:

1. Parties could enter into oral agreements
2. Referring to property as "ours"
3. Treating the property as community for tax purposes

Front 9

What are the post-1984 transmutation rules?

Back 9

1.Requires an express declaration signed by the person whose interest is adversely being affected
2. Have to indicate you are giving up your SP and converting it to CP, etc
3.Using a will for transmutation not allowed
4. Exception: interspousal gifts of a personal nature that are relatively insubstantial in value considering the economic status of the couple. (No writing required)

Front 10

What decisions must be made jointly by spouses in the management of the community estate?

Back 10

1. Real property transfers: Lease for more than a year, sell, encumber

2. Personal property used as a dwelling

3.Selling home furnishings

4. Community property business

Front 11

What is the family expense presumption?

Back 11

If you expend money out of a commingled account for family expenses we presume you are drawing down on the community funds first

Front 12

How do you demonstrate that property in a commingled account is separate?

Back 12

Two methods:

1. Exhaustion method: § If at the time of the purchase all the community funds had been exhausted paying community expenditures

2. Direct tracing: Must demonstrate that at the time the purchase was funds you were keeping track of how much community and how much separate was in the account and you drew down on the separate funds

Front 13

When does the economic community end?

Back 13

1. Permanent physical separation
2. Intent by at least one party to not resume the marital relationship

Front 14

Community property not divided upon divorce

Back 14

The court retains continuing jurisdiciton to award CP that was not previously adjudicated, and on motion the unadjudicated CP will be divided 50-50 unless the court finds that the interests of justice require unequal division

Front 15

When can earning power be considered in divorce.

Back 15

1. alimony
2. child support

Front 16

What are exception to pro-rata division.

Back 16

1.Economic circumstances:
a. Family residence: family residence and loss of family home would uproot minor children
b. closely held corporation: all shares are CP and W or H is CEO
c. pension: Allowing one to keep their pension allows parties to go their separate ways

2. statutory exceptions:
a. misapropriation of CP by spouse
b. educational debts
c. tort liability not incurred based on activity for the benefit of C
d. personal injury award
e. community liability exceeds debt: ability to pay debt is considered

Front 17

Gifts of CP

Back 17

1. Must have written consent to make a gift of CP, w/o spouse can set aside the gift or on divorce the spouse can take equal offsetting CP assets to take half CP

2. After death:
a. Set the gift aside as to her half CP,

Front 18

When does the economic community end?

Back 18

1. Permanent physical separation
2. Intent by at least one party to not resume the marital relationship

Front 19

Community property not divided upon divorce

Back 19

The court retains continuing jurisdiciton to award CP that was not previously adjudicated, and on motion the unadjudicated CP will be divided 50-50 unless the court finds that the interests of justice require unequal division

Front 20

When can earning power be considered in divorce.

Back 20

1. alimony
2. child support

Front 21

What are exception to pro-rata division.

Back 21

1.Economic circumstances:
a. Family residence: family residence and loss of family home would uproot minor children
b. closely held corporation: all shares are CP and W or H is CEO
c. pension: Allowing one to keep their pension allows parties to go their separate ways

2. statutory exceptions:
a. misapropriation of CP by spouse
b. educational debts
c. tort liability not incurred based on activity for the benefit of C
d. personal injury award
e. community liability exceeds debt: ability to pay debt is considered

Front 22

Gifts of CP

Back 22

1. Must have written consent to make a gift of CP, w/o spouse can set aside the gift or on divorce the spouse can take equal offsetting CP assets to take half CP

2. After death:
a. Set the gift aside as to her half CP, take recovery from eith the donee or decedent's estate

Exception: Federal preemption: cannot recover CP that is given away when US government savings bonds are involved.

Front 23

Widow's election

Back 23

Testor devises CP

1. take under the will

2. take against the will: claim 1/2 CP but relinquish all testamentary gifts in their favor.

Front 24

Community credit presumption

Back 24

Funds borrowed during marriage, and goods purchased during marriage, are presumptively community credit. However borrowed funds (and credit purchases) are classified according to the primary intent of the lender (where the lender is looking for satisfaction of the debt)

Front 25

Fiduciary duties

Back 25

If one spouse gains an advantage from a transaction, a presumption of undue influence arises.

A grossly negligent and reckless investment of community funds is a breach of a spouse's fiduciary duty.

Front 26

Transmutation

Back 26

1. by gift
2. by agreement

Front 27

Defenses to enforcement of a premarital agreement

Back 27

1. Not signed voluntarily
a. rep by independent legal counsel
b. given 7 days to sign
c. if not rep. then was fully informed in writing of terms and basic effect agreement. Party must execute docuemnt delaring that they got information and ID who provided it.

2. unconscionability:
a. spousal support
1. not reped by legal counsel at time signed
2. provision was unconscionable at time signed

2. anythign elese
a. unscionable when made AND
b. no fill and fair disclosure of property and financial onbligations
c. not in writing
d. no adquate knowledge of poeprty or financial circumstances

Unconscionably is decided as a matter of law ( not a jury question)

Front 28

Marital agreements (transmutation)

Back 28

Before 1985: ORAL transmutations were permitted, whether by express agreement or agreement-in-fact

After 1985:
1. in writing
2. signed by spouse whose interest is adversely affected
3. explicitly state that a change in ownership is being made

ONLY EXCEPTION:
Gifts of tangigble property of personal nature which are not substantial in value taking into account the circumstances of the marriage

Front 29

Married Woman's Special Presumption

Back 29

Property Acquired BEFORE 1975

Where CP was used to take written title in a married woman's name before 1975, and the title did not indicate CP or JT was intended, the property was presumptively wife's SP.

Applies in three situations:
1. title is taken in W's name alone before 1975

2. title in name of W & H before 1975, but ttile is not taken in joint tenancy form, and not as "husband and wife" or "Mr and Mrs" (Property is 1/2 W SP, 1/2 CP)

3. Title in name of W and some third party before 1975 (W would be tenant in common with third party)

Front 30

"Joint and equal form"

Back 30

Means that tile lists both spouses name

Front 31

Marriage of Lucas

Back 31

Applies at death:

By taking title as joint tenants property was presumptively CP. Absent proof of an agreement that W was to have
a SP interest, by taking title in CP form W must have intended gift to community. No SP ownership interest / right to reimbursement.

Front 32

Anti-Lucas

Back 32

Applies on divorce or separation

1. Ownership: For the purposes of division of property on divorce or separation, property acquired during marriage in joint and equal form is presumptively CP, and is subject to equal divison on divorce. CP presumption can rebutted by:
a. Express statement in deed or other instrument of title that the property is SP OR
b. Written agreement by the parties that the property (or portion thereof) is SP.

2. Reimbursement: Spouse who made contributions of SP to the acquistion or improvement of CP is entitled to reimbursement without interest for contributions to DIP:
a. Down paymenet
b. Improvements
c. Principal payment on mortgage

No reimbursement for SP used to pay interest on mortgage, taxes, insurance, or maintenance.

Front 33

Proration Rule

Back 33

Installment purchase before marriage, payment with CP funds after marriage ( or during marriage W inherits land subject to mortgage and pays off note with CP funds), the community estate take a pro rata portion of the property measured by the amount (percentage) of principal debt reduction attributatble to the expenditure of C funds.

principal debt reduction attributable to CP/ purchase price

Front 34

Whole life insurance policy

Back 34

Proration rules apply

Front 35

Term life insurance policy

Back 35

Whether CP or SP pays the last premium determines character

Front 36

Community funds used to improve SP

Back 36

1. Share of ownership:

Doctrine of fixtures: Improvement become part of the property and the expenditure of CP does not change ownership character of house.

2. Split of authority for reimbursement:

No reimbursement: Presumption of gift can can be overcome only by evidence of an agreement to reimburse community estate.

Reimbursement: Other cases rejected presumption of gift and granted reimbursement

Front 37

Reimbursement rules triggered by improvements

Back 37

1. If H expends CP to improve own SP (feathering his nest), community has reimbursement claim for greater of the cost of improvements or the enhanced value

2. If H expends CP to improve other spouse's SP, there is a split of authority on whether there is reimbursement or not.

3. If H expends SP to improve community property, we are governed by anti-Lucas statues (divorce) or Lucas (death).

Front 38

Co-mingled bank accounts

Back 38

Family expense presumption: it is presumed that expenditures for family expenses were made with community funds even though separate funds were available. If family expenses were paid with SP funds, in which case the presumption is of a gift to the community w/no reimbursement intended. To defeat presumption, H would need an agreement to reimburse.

Burden of proof to show that asset was purchased with SP funds.

a. exhaustion method

b. direct tracing method
requires:
1. sufficient separate funds were available AND
2. H intended to use SP funds to buy the asset

Front 39

Pereira

Back 39

Think Personal Skills and Effort

a. Use where spouse's time, skill, and effort are major factors in growth of business. Look for instances where spouse contributed creative ideas or develop new techniques , and/or worked long hours and only drew modest salary.

b. Pay interest in SP; the rest is CP

Pay interest (10% annum) on the value of business at time of the marriage

Reasonable rate of return + original principal = SP interest

Front 40

Van Camp

Back 40

Think Valuable Company or asset

a. Use where capital investment was the major factor in the business's growth, and spouse's skills and efforts were less of a factor. Look for instances where spouse was paid substantial salary and large bonuses (meaning the community was compensated)

b. value community labor; the rest is SP

Start with value of spouse's services at market rates (how much would executives in similar positions could be compensated on the market?) MINUS family expenses paid from community funds EQUALS community component.

value of H's services LESS family expenses paid from business earnings

Front 41

Pension

Back 41

Employee retirement benefits accumulated during marriage, whether or not vested at the time of divorce, are CP

Years service while married/ total years employed to retirement

If a nonparticipant spouse in a qualified pension plan divorces a participant spouse, her community property interest is recognized; under federal law she can get a qualified domestic relations order and receive payments from the plan.

Marriage end by death: under ERISA interest of an NPS is terminated when she predeceases the participant.

Front 42

Disability retirement benefits and workers' compensation benefits

Back 42

Disability retirement benefits and workers' compensation benefits are treated as wage replacement. Classified according to when received not when earned.

Front 43

Severance Pay

Back 43

Courts of appeal are split:

1. H's severance pay is SP because it replaced lost earnings which after a divorce or permanent separation would be H's SP; OR

2. H's severance pay is CP because it arose from a collective bargaining agreement and thus was earned by employment during marriage

Front 44

Stock Options

Back 44

If the option is awarded during marriage but does not vest until after the economic community has ended, the proration forumla that is used in determining what poweriot of the option is CP and what portion is SP depends on the primary intent of the employer in granting the option.

1. stock options were primarily to reward Hank for his past services, as a form of deferred compensation

years employment to date economic community ends/ years employment to date option becomes exercisable = CP

2. Stock options were awarded primarily to encourage spouse to remain with the company

eyeards from the date option granted to date economic community ends/ years from date option granted to date option becomes exercisable

Front 45

Goodwill of a professional practice

Back 45

Goodwill of a professional practice ( to the extent acquired during marriage) is CP subject to division upon divorce.

Goodwill= qualities that generate income beyond that derviced from 1) professional's labor; and 2) reasonable return on capital and physical assets

Goodwill is primarily established by expert witness as to its value

Front 46

Educational Expenses

Back 46

Reimbursement for cost of education if the education enhanced earning capacity

Reimbursement is avialable if the edcuational expenses were incurred before mearriage and the loans wer epaid with community funds after marrraige.

Defenses to reimbursement:
1. community has already substantially benefited from the earnings of the educated spouse. If more than 10 years have elapsed since the degree was awarded, the presumption is that the community has substantially benefited, meaning that unless presumption is rebutted, no reimbursement.

2. spouse also received a CP-funded education

Education debts are assigned solely to party who incurred the educational debt.

Front 47

tort recovery

Back 47

1. where the spouse was a tortfeasor, the tort recovery is SP

2. Where damages are recovered from a third party, the tort recovery is CP.
a. In property division on divorce or legal separation, everything will be awarded to injured spouse so long as it can be traced and was not already spent. (Result unless the interests of justice require otherwise)
b. On either spouse's death, all will be CP.

Front 48

Tort liability

Back 48

CP is subject to the tort liability of either spouse
a. If spouse was perofmating act for the befit of community = liability is satisfied from CP first
b. If not performing an act on behalf of the community= satisfied from SP first

Front 49

Management Rules

Back 49

General rule - equal management powers- Each spouse has equal mangement and control over all community property and thus has full power to buy or sell CP and contract debts without the other spouse's joinder or consent.
Exceptions:
1. Personal belongings: One spouse cannot sell or encumber personal property used in family dwelling without written consent of other spouse.

2. Business: APplies when a spouse operates a business interest that is all or substnatially all community perosnal property and has primary management and control of the business. Whule this spouse can act alone in all transactions, if the spouse sells, leases or otherwise encumbers substantially all of the personal property used in the business, must given written notice to the other spouse.

Front 50

Conveyance of CP real property

Back 50

For conveyance of CP real property joinder of both parties is required (statute of limitations- none if BFP knew or should have known spouse was married)

Rule: Neither spouse can transfer or encumber their 1/2 interest in real CP (house). Only entire interest can be transferred or encumbered.
Exception: A spousne can unilaterally encumber her 1/2 interest in real CP to pay family attorney representing her in a divorce action.

Front 51

Satisfaction of debts

Back 51

Cp can be reached for debt incurred by one spouse before marriage.
Exception: the earnings of the nondebtor spouse cannot be reached for premarital debts if held in a separate account.

Medical bills: Each spouse is personally liable for the other spouse's necessities. If CP funds are vailable to pay medical bills, the spouse can be reimbursed from the community estate. (Applies until DIVORCE- even if the community had ended before).

After divorce, a creditor cannot reach CP awarded to a spouse unless that spouse: incurred the debt or was assigned the debt by the court.

Front 52

quasi community property

Back 52

Property acquired while the couple was domiciled in a non-CP state, which would have been classified as CP had it been acquired under the same circumstances in CA>

*Foreign real property: For purposes of division on death, foreign real property, the other state law controls.

*Quasi CP system gives protection only if the non-acquiring spouse survive the acquiring spouse.

Front 53

Common Law marriage

Back 53

CA does not recognize common law marriage

Exception: where common law marriage is validly contracted in another state

Front 54

Putative spouse.

Back 54

Test is whether spouse had an objectively reasonable and good faith belief that they were lawfully married.

If so assets are called quasi-martial property, divided like CP at divorce.

Front 55

Creditor's rights follow management rights

Back 55

A creditor may reahc any property over which the debtor has the legal right of management and control.

Front 56

When debt occured

Back 56

Debt is incurred at the time the contract was made or the tort occurs.

Child/spousal support from prior relationships are treated as if they occurred before marriage.

Front 57

Property liable for debts

Back 57

All CP and debtor's SP are liable if incurred before or after marriage.

Spouse's SP is not liable.

CP earnings of non-debtor spouse not loiable for premarital obligation if incurred before marriage and earnings held in separate account where debtor has no onctrol.

Front 58

Statutory reimbursement for debts

Back 58

1. when CP is applied to child/spousal support
2. when spouse's SP was applied to debts incurred by othe other spouse for neccessaries and the debt had SP or CP avialable to pay the debt

3. when the order of satisfaction for tort debts is not followed.

Front 59

Foreign real property

Back 59

If qausi community real property it is subject to 50-50 division.

Court still has personal jurisdiction so they can make the one spouse sell the land or let one spouse keep it and give the other spouse assets to equal out division.