Community Property - Ca Bar Feb 2009

Front 1

When does the marital economic community end?

Back 1

(1) Death of one spouse; or
(2) When H and W effect a permanent physical separation including ACTUAL separation and an INTENT not to resume marital relationship.

Front 2

What types of property that are acquired during marriage, are nonetheless treated as SEPARATE PROPERTY?

Back 2

(1) received by gift, bequest, devise, or descent;
(2) rents, issues, and profits of SP acquired before or during marriage; and
(3) property acquired in exchange for SP.

Front 3

What are the community property rules concerning personal injury recovery against third-party tortfeasors?

Back 3

If the injury occurs:

(1) during marriage then CP.
(2) after permanent separation then SP, but injured spouse must reimburse the community or other spouse's SP for any expense incurred as result of injury.

Front 4

Retirement pensions and stock options are:

Back 4

Community Property TO THE EXTENT that the benefits were earned during marriage, regardless of when pension vests or stock options are exercised.

EXCEPTION: if it is a federal retirement plan, federal preemption may immunize it from state CP laws.

Front 5

Disability Pay and Worker's Compensation

Back 5

CP, to the extent that such pay is intended to replace marital earnings.

SP to the extent that they are intended to replace post-divorce earnings.

Front 6

Business and Professional Goodwill

Back 6

is CP, to the extent that it was earned during marriage.

Valuation is determined one of two ways: (1) market sales valuation; or (2) capitalization of past excess earnings

Front 7

Education and Training

Back 7

is NOT considered property at all.

But at divorce, if CP was used spouse's education expenses and resulted in substantially increased earning potential, other spouse has a RIGHT TO REIMBURSEMENT.

Defenses against reimbursement: (i) community already benefited; (ii) other spouse also received education from CP funds; (iii) the need for spousal support is reduced b/c of education

Front 8

Life Insurance

Back 8

If dead spouse names someone other than surviving spouse as beneficiary, the beneficiary takes 1/2 community interest in policy and surviving spouse takes 1/2 interest.

Whole life policy: CP to extent paid by community.

Policy at divorce:
(1) whole-->cash value is CP in proportion to community contribution.
(2) term--> no cash value, so no value at divorce

Front 9

Property Insurance proceeds from SP

Back 9

SP, but there is a right of reimbursement if CP funds used to pay insurance premiums.

Front 10

What is the general presumption of community property?

Back 10

All property acquired during marriage is CP. A showing of possession during marriage may imply acquisition during marriage.

Front 11

The CP presumption can be overcome by a showing of what facts?

Back 11

(1) statutory facts (gift, bequest, etc.); OR
(2) parties took written title to asset in manner that shows parties agreed to hold it other than as CP; OR
(3) parties agreed that property would not be CP; OR
(4) one spouse took title in a form that evidences a gift to other spouse; OR
(5) when title inconclusive, purchase funds are traced to SP source, in which case the separate estate is owner in proportion to contribution.

Front 12

What are the requirements and limitations of a premarital (prenuptial) agreement?

Back 12

(1) consideration NOT required
(2) MUST be in writing and signed by both parties
(3) oral prenup OK only if (i) executory promise fully performed; or (ii) promisor is estopped to assert Statute of Frauds because of promisee's detrimental reliance
(4) limitations/waivers of property and death rights OK
(5) NO limitations/waivers of spousal/child support
(6) UNENFORCEABLE if: (i) promote divorce; (ii) unconscionable when executed and other party no notice of other party's wealth

Front 13

What are transmutations?

Back 13

Agreements to alter the character of property DURING marriage.

Front 14

What is the rule for transmutations occurring PRIOR to January 1, 1985?

Back 14

(1) ORAL agreements between recognized; and

(2) agreements and donative acts may be inferred from one or both parties' behavior.

Front 15

What is the rule for transmutations occurring ON OR AFTER to January 1, 1985?

Back 15

(1) must be in WRITING, signed or accepted by spouse whose interest is ADVERSELY affected.
(2) applies ONLY to INTERSPOUSAL transactions.

DOES NOT apply to:
(1) nonprobate beneficiary designation, for which spousal consent is deemed valid and irrevocable at death of either spouse.
(2) gifts between spouses of personal nature that are insubstantial in value

Front 16

What does the court presume when one spouse gains an advantage over the other in a property transaction between spouses?

Back 16

Rebuttable presumption of undue influence. The confidential relationship of spouses imposes a duty of the highest good faith and fair dealing on each spouse.

Front 17

What are the ways that a married couple may jointly hold property?

Back 17

(1) Joint Tenancy
(2) Tenancy in Common
(3) Community Property
(4) Community Property w/ right of survivorship

Front 18

What is the "married woman's special presumption"?

Back 18

Applies only to title acquired PRIOR to 1975:
(1) Title in married woman's name presumptively woman's SP.
(2) Tenancy in common title held by married couple--> W has 1/2 SP; H has 1/2 CP (yes, CP!)

Front 19

When does the Lucas rule still apply? What are the implications of Lucas rule?

Back 19

It is only operative when marriage ends in death of one spouse, NOT in divorce.

Lucas presumes that absent an agreement to the contrary, an acquisition of TITLE to property DURING marriage where one spouse contributes SP, he is presumed to have made a GIFT to the community. Thus, it becomes CP.

Front 20

What are the two statutes that replaced Lucas (anti-Lucas statutes) with regards to claims for reimbursement of SP after divorce or legal separation?

Back 20

(A) California law PRESUMES that all property held by spouses in JOINT FORM of title is CP (applied retroactively to pre-1984 properties, as long as no vested rights are impaired).

This presumption can be overcome ONLY by a (1) collateral written agreement; or (2) statement in deed or other instrument of title that the property is SP and not CP.

(B) A spouse who has made contributions on/after 1984 is entitled to REIMBURSEMENT for DIP (Downpayment, Improvements, Principal payments on mortgage)

Front 21

What is the result when a W owned a house secured by a mortgage prior to marriage and completed payments after marriage to H.

Back 21

Pro-ration rule applies:

The percentage of principal debt reduction during the marriage is the percentage of CP. The remaining percentage is the W's SP.

Front 22

What is the result when one spouse uses community funds to improve/enhance the value of:
(1) his own SP?
(2) his spouses SP?

Back 22

Generally, improvements becomes part of the SP.

(1) Community has right to reimbursement.
(2) Presumed a gift. No reimbursement.

Front 23

What are the two presumptions with regard to tracing the purchase of assets from a bank account with commingled separate and community funds?

Back 23

(1) Available community funds are presumed to have been used to pay for family expenses (thus no reimbursement); and
(2) A gift is presumed when SP is used to pay family expenses (absent reimbursement agreement)

Front 24

What are the two permissible methods of tracing property from commingled funds?

Back 24

(1) Exhaustion method: at time asset purchased, CP funds in account had been exhausted by payment of family expenses, and therefore asset must have been purchase with SP funds.

(2) Direct tracing: at time of asset purchase, there were separate funds available, and the SP proponent intended to use those separate funds to purchase SP asset.

NOTE: an SP proponents failure to trace means that entire commingled account is CP.

Front 25

Explain the rule of recapitulative accounting and its relation to the tracing of SP funds in commingled bank account.

Back 25

An SP proponent can't simply show that total family expenses exceeded community income and conclude that all the remaining funds and assets purchased from commingled account are her SP.

Front 26

What are the two methods of accounting are used to calculate the amount of community funds and/or labor used to enhance the value of a separate business?

Back 26

(1) Van Camp Accounting: manager's services market value salary - family expenses paid by business earnings = CP portion of the business. The rest of business is SP.

(2) Pereira Accounting: manager's initial capital + reasonable rate of return on initial capital = SP. The rest is CP.

Front 27

When do you use the Van Camp method of accounting versus the Pereira method?

Back 27

Use the Pereira method when the management of the spouse was the primary cause of the growth of the business.

Use the Van Camp method when the character of the separate business is largely responsible for its growth or productivity.

Front 28

How does a spouse demonstrate that loan proceeds or credit purchases are his SP?

Back 28

The borrowing spouse must show that the lender primarily RELIED on borrower's SP in granting the loan or extending credit.

Front 29

What does the mnemonic ASAP-MD apply to and what does it stand for?

Back 29

It applies to the elements that must be discussed in a CP essay.

(1) Applicable law
(2) Source of the property
(3) Actions of the parties
(4) Presumptions of statute
(5) Management and control issues
(6) Disposition

Front 30

"Presume Gentle Men Think Howard Johnson"

Back 30

Statutory Presumptions in Community Property:
(1) General presumption
(2) Married Woman's presumption
(3) Tenancy in common presumption
(4) Husband and Wife C/P presumption
(5) Jointly held presumption

Front 31

"Action Got A Senator In Contempt"

Back 31

Actions by parties affecting community property:

(1) Gift between spouses
(2) Agreements between spouses
(3) Separation of CP and SP
(4) Improvements to SP
(5) Commingling of SP and CP

Front 32

How do you begin a California Community Property essay?

Back 32

"In this case, H and W are validly married and domiciled in California. Therefore California community property laws apply.

Because California is a community property state, all property acquired during marriage is community property (CP), while property acquired prior to marriage or after permanent separation, or by gift, inheritance or bequest, is separate property (SP)."

Front 33

What is a life estate pur autre vie?

Back 33

A life estate measured by the life of someone OTHER than the grantee's.

Front 34

Student Loans.

Back 34

Community has a right of reimbursement with interest IF community funds are used to repay a loan incurred for education or training and the education substantially ENHANCES the earning capacity of the educated spouse.

Reimbursement may be REDUCED, if: (i) community has already substantially benefited from the education; (ii) education is offset by community education funding of other spouse; or (iii) education enables its recipient to engage in gainful employment that substantially reduces the need for spousal support.

Front 35

CHILD SUPPORT obligation from prior marriage.

Back 35

Treated as a debt incurred before marriage. Non-debtor's SP is not liable. Non-debtor is entitled to REIMBURSEMENT of COMMUNITY funds if debtor had SP income available, but was not applied to satisfy the obligation.

Front 36

Tracing Asset to Source.

Back 36

Proof that an asset was acquired during marriage only creates a PRESUMPTION that it is CP.

Proponent of SP can overcome by (i) showing that that the property was acquired by gift, is the fruit of SP source, or (ii) TRACING the acquisition back to a SP source.

Front 37

Premarital or post-marital earnings.

Back 37

SP so long as no alteration to SP character (commingling, etc.).

Front 38

Debts incurred before marriage.

Back 38

(1) All CP is liable, UNLESS non-debtor's earnings earnings are held in a SEPARATE deposit account.

(2) Debtor's SP is liable.

(3) Non-debtor spouse's SP is NOT liable!

Front 39

Debt's incurred by one spouse during marriage.

Back 39

All CP liable + debtor's SP.

Non-debtor's SP not liable, unless debt is for "necessaries" (during marriage) which are living expenses that are appropriate to the person's station in life and resources of the parties.

Front 40

Valuation of professional goodwill earned during marriage.

Back 40

Goodwill is the difference between the total value of a business or professional practice and the value of its assembled physical assets.

Two valuation methods:
(1) MARKET SALES valuation -- the price the goodwill would command in a sale of the business or profession.

(2) CAPITALIZATION of past excess earnings -- ascertains value of the future stream of income that the goodwill developed during marriage.

Front 41

Married Woman's Presumption.

Back 41

If before 1975, when written title to property placed in married woman's name, it is presumptively her SP.

Front 42

Putative spouse.

Back 42

Good faith believe that she is married, but in fact NOT legally married.

Almost the same rights as a lawful spouse. All property during relationship is "quasi marital property." However, private contractual benefits may be limited to lawfully married spouses.

Front 43

Unmarried Cohabitation.

Back 43

Contract law will apply. CA does not apply CP law to unmarried cohabitants.

Front 44

Transfer of CP real property.

Back 44

Exception to the rule that both spouses may manage and control CP. If it involves real estate, both spouses must execute deed.

Problem arises when title to CP property is only in one spouse's name and he sell's it without consent of spouse, without notice to BFP.

Non-consenting spouse has ONE YEAR to bring claim to VOID TRANSFER. Must overcome the presumption of valid transfer to BFP, and return BFP's purchase price.

Front 45

Management and Control of CP.

Back 45

Spouses have equal management and control, which means each can buy, sell, spend, and encumber all CP during LIFETIME.

Each spouse has testimentary control of only his 1/2 of CP.

Front 46

Out of state real property.

Back 46

California court may distribute all community and QUASI COMMUNITY PROPERTY at divorce.

QUASI-CP is community property at divorce.

However, at death, Quasi-CP is probated by the local jurisdiction.

Front 47

Quasi-Community Property.

Back 47

Out of state (non-CP state) property that WOULD HAVE been CP if domiciled in CA at the time of acquisition.

If out of state is CP state, then property is CP.

Divorce: QCP is treated the same as CP.

Death: Survivor has one-half interest in decedent's QCP. Decedent has NO RIGHTS in the survivor's QCP.

Front 48

Prenuptial Agreements.

Back 48

Not voluntary, UNLESS:

(1) Signed, in writing
(2) Independent counsel, or express waiver in separate writing
(3) Signor must have 7 days to review, and advised to seek legal counsel.
(4) If no counsel, fully informed in writing in correct language
(5) No fraud, duress, or undue influence;
(6) Any other factors court deems relevant.

Front 49

Transmutations before 1985.

Back 49

VERY LIBERAL. Almost all agreements between spouses during marriage to change the character of CP will be recognized.

1985 or later: agreement must express declaration (containing language that expressly states change in character of property is being made) in writing that is signed or accepted by spouse whose interest is adversely affected.

EXCEPTIONS: personal gifts of sentimental value but little financial value.

Front 50

Debt incurred during marriage by spouse acquiring "necessaries."

Back 50

CP and debtor's SP is always liable.

However, if debt incurred from purchase of "necessaries," creditors can reach non-debtor spouse in this situation.

Front 51

Tort liability.

Back 51

NOT personally liable for other spouse's torts, except where she would be liable for them if the marriage didn't exist.

Tort Committed while spouse engaged in activity BENEFITING the community, then satisfaction from CP first, then SP.

If activity not for the benefit of community, then satisfaction from SP first, then CP.

Front 52

Disability pay.

Back 52

Treated as wage replacement. CP to the extent that the disability pay was to replace marital earnings.

Front 53

Stock options.

Back 53

Apply the pension "time rule." The denominator is the total number of years up until able to exercise, and the numerator is number of such years during marriage. Example 15/20 = 3/4 CP.

Front 54

Life insurance proceeds.

Back 54

CP in proportion to the percentage of premiums paid by the community.

Front 55

Community funds used to pay off mortgage of SP.

Back 55

Community acquires an ownership interest.

Example: $100,000 mortgage on W's SP. After marriage, W pays remaining $20,000 with CP. $20,000/ $100,000 = 1/5. Community now owns 1/5 of the property. If it sells for $1 million, then CP would be $200,000 and SP would be $800,000.

Front 56

Management of spouse was the primary reason for the growth of her SP business.

Back 56

Pereira "fair rate of return" accounting applies.

Pereira = Principal plus interest is SP, the rest is CP.

Otherwise, use Van Camp "market rate" accounting, which treats as CP the "market rate salary" for the spouses services, minus family expenses paid by the business.