Community Property

Front 1

In what ways can property be held during a marriage (or purported marriage)?

Back 1

(1) SP (separate property)
-one spouses

(2) CP (community property)
-50/50

(3) QCP (quasi-community property)
-50/50 acquired out of state

(4) QMP (quasi-marital property)
-Putative spouse

Front 2

Community Property Defined

Back 2

Property, other than separate property, acquired by either spouse during marriage.

-Absent an agreement or title to the contrary, the burden of proof that a particular asset is NOT CP is on the contending party.

Front 3

When does the economic community end?

Back 3

(1) Permanent physical separation

AND

(2) Intent not to resume the marital relation by either spouse

-Exception:
Maintaining the facade of marriage

Front 4

How is community property divided at divorce?

Back 4

Equal Pro Rata Division
(50/50 per item)

UNLESS:

Equity Exceptions: "interest of justice"
(1) Family residence
(2) Shares of closely held corporation
(3) Pension

Statutory Exceptions
(1) Misappropriation of CP by one spouse
(2) Educational Debt
(3) Tort liability during a non-community activity
(4) Personal injury award
(5) Community liabilities exceed assets

Front 5

What can spouse 1 do if spouse 2 makes:

(1) a lifetime gift of CP?

(2) a testamentary gift of CP?

Back 5

(1) a lifetime gift of CP:
(a) Set aside the gift in its entirety; or
(b) Take equal offsetting CP

(2) a testamentary gift of CP
(a) Set aside 1/2 of the gift (her CP interest);
(b) Take under the will (widow's election will)

-Each spouse has the power of testamentary disposition over all of his/her SP but only over 1/2 of the CP

Front 6

How are funds borrowed during marriage classified?

Back 6

(1) Presumed community loan
(2) Classified according to the intent of the lender

Front 7

Fiduciary Duties Owed by Spouses

Back 7

(1) Not gain an advantage from transactions
-Presumption of undue influence

(2) No grossly negligent or reckless investments of CP
-Breach of duty

Front 8

Requirements of a Premarital Agreement

Back 8

(1) Writing
(2) Signed by both parties

Front 9

Exceptions to the signed writing requirement for premarital agreements?

Back 9

(1) Fully executed
(2) Estoppel based on detrimental reliance

Front 10

Defenses to the enforcement of a premarital agreement?

Back 10

(1) Involuntarily signed

Presumed involuntarily signed unless
(a) Independent legal counsel
(b) 7 day allowed before signing
(c) If no counsel:
-fully informed
-in lay language
-document declaring what they were told and who told them



(2) Unconscionable

(a) when made there was,
(b) no fair and full disclosure,
(c) right to disclosure not waived, and
(d) no knowledge of other party's assets

Front 11

What can't a premarital agreement limit?

Back 11

Child support

Front 12

Community Property Approach

Back 12

(1) Source of asset

(2) Actions taken to change character of property

(3) Presumptions that affect the character of property

(4) Disposition

Front 13

Quasi-CP

Back 13

QCP is property acquired by either spouse that would have been CP had the spouses been domiciled in CA at the time of acquisition. At divorce, QCP is treated as though it were CP.

Front 14

Presumption for Property Held in JT

Back 14

Property held by spouses in JT is presumed CO for purposes of distribution at divorce.

Front 15

Action of changing SP to being held as JT

Back 15

(1) Property held as JT by spouses is presumed CP

(2) Spouse who originally held property as SP is entitled to reimbursement for FMV of property at time deeded to JT

Front 16

What is not CP

Back 16

Property acquired before marriage or after dissolution or legal separation, or property acquired during marriage by gift, devise, descent, bequest or bequeath.

Front 17

Is a premarital agreement that promotes divorce enforceable?

Back 17

NO

However, a premarital agreement that paid W $100k in the event of a divorce did not violate this prohibition.

Front 18

Is the issue of unconscionability an issue of law or fact?

Back 18

LAW

The court is to decide this issue.

Front 19

Important Dates

Back 19

1975:
-Married woman's special presumption
-Pre-1975

1984:
-Anti-lucas statutes
-Pre-1984 lucas controls; no reimbursement; assumed gift

1985:
-Oral transmutations
-Pre-1985

Front 20

Elements of a valid transmutation?

Back 20

(1) Pre-1985
-Oral or written
-Express or Implied-in-fact agreement

(1) 1985-present
-Written
-Signed by adversely affected spouse
-Expressly states change in ownership to be made

Front 21

Exceptions to the 1985-present transmutation requirements?

Back 21

(1) Gifts of tangible personal property
-Must not be substantial in nature considering couple's finances

NOTE:
Typical SOF defenses do NOT apply (e.g., estoppel, part performance)

Front 22

May a statement in a will or revocable trust be used to satisfy the post-1985 transmutation requirements?

Back 22

NO, not if the trustor/testator is still living.

-A will is revocable and so is a revocable living trust

-These instruments are NOT even admissible

Front 23

Married Woman's Special Presumption

Back 23

(1) Pre-1975

(2) CP used to purchase

(3) Written title acquired
-NOT a receipt
-Deed or pink slip needed

(4) Title in wife's name
-NOT "H and W, husband and wife"
-NOT "H and W, as joint tenants"

(5) Presumed wife's SP
-Rebuttable as between W and H
-NOT rebuttable as between H and BFP who purchased from W

Front 24

If the wife's name is on the title of property acquired pre-1975, what are the only two ways that title could be taken to that would not giver rise to the Married Woman's Special Presumption?

Back 24

(1) Hobie Gates and Winkie Gates, husband and wife.

OR

(2) Hobie Gates and Winkie Gates, as joint tenants.

NOTE:
-Hobie Gates and Winkie Gates.
-50% W's SP
-50% CP
-Therefore 75% W; 25% H

Front 25

Reimbursement of SP use to purchase CP in joint form and/or used to improve CP.

Back 25

**Pre-1984**
(1) Issues arising on Divorce
-Lucas Controls
-Presumptively CP
-No reimbursement

(2) Issues arising on Death
-Lucas Controls
-Presumptively CP
-No reimbursement


**1984-Present**
(1) Issues arising on Divorce
-Anti-lucas statutes control
-Still presumptively CP
-But reimbursement allowed for: DIP
-DIP: Down Payment; Improvements; Principal on Mortgage

(2) Issues arising on Death
-Lucas Still Controls
-Presumptively CP
-No reimbursement

Front 26

What can be used to rebut the 1984-present (anti-Lucas) presumption that property held in joint form is CP?

Back 26

(1) Express statement in the deed that it is SP

OR

(2) Written agreement by the parties that it is SP

Front 27

What is the spouse who contributed SP to a CP asset entitled to upon divorce, and how is it calculated?
(anti-Lucas statutes (1984-present))

Back 27

Reimbursement WITHOUT interest for:
DIP

(1) Down payments
(2) Improvements
(3) Principal paid on mortgage

Front 28

What triggers an Anti-Lucas analysis?

Back 28

(1) Property acquired in JOINT FORM (1/1/84 - present)
-This triggers the presumption that it is CP

(2) Some SP was used to acquire or improve the property
-If all CP, the asset is CP

(3) DIVORCE

(4) Reimbursement w/o interest for DIP
-Down payments
-Improvements
-Principal paid on mortgage

Front 29

What triggers a Lucas analysis?

Back 29

(1) past - 12/31/83

(2) Property acquired in JOINT FORM
-This triggers the presumption that it is CP

(3) Some SP was used to acquire or improve the property
-If all CP, the asset is CP

(4) DIVORCE or DEATH

(5) NO Reimbursement



OR



(1) 1/1/84 - present

(2) Property acquired in JOINT FORM
-This triggers the presumption that it is CP

(3) Some SP was used to acquire or improve the property
-If all CP, the asset is CP

(4) DEATH
-ONLY

(5) NO Reimbursement

Front 30

Situations and relative analysis:

(1) H uses CP to improve his OWN SP

(2) H uses CP to improve his W's SP

(3) SP used to improve CP

Back 30

(1) H uses CP to improve his OWN SP
-CP entitled to reimbursement
-Greater of cost to improve OR enhanced value (buy-in)

(2) H uses CP to improve his W's SP
-Split jdx
-Jdx 1 Gift no reimbursement
-jdx 2 Greater of cost to improve OR enhanced value (buy-in)

(3) SP used to improve CP
-Lucas or Anti-Lucas
-No reimbursement OR
-DIP reimbursement W/O interest

Front 31

Life Insurance

Back 31

(1) TERM
Funds used to make last premium payment determines character,
i.e., if CP used to pay last premium, insurance proceeds are CP
(visa versa)


(2) WHOLE LIFE
Pro Ration Rule
Percentage of CP used towards premiums v. Percentage of SP used towards premiums

Front 32

Commingled Accounts

Methods of accounting

Back 32

(1) Recapitulation Method (NOT ALLOWED)
-Total CP expenses exceed Total CP income
-Therefore, remainder in account is SP

Recapitulation Method is NOT allowed because the challenging party must establish that EACH ASSET was purchased with SP.

(2) Exhaustion Method
-CP funds were insufficient to purchase asset at the time it was purchased BUT SP funds were sufficient

(3) Direct Tracing
-SP available AND H intended to use SP to purchase SP asset

Front 33

Does Lucas or Anti-Lucas apply to bank accounts that are taken in joint form?

Back 33

NO

Bank accounts are governed by the probate code and therefore NOT governed by these rules.

Front 34

Pereira

v.

Van Camp

Back 34

PEREIRA (pro-CP)

*used when community labor was primary reason for appreciation in value of the asset

(1) Take starting value of the separate property business ($100k)

(2) Using 10% as fair rate of return, calculate rate of return over course of marriage. (e.g., 10% per year for 10 years)

(3) Add starting value of business + total fair rate of return = SP investment

(4) Subtract SP investment from the value of the business NOW to determine CP portion




VAN CAMP (pro-SP)

*used when the uniqueness of the asset or circumstances surrounding it was reason for the appreciation

(1) Calculate a fair salary for spouse's CP labor put in to the Business.

(2) Subtract from CP labor CP living expenses to determine CP labor surplus.

(3) Multiply CP surplus by the # of years of marriage = total CP surplus

(4) Take CURRENT value of Business subtract total CP surplus = SP

Front 35

Interesting thoughts about Van Camp and Pereira

Back 35

If H owned a business prior to marriage worth $100K and at divorce the business was worth $5 million, H is going to argue that the enormous increase in value was NOT attributable to his skill or labor, but rather to luck. If he can establish that the business' value increased because he was just in the right place at the right time, the Van Camp formula will be used, and he will walk away with MUCH more.

Front 36

Are the Van Camp or Pereira formulas used for business acquired after marriage?

Back 36

NO

ONLY for business that were the SP of one of the spouses before the marriage.

Front 37

Pension Benefits

Back 37

Pro Ration Rule

Pension * (years of services while married / total years of employment to retirement)

Front 38

If H is not yet eligible for retirement, what are W's options as for his pension?

Back 38

(1) Get a "when and if received" decree
-H will have to pay when and if received

(2) Cash her out with other assets

(3) Court can retain jdx and determine later

Front 39

Can H avoid having to pay W her interest in his pension or retirement proceeds by:

(1) continuing to work after he is eligible to retire

OR

(2) electing disability retirement as opposed to regular retirement

Back 39

NO

(1) continuing to work does not defeat W's present right to a vested retirement benefit

(2) although disability pay is not CP, if it is taken in lieu of retirement it is CP

Front 40

Are disability retirement and workers' compensation benefits classified as CP or SP?

Back 40

It depends.

They are classified when they are received.
Therefore, if received after separation or divorce they are SP.

Front 41

Severance Pay

Back 41

JDX Split

Some courts consider it replaced lost earnings therefore SP

Other courts consider it something that accrued during marriage and therefore CP

Front 42

Stock Options

Back 42

Look to the "primary intent of the ER in granting the option"

(1) IF given as an award for PAST services
(years employed while married)
÷
(years employed until option becomes exercisable)


(2) IF given as an incentive to stay with the company in the FUTURE then SP
(years from date option is granted to divorce)
÷
(years from date option granted to exercisable)

Front 43

Professional Goodwill

Back 43

GOODWILL is CP

GOODWILL FORMULA:

Net annual return from business (business profits)
LESS
Reasonable value of H's services (salary)
LESS
Reasonable return on business' physical assets (ROI; 10%)
EQUALS
Excess earnings attributable to goodwill (Capitalism:)

Front 44

Is a partnership agreement that places a "cap" on the amount of goodwill a dissolving partner is entitled to taken into account when determine the value of goodwill the other spouse is entitled to upon divorce?

Back 44

yes, BUT it is ONLY a factor.

Front 45

Is a professional degree "property" subject to division?

Back 45

NO

-But CP may be entitled to reimbursement

Front 46

Educational Reimbursement

Back 46

ANY educational expenses that "enhances the earning capacity" of one spouse must be reimbursed.

DEFENSES:

(1) Community has substantially benefited from the education.
-10 year presumption

(2) Both spouses received CP-funded education

(3) Education reduces need for spousal support

Front 47

How is Educational DEBT assigned upon divorce?

Back 47

SOLELY to the spouse that incurred the debt.

Front 48

Tort Awards and Settlements

Back 48

(1) H sues W
-H's proceeds are his SP

(2) H sues 3rd
-CP during marriage
-CP upon death
-SP upon divorce if traceable unless inequitable

Front 49

Tort Liability

Back 49

(1) W injures 3rd while on an errand for the COMMUNITY
-Judgement satisfied 1st from CP
-2nd from W's SP
-NEVER from H's SP

(2) W injures 3rd while on a PERSONAL errand
-Judgement satisfied 1st from W's CP
-2nd from CP
-NEVER from H's SP

Front 50

Management and Control

Back 50

Equal management and control over CP
May contract debt and encumber w/o consent

EXCEPTION

(1) Business exception
-Family business cannot be sold w/o consent
-Remedy against other spouse if CP interest is substantially impaired
-NO remedy from 3rd party


(2) Real Property
-Non-consenting spouse can void sell at w/in 1 YEAR SOL if BFP
-Non-consenting spouse can void sell at ANYtime if NOT BFP


(3) Personal belongings
-Home furnishing cannot be sold w/o consent
-Non-consenting spouse can void sell at ANYtime

Front 51

Exception to the general rule that REAL CP cannot be unilaterally encumbered?

Back 51

Family law attorney's real property lien.

Front 52

Can CP be reached to pay medical expenses incurred BEFORE marriage?

Back 52

YES

UNLESS
CP Earnings of the other spouse are NOT commingled

Front 53

Can SP be reached to pay medical expenses incurred by the OTHER spouse?

Back 53

YES

Each spouse is personally liable for ANY debt incurred for NECESSARIES until DIVORCE (past the end of the economic community).
-Food
-Shelter
-Medical Attention


HOWEVER
If CP funds were available, CP must reimburse SP

Front 54

Quasi-CP at Death

Back 54

The QCP statute does not give the non-acquiring spouse an ownership interest. Therefore, QCP cannot be given by testamentary instrument by the non-acquiring spouse because QCP statutes are ONLY relevant upon divorce.

Front 55

What is a "putative spouse?"

Back 55

An individual who is NOT legally married BUT
has an "objectively reasonable and good faith belief" that their was a legal relationship.

Putative spouses are entitled to CP law protections.

Front 56

When should Van Camp and Pereira be discussed?

Back 56

ANYtime there is a SP business
-Owned prior to marriage
-Acquired during marriage w/ SP funds


NOTE:
Do not discuss if the business was acquired during marriage w/ CP funds

Front 57

What should be discussed anytime time there is a savings bond at issue?

Back 57

Federal preemption.

CP laws do NOT apply to savings bonds. Therefore, the name on the bond controls.

Front 58

What property is liable for debt incurred:

(1) Before marriage

(2) During marriage

(3) After marriage

Back 58

(1) Before marriage
-CP share of the spouse that incurred the debt
-SP of the spouse that incurred the debt

(2) During marriage
-CP in its entirety
-SP of the spouse that incurred the debt

(3) After marriage
-SP of the spouse that incurred the debt

Front 59

When one partner is a good-faith putative spouse but the other knows of the defect in the attempted marriage, can BOTH claim to be putative spouses?

Back 59

JDX split.

Argue both ways

Front 60

Is a judgment to pay child support considered a pre-marriage debt?

Back 60

YES, even if the judgment is entered after marriage.

Therefore, the property that is subject to the debt includes:
-CP share of the spouse that incurred the debt; AND
-SP of the spouse that incurred the debt

Front 61

Are attorney's fees incurred during marriage in defending a paternity suit considered a pre-marriage debt?

Back 61

NO

Therefore, the property that is subject to the debt includes:
-CP in its entirety; AND
-SP of the spouse that incurred the debt

Front 62

Moore

Back 62

If you buy property prior to marriage with a down payment from your own funds, but make payments with community funds during marriage, then your spouse will have community interest in the property. Community funds imply your spouse's money and yours as spent towards loan payment. The community interest is known as Moore Marsden interest, which is calculated using a formula known as Moore Marsden Rule.

Front 63

Does CA recognize CL marriage?

Back 63

NO

However, discuss:

-Putative spouse

-K agreements, so long as not based solely on sex