Community Property

Front 1

Definition of Community Property

Back 1

All things acquired from the DOM to the DOS except by gift, bequest, devise or descent with the rents, issues and profits thereon.

Front 2

Section 760

Back 2

All property, real or personal, wherever situated, acquired by a married person while domiciled in this state is Community Property.

OVERCOME BY PofE.

Front 3

Section 770

Back 3

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

Front 4

Pre-1975 System

Back 4

Fault-based system

Front 5

Post-1975 System

Back 5

Community Property No Fault System per FAMILY LAW ACT

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4 ways to get into Community Property System

Back 6

Marriage (300), Domestic Partnership Act (297.5), Quasi-Marital Property (2251), Marvin Action

Front 7

DOS

Back 7

NO STATUTE. Case law defines this as that date on which marriage is irretrievably broken. Baragry advanced objective standard, "when third party looking in would think 'no hope.'" Manfer is an exception to general rule that takes into account subjective understanding of parties along with objective behavior. There couple had a meeting of the minds, but then lied to public and held themselves out as married still. Heightened scruitiny for couples who still have to live together for economic reasons. Novell.

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Section 300

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Marriage = valid between cabable man and woman, saying magic words for solemnization, followed by license.

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DOMA

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Defense of Marriage Act - federal governmental act saying marriage was only between man and woman. CP system allows DPs to enjoy all rights and responsilities of FLC, but cannot extend to federal programs (i.e., DRTRA, and similarly court cannot consider TAX consequences for DP)

Front 10

DPA

Back 10

Domestic Partnership Act - Section 297.5 = distinction without a difference. Applies to those who are same sex or over 62 AND LIVE TOGETHER. Same rights and responsibilities under FLC, except for DRTRA and tax consequences.

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Quasi-Marital Property

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Section 2251 = Putative spouse concept. GOOD FAITH belief that married, but through no fault of own not. Wagner (no wedding ceremony but kids, held themselves out, etc.)

CA prefers something objective manifestation like a license that you never filed with court for some reason. DePasse. This is because we have outlawed CL marriage, and if no obejctive manifestation, right back there. IF IN THIS DOOR - ALL CP STATUTES APPLY. Even debts 50/50 - special section 2254.

Non putative spouse may claim, too if the other couple makign more $$!!

Front 12

Quasi-Marital Property Cases

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Monti & Vargas - took language and ran with it to allow it out of fairness - this was first time court went past nullity.

Front 13

Marvin Actions

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Contract claim where court wants to find express or implied contract that they agreed to support one another and treat their relationship as M. Have to have (1) K, (2) breach (move out), and (3) remedy - can be damages for actual things promised or quantum meruit in equity.

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Reconciliation and DOS

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If reconcile for ONE HOUR, new DOS - last DOS is DOS.

Front 15

Equal Division Rule

Back 15

Section 2550 - POINT IS NOT FAIR/EQUITABLE.

Front 16

Jurisdiction of FLC

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Robinson (SMJ of FLS to divide CP 50/50 and IDENTIFY SP). Hebbring (court can do no more than identify SP - cannot award reimbursement and can't rely on equitable prinicples).

EXCEPTION - 2601 where can't divide asset without impairment and one party has a critical need.

Front 17

Impossible to Divide Asset Equally

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Section 2601 - Brigden - if impossible to divide asset equally, court can award whole asset to one party if: can't be divided without impairment, and provides a critical need (common - family residence situation or law/medical practice. not as common - stock ownership where H owning stock at 51% means he runs the business and to divide would take away his CEO status).

Front 18

Joint Tenancy division

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Section 2650 allows courts to divide joint tenancy like CP. Coupled with Section 2581 which says all property held in joint title - they removed distinction between types of tenancies.

Front 19

Quasi Community Property

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Section 125 = all property wherever situated that would have been community property had it been acquired here. (PROF THINKS UNCONSTITUTIONAL - divests people of their legal title by virtue of their moving to CA). FLC can order them to split it anywhere in world, but realistically foreign jurisdictions may or may not comply.

Front 20

Probate Code Section 66

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Only includes in quasi community property personal property wherever situated - REAL PROPERTY must be here to be considered. FLC SAYS ALL PROPERTY WHEREVER SITUATED.

Front 21

Two Pronged Test for determining whether QCP

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(1) must move to alter status of marriage (this is what gets you PJ in state - like a consent concept) (Addison - this case still stands but doesn't make sense b/c keeps fault concept in CP system post FLA. BUT NO ONE CHALLENGES B/C WE NEED QCP!!). Thorton (moving across state lines not enough)and

(2) must be domiciled in state.

Front 22

Date of Valuation

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Section 2552 - value as near as practicable to DOT. EXCEPTION - Closely held business value at DOS. Green. Practical reasoning - don't want worker to run biz into ground after DOS b/c know valuation not until DOT, and the earnings of spouse supposed to be separate after DOS and if running closely held biz, very tied together so don't want all of that to be CP, too.

Front 23

Overcoming presumption of Section 760

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Argue when asset came into existence - Clark (when son died is when his ability to sue was created, and that was before marriage so SP even though exercised during M); Downer (ranch NOT a gift b/c compensation for services which equals C efforts = CP).

Front 24

Presumptions (4)

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(1) Always presume Section 760 - CP unless overcome by PofE.

(2) Section 2581 ~ property acquired in joint title is CP unless EXPRESS WRITING TO CONTRARY. He has NEVER seen one of these writings.

(3) 803 ~ married woman's presumption - if before 1975, any property titled in her name = SP. Overcome with PofE

(4) Evidence Code 662 ~ title of property presumed correct. Used in Weaver but counter to all CP concepts and whole premise of 760, but case still stands and they originally used in Matthews.

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Where to presumptions conflict . . .

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the more specific one controls.

Front 26

Three ways to CO-MINGLE assets

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(1) Transmuation (section 850) - SP to CP (Section 2640), CP to SP (nothing), and SP1 to SP2 (Section 2640(c)). EXCEPTION - gift with CP $$ = gift to SP if not substantial value per circumstances of marriage.

(2) SP contribution into CP asset (overcome by tracing using Mix or Sees).

(3) CP contribution to SP (Moore/Marsden, Hug/Nelson, Brown/ Gilmore)

Front 27

Pre-1985 Transmutation Analysis

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If made clear statement of intent = transmuation. Estate of Raphael ("this is OUR house forever.")

Front 28

Post-1985 Valid Transmutation Analysis

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Two pronged test under Section 852 and Section 721:

(1) must be in writing with express intent to transmute (high hurdle - McDonald she definitely intended to but waiving her beneficiary rights did NOT equal express intent to transmute even though in writing), and

(2) must be done voluntarily (easy hurdle - did you sign it not under duress) and knowingly (THIS IS MORE JUST COULD HAVE KNOWN - spoke english, etc.)

Front 29

Matthews, Haines & Delaney

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Mathews added 721 FD which was not created to go with 852 transmutation statute, but now is another prong. Mathews looked to "sophistication" of person giving away rights (she spoke and taught english, worked as translator, etc. = enough! even though not first language.)

Haines was a "not voluntarily" case where he gave her ultimatum - "I'll help you buy car if you sign over right to house in quit claim."

Delaney - guy was mentally impaired and wife was legal secretary. Found that he did not do it knowingly on those facts.

Front 30

General Fiduciary Duty

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Section 721 ~ confidential relationship imposes a duty of the highest good faith of each spouse. Mathews applied to transmutations and now used as two pronged test.

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Pre-1984 Lucas Laws

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SP contribution to a CP asset is a gift unless writing to the contrary ("this is not a gift"). Legislature HATED b/c obvious inadvertant transmutation problems so instated Section 2640 to allow for reimbursement of SP contributions into CP.

Front 32

Post-1984 ANTI-Lucas Laws

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Section 2640 = SP contribution into CP asset for acquisition or improvement of asset to be discovered through tracing.

Mix/Sees. (Next card).

COMES OFF TOP

$ for $

BEFORE DIVISION

NOT ACCOUNTING FOR CAPITAL APPRECIATION.

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SP1 contribution into SP2

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Section 2640(c) - EFFECTIVE 2005 AND AFTER

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CP asset into a SP asset

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NO Section 2640 REIMBURSEMENT by community if you transmute something from CP to SP for that time that it was a community asset!! IF you transmnute BACK to SP, SP gets Section 2640 claim back of 100% of value at that time as reimbursement!!!

Front 35

Valuation of Business

Back 35

(1) tangible assets
(2) accounts receivable
(3) minus accounts payable
(4) GOODWILL - anticipation of future patronage based on standing in community

Excess capitalization multipled by cap rate (Foster) = your salary - fungible person's salary = Annual EC multiplied by cap rate

Front 36

Valuing Business Formulas

Back 36

Pereira/VanCamp

Pereira - labor intensive - C almost always wins!!

FMV of B @ DOM times reasonable rate of return, compounded annually for length of M (SP) - FMV of B @ DOS = CP portion.

Van Camp - capital intensive - S almost always wins!!

Reasonable value of your services - any compensation actually received (can be more than salary + cars, benefits, etc.) = how much you're worth each year. DO FOR EACH YEAR OF M and add together = CP portion. If nothing left/negative = no C. IF NOT SELLING biz just IS SP and C reimbursement is any positive # above. IF SELLING have to find the SP portion of value of biz so take FMV @ DOS (if closely held) and DOT (if not) and then subtract portion that is CP and have SP figure.

Front 37

Retirement plans

Back 37

French rule - courts believed that right to a benefit plan was a mere expetency and therefore would not divide if not vested.

Then Brown/Gilmore said = because of CP efforts was as much CP as anything else and then divisible.

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Defined contribution plans

Back 38

= easy = $ already there like glorified savings account

Front 39

Defined Benefit Plans

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Used to be expectancy under French. Now can value and divide based on what we think will be date of retirement.

Can also opt to take Gilmore election if spouse refuses to retire at any time past maturity of benefits.

Front 40

Brown/Gilmore

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Brown = total number of months married while employed/total number of months employed = CP % x amount per month they will receive/2 = unemployed spouse's share per month.

Gilmore (if H works after DOM, can't unilaterally keep W from receiving pension share) = total number of months married/total number of months employed until election = CP % x amount per month they will receive/2 = unemployed spouse's share per month.

REMEMBER - company can't pay pension to W and also salary to H - H pays OUT OF POCKET UNTIL HE RETIRES. Sometimes forces him to retire and take another job if he REALLY wants to keep working. IF take it earlier, higher %, btu smaller pie. If take later, lower CP% (haven't been married for that whole time), but larger pie.

Front 41

Terminable Interest Rule, ERISA and DBP interplay

Back 41

Per ERISA, now no more terminable interest rule - interest does not die with employed spouse if he dies after retirement, and if unemployed spouse dies pension share goes to her heirs (potentially awkward).

Front 42

QDRO

Back 42

Per ERISA, have to attach DBP to the action as an indispensible party in rem. Then when court orders share to unemployed spouse, have to file a QDRO on the adminstrator of the employer to follow the Brown or Gilmore Election.

If not served within one year = no responsibility of employer to follow.

If employer can't find you and you leave state = escheat.

Front 43

Disability and Severance

Back 43

Both SP by definition AFTER marriage but CP during.

Disability = tax free!! And not CP by definition (Stenquist - said he cannot dishonor wife's pension by CHOOSING disability over set amount of pension (75% of basae salary as opposed to 65% of disability). Let him take disability, but had to pay wife half of what pension would have been during marrige if took that and amount over = SP.)

Severance = discretion to determine if disguised retirement buyout which woul be CP or actual compensation for future loss of wages which would be SP. (Wright - have to decide which and if compensation for past efforts (retirement) 1/2 of $ while married goes to CP.)

Front 44

Stock Options

Back 44

WAVE OF FUTURE = golden handcuffs.

Hug/Nelson

Hug ~ use if enticed to come to company b/c of SO - bring them into Hug.

Total # of months stock is earning during marriage/total # of months employed while stock earning = CP%

Nelson - use like wrestling move - keeping at company by giving SO.

Total # of months from granting while married/total # of months employed since granting = CP %

Front 45

Principle Pay Down and Capital Appreciation back to CP for contributions to SP - IF NO TRANSMUTATION

Back 45

Moore/Marsden

Step 1: Find SP = purchase price + SP payments before marriage + any PMCAP. Give that to SP = section 2640 claim.

Step 2: Find equity at DOTrial by subtracting FMV @ DOTrial - FMV @ DOM

Step 3: (Purchase Price - CP Pay Down)/Purchase Price = SP %. Balance = CP %.

Step 4: Find CAP.

FMV @ DOTrial - purchase price = CAP

Step 5: Multiply SP%/CP% times CAP to find out what portion is SP/CP.

Step 6: ADD Step 1 # and SP portion of CAP = SP, and ADD CP Pay Down and CP portion of CAP = CP

Front 46

Principal Pay Down and Capital Appreciation back for CP contribution into SP asset - WITH VALID TRANSMUTATION

Back 46

Moore/Marsden

Step 1: Find SP = purchase price + SP payments before marriage + any PMCAP. Give that to SP = section 2640 claim.

Step 2: Find equity at DOTransmutation by subtracting FMV @ DOTransmutation - FMV @ DOM

Step 3: (Purchase Price - CP Pay Down)/Purchase Price = SP %. Balance = CP %.

Step 4: Find CAP.

FMV @ DOTrial - purchase price = CAP

Step 5: Multiply SP%/CP% times CAP to find out what portion is SP/CP.

Step 6: ADD Step 1 # and SP portion of CAP = SP, and ADD CP Pay Down and CP portion of CAP = CP

Front 47

Tracing

Back 47

Presumption under Section 760 that everything acquired is CP. But can overcome by PofE.

Merely commingling property does not change its character. The SP holder is entitled to reimbursement to the extent they can trace it back to their SP. Section 2640 claim so NO CAP. $ for $ and off top.

Mix/Sees.

Mix ~ Direct tracing. Easier/preferable one of two. If you have receipts - prove it - done. Here schedule of her assets, combined with accountant's testimony = enough to bolster her evidence of direct tracing.

Sees ~ family expense method. RESORT to this method if don't have actual receipts/proof. Have to do a date by date accounting to show that the CP income - CP expenses = negative value. If you can show that, then SP must have been used to make investments or purchase.

Front 48

Fiduciary Duties

Back 48

Section 721 - you owe a duty of the highest good faith.

Section 1101(e) - extends duty of 721 to DODistribution.

Section 2101 - requires disclosure of all assets you MAY have an interest in up until DODistribution. Must disclose in writing, under penalty of perjury.

Front 49

Deliberate Hiding/Ridding

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1100 Series deals with this issue.

If ridding personal property, don't need to tell spouse as long as getting FMV for asset. (Moore - traded property for alcohol).

Section 1102 - if ridding of real property, must get spouse's signature within one year. If not, non-consenting spouse can void transfer. BUT THIRD-PARTY CREDITORS STILL HAVE CLAIM - they have vested property right and FD is only between H&W - NOT third-parties. Lezzine.

REMEDIES:

Section 1101(h) - incorporates Section 3294 from Civil Code that says - IF fraud, malice or oppression than can get punitive damages - entitled to 50%, but can get UP TO 100%! Rossi. VARIANCE FROM NO-FAULT SYSTEM.

Front 50

Failure to Inform

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Gray area - professor says he would not hold someone to it unless it was an affirmative action - not just an omission to act, like negligently selling stocks in down market.

Remember, 721 applies between DOS and DODistribution for higher duty to C than yourself!

Section 2101 requires disclosure up until DODistribution. CANNOT WAIVE.

Court retains jurisdiction FOREVER so do not lie. Must disclose in writing, under penalty of perjury.

Not doing so is AUTOMATIC BREACH OF FD. And remedy could be Section 1101(h).

Pastry shop hypo.

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Two Exceptions to Equal Division Rule

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Personal Injury Damages - Section 2603.

Educational Degrees - Section 2641.

Front 52

Personal Injury Damages

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Section 2603 ~ PI damages CP when injury took place - regardless of when lawsuit is.

Presumed SP first - but spouse can be reimbursed for up to 50% in the interests of justice.

Courts will look to:

Economic conditions, needs of the parties, and lapse of time between injury and judgment (if sat by bedside and nursed them back to health and then got judgment after divorce).

Front 53

Educational Degrees

Back 53

Section 2641 - silly because we DO value business, etc., so why not this?

Rememdies available for the spouse that put you through school IF loans taken out during M. Otherwise regular debt rules apply from Section 910.

Reimburse C for tuition and books ONLY. (50% to each party).

Degree must have substantially enhanced earning capacity.

10 year presumption - more than 10 years we presume you've gotten your R and don't need R.

DEBTS AFTER DOS = SP.

LIVING EXPENSES DEBTS = CP.

CAN INCORPORATE SS if standard of living goes down after D per Section 4320 up to lifestyle limit. SofL cannot go down.

Front 54

Debts

Back 54

Section 910 - any debts acquired before or during M = CP.

@ DOS - reverts back to SP. Section 2621.

Three time frames: Before DOM, DOM-DOS, DOS-DOJ.

Front 55

Three debt time frames

Back 55

Before DOM:

Standard = Section 910 - presumed community.

EXCEPTIONS:

Section 911 - earnings of spouse cannot be reached for SP debt if earnings kept in account, with no right of withdrawal and no commingling. ANTITHETICAL TO CP CONCEPTS b/c SALARY = CP by definition.

Section 920 - can seek R for paying back SP debts with SP assets - 3 year SOL.

Section 915 - child support/spousal support debts - can have R BUT have to have had SP $$ at time of payment.

DOM-DOS: Presume CP - overcome by PofE. Section 2625.

Case law has come up with only three valid exceptions:

(1) intentional wrongdoing (notice NOT negligent - so if you just forgot to pay taxes = CP).

(2) Not for benefit of Third-Party - really only applies to mistresses - strip clubs still = CP. Family members are now no longer third-parties, so if pay for brother or sister in law to go to school = CP.

(3) Anticipation of Dissolution - has to be connected with not just eat out every night out if spite.

DOS-DOJ - Section 2623 says responsible up until DOJ for NECESSARIES of life - this has been only ever found when medical costs.

Also can get Epstein Credits and Watts Charges:

Epstein - if SP is paying CP house mortgage, and W still living there, SP automatically entitled to 1/2 R.

Watts Charges - usage charges - W living in house at detriment to C at exclusion of spouse, has to R C.

Can only get around through written stipulation.

Front 56

Antenuptial Agreements

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About future, not past!! Noghery - against public policy b/c he waived rights that he didn't have to - his SP rights before marriage.

Three different time frames:

(1) Pre-1985: K concepts = civil trial with juries. Legislature wanting PMA's valid so . . .

(2) 1985-2001: UPMAA - family law court now has exclusive jurisdiction.

(3) Bonds Amendments (2001) - they were looking for a case to make a point and some changes.

Front 57

UPMAA ~ 1985-2001

Back 57

Can negotiate anything. Two exceptions:

(1) cannot promote dissolution b/c violative of public policy (BUT STATS SAY OF COURSE THEY DO)

(2) Per se invalid if addresses child support or custody. Addressing PERMEATES entire doc so not just provision invalid = whole thing invalid.

CAN waive spousal support however, as long as doesn't promote dissolution. Fireman & Pendelton.

ONLY REQUIRES 3 THINGS:

writing, entered into freely and voluntarily (with knowledge and without coercion i.e., "If you really want to get married in 2 hours, you HAVE to sign this."), and waiver of disclosure of all CP assets/liabilities.

Front 58

Bonds Amendments & UPMAA revisions

Back 58

Pointed out that there is no FD per 721 b/c not yet H&W!!

But, added Section 1615 for protection of waiving spouse:

(1) MUST have 7 day review period before signing. Even one change can trigger new 7 day period.

(2) MUST be written in language proficient to signing spouse (question of fact)

(3) IF waive counsel, have to have express separate writing

(4) If unrepresented, have to have written verification from a third-party explaining what you're doing - PATERNALISTIC - cannot be future H, cannot be his lawyer, so de facto has to be another lawyer.

UPMAA Section 1612 - addresses what you CAN sign away.

Says you can waive spousal support, but MUST have counsel if waiving, and (2) cannot be unfair/unconscionable @ time of ENFORCEMENT - allows a "second look" just to spousal support provision. Notice - a lot can change - signing B4 marriage, and how is anyone to know what situation will be at D? Big malpractice area. Makes waiving spousal support nearly impossible.

Front 59

Federal Preemption of CA Marital Property Statutes

Back 59

If Federal program, CA has no right to divide UNLESS enabling statute.

Two main areas affected here:

Social Security - but in CA HUGE groups (like Teacher's Association) have opted out of federal programs in lieu of their own so those ARE DIVISIBLE.

Military pensions - they've enabled but with restrictions so that the military person has to: agree (never going to happen), has to be domiciled here (never going to be technically), and has to have purposefully availed himself (like International Shoe) so that he's doing more than necessary in CA not just because stationed here. McCarty; Tucker (there he volunteered at church, his child was receiving state disability benefits, etc. - that was not engouh).

Front 60

Tax Ramifications

Back 60

DRTRA says division of assets is a tax free event between spouses.

Does NOT apply to DPs.

Putative spouses ARE OKAY.

But attorneys need to be cognizant of ramifications b/c courts will only address those tax issues that are "immediate and specific."

E.g.:

Fonstein: law practice future sale not enough to consider immediate or specific

Epstein: sale of house now = IandS

NOTICE - 401K's DO have tax ramifications upon withdrawal - so spouse who gets needs to bargain around this in value now. Attorney's job - court WILL NOT LOOK.