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50 Cards in this Set
- Front
- Back
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Separate Property
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• Property owned or claimed by either spouse before marriage
• Property acquired during marriage by gift, devise, or inheritance • Tort recovery for personal injury (Not earnings or lost wages or medical expenses) • Tracing principles: property purchased with separate funds is separate • Burden to prove asset acquired during marriage is separate property is clear and convincing evidence |
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Community Property
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• Property acquired by either spouse during marriage is presumed CP.
• All assets acquired on credit during marriage are presumptively acquired on community credit • Examples include--salary and wages, income from community assets |
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Gifts between Spouses
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A gift from one spouse to the other spouse is presumptively the donee spouse's separate property
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Inception of Title
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• The character of an asset is determined AT THE TIME THE ASSEST IS ACQUIRED
• Exception (1) Employee Retirement Benefits (2) Employee Stock Options • Subsequent events or expenditures NEVER affect the asset's characterization, but only go to the creation of a claim for reimbursement (if filed before Sept. 1, 2009 claim for economic contribution) |
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Special Characterization Rules
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• Oil & Gas Interest
Bonus, Royalties--SP Delay Rentals--CP • Income Interest in Trust SP--UNLESS spouse has unrestricted rights to trust corpus • Corp. Distributions Cash Dividends--CP Stock splits, stock dividends, capital gains etc.--SP • Animals CP UNLESS purchased with proceeds of sale of original SP • Life Insurance Inception of Title Rule • Employee Bonuses Prorate as earnings over entire year into SP and CP • Closely Held Business Interest SP if owned before marriage but CP entitled to reimbursement for time, toil, talent, and effort expended by spouse to enhance SP • Partnership Interest SP if spouse partner at time of marriage • Mercantile Inventory--SP |
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Claim for Reimbursement for Community Funds
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• Reimbursement for funds expended by marital estate for improvements to another marital estate is measured by the enhancement in value to the benefited marital estate
• A party claiming the right of reimbursement MUST PLEAD AND PROVE that the expenditures and improvements were made and that they are reimbursable • Claim to the Community upon death--50/50 • Claim to the Community after divorce--just and right division • Equitable Liens can be placed on property benefited to secure a claim for reimbursement against that property • NO equitable claim for reimbursement when CP funds are expended for the benefit of CP |
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Claim for Reimbursement for Community Funds--Fixtures
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Fixtures take on the character of the land it is attached. Thus CP taken to pay for house on SP land is an SP house. Only claim for reimbursement is possible
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Claim for Reimbursement for Community Funds--Use and Enjoyment of Property
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• Benefits for the use and enjoyment of property may be offset against a claim for reimbursement for expenditures to benefit the marital estate,
• EXCEPT that a spouse's SP may NOT claim an offset for the use and enjoyment of PRIMARY or SECONDARY RESIDENCE owned wholly or partly by the SP against contributions made by community to the separate estate. |
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Claims for Reimbursement are NOT allowed for
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• Payment of child support, alimony, or spousal maintenance
• Living expenses of a spouse or child • Contributions of property of a nominal value • Payment of a liability of a nominal amount • Student Loans |
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Property Brought to Texas from Another State
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• Property acquired while a couple is domiciled in a common law state is that spouse's separate property in that state; and when couple thereafter moves to Texas, such is the acquiring spouse's separate property
• Upon DIVORCE (NOT Death) property acquired in another state, which would be CP if acquired while domiciled in Texas, is treated the same as CP and is subject to "just and right" equitable division (Quasi-CP) |
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Community Credit Presumption
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• For property acquired on credit, during the marriage, it is presumed that the credit is community; accordingly, the property acquired will be presumed CP.
• Separate security or separate collateral does NOT overcome the CP presumption |
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Effect of How Title is Taken
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• How property is titled does NOT affect the character in Texas, the inception of title determines
• EXCEPTION (1) Where one spouse uses SP and puts title in OTHER spouse's name it is presumed the OTHER spouse's SP (gift) (2) Spouse uses SP and puts title in BOTH names it is presumed 1/2 H SP and 1/2 W SP (This presumption can be overcome by evidence showing that no gift was intended). (3) When a spouse PARTICIPATES in a transaction and there is a SIGNIFICANT RECITAL of SP, absent fraud or mistake, bars the spouse from contradicting language |
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Inception of Title and Adverse Possession
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• Title by AP relates back to Spouse's entry under a rightful claim (mistaken deed) and land takes status of Spouse at time of rightful claim
• A naked trespasser enters without a rightful claim and thus no AP until AP period is complete and if married during AP period title becomes CP when AP is complete |
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Life Insurance
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• First premium payment determines SP or CP
• A spouse has a claim for reimbursement if CP was used to pay premiums on SP insurance • If Insurance CP (first premium paid during marriage) but leaves a beneficiary that is NOT a spouse there is NO claim for reimbursement if CP funds used to pay premiums because CP was expended on CP. |
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Employee Retirement Benefits--Defined Benefit Retirement Plan
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• Employee retirement benefits accumulated during marriage are CP (whether or not vested at time of divorce).
• The value of the CP component is FROZEN at the time of the divorce. Future increases in the pension will represent post-divorce earnings or SP. • Value of CP of Defined Benefit Retirement: (Years Married and Employed / Total Years Employed) * Value of Retirement at Divorce = CP Share |
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What two forms can the divorce decree take when a spouse is not eligible for retirement
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• "If, as, and when receive"
• Cash out Spouse by awarding the Spouse the other assets of equal value, leaving entire pension plan with Spouse with Benefit Plan. |
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Federal Law in Pension Plans
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• If the nonparticipating spouse (NPS) in a qualified pension or retirement plan divorces the participating spouse her CP interest in a qualified plan is recognized; under federal law the NPS can get a QDRO (qualified domestic relations order) and receive payments from the plan.
• The NPS does NOT have a devisable interest if she predeceases the participating spouse |
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Employee Retirement Benefits--Defined Contribution Plan (401k)
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• SP is the assets in the account as of marriage, INCLUDING appreciation in value thereon
• CP is the (1) additional contributions to the account during marriage plus (2) interest and dividend income on the account (income from SP is CP) |
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Military Retirement Benefits
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• Under federal preemption a spouse does have CP rights in military retirement plans
• However military disability retirement pay is NOT CP under federal preemption. |
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Stock Options
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• If the option is awarded during marriage but does not vest until after the marital community has ended a proration formula is used
• Formula for CP Stock Options (Years from date options awarded to date of Divorce / Years from date option awarded to date options exercisable) |
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Business Interest
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• Stock in closely held corporation is SP since owned before marriage.
• Other Spouse is entitled to equitable claim for reimbursement for value of time, toil, talent expended by the enhancement to other Spouse's SP |
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Value of Time, Toil, and Talent
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Value of Time, Toil, Effort beyond that reasonably necessary to maintain and preserve his separate estate
REDUCED by compensation received by spouse in salary, bonus, dividends, fringe benefits |
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Commingled Bank Accounts
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• When sole management community property of one spouse is commingled with sole management community property of the other spouse the account becomes Joint Management Community Property
• While the community presumption applies and tracing to establish SP is difficult the court will apply the Community First Out Rule • Court will use the Lowest Intermediate Balance Rule to determine CP funds. CP funds are presumed to be withdrawn first (SP funds sink to the bottom) |
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Just and Right Division
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• Upon divorce the court will apply the equitable just and right division over the community property and the quasi-community property
• Divorce court CANNOT divest separate title of one spouse and award it to the other spouse. • The court's only power over one spouse's separate property is that it can set aside support for minor children of the marriage (i.e. secure payment of child support) |
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Factors for Just and Right Division (Non-exclusive list)
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• Age
• Relative physical condition of the parties • Earning power and business opportunities • Education • Need for future support • Size of the community estate • Size of each party's separate estate • Length of the marriage • Children of the marriage • Benefit innocent spouse would have received from continuation of marriage • Fault in breaking up the marriage |
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Discretion of the Trial Court in the Just and Right Division
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• Wide latitude is given to the trial judge.
• It is NOT sufficient reason to reverse that the Court of Appeals might reach a different decision • A decision will be reversed ONLY if division is so disproportionate as to be manifestly unjust and an abuse of discretion • Court of Appeals must Reverse and Remand; it CANNOT render judgment. ONLY the trial court can make a just and right division |
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Can fault be taken into account if it is a No-Fault Divorce
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• Yes OR No
• Appellate courts are split on the issue. |
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Later Discovered Community Property
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• Subject to the just and right division in separate action brought for that purpose
• Statute of Limitations of 2 years after the other party repudiated claim of community ownership (This is NOT two years after the divorce) |
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Spousal Maintenance
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• Eligible if
(1) Married for 10 years UNLESS other spouse is convicted of family violence within past 2 years (2) Spouse must lack sufficient property, including property distributed to the spouse under the Family Code to provide for her minimum needs; AND (3) The spouse must either (a) be unable to support herself because of a disability; OR (b) be custodian of a disabled minor or adult child; OR (c) lack employment skills adequate to provide for her minimum reasonable needs • Maximum award is LESSER of $2500/mo or 20% of spouse average monthly gross income. • Payment CANNOT continue for more than 36 months • Award can be modified downward (NOT upward) upon showing that circumstances have materially and substantially changed • Award Terminates (1) Death of either party (2) Remarries or cohabits conjugally |
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Divorce results on Insurance Beneficiaries
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• Divorce terminates former spouse's rights as beneficiary, BUT--unlike wills--NOT relatives of former spouse.
• Read policy as if former spouse predeceased the insured UNLESS (1) Insured renames ex-spouse as beneficiary after the divorce (2) Divorce decree names ex-spouse as beneficiary (3) Ex-Spouse is designated to receive the proceeds in trust for, or on behalf, or for the benefit of, a child or dependent of either former spouse • Divorce Revokes does NOT apply to ERISA |
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Insurance Policy NOT mentioned in Divorce Decree
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• If a community life insurance policy was not mentioned in the divorce action, H and W become tenants in common, 1/2 each.
• This is omitted CP, the divorce revokes rule applies only to Insured spouse's 1/2 CP interest in policy. |
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Good Will
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Good will is NOT separate property and apart from a person is not a property interest that can be divided upon divorce; must be separate and apart from the person and have commercial value to be divided
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Professional Educational Degrees
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• Is NOT property that can be divided
• NOR is there a valid claim for reimbursement |
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Community Property in a Bigamous Marriage (Putative Spouse)
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• If second spouse (putative spouse) is UNAWARE of previous marriage the CP created is in the nature of a partnership or joint venture
• Putative spouse receives 1/2 of CP while bigamous spouse and 1st spouse receive 1/2 of the bigamous CP. • If putative spouse was AWARE of the preexisting marriage, then the putative spouse receives NOTHING of the bigamous CP and that CP goes to the CP of the original marriage • If bigamous spouse removes the impediment from the bigamous marriage then all future acquisitions would be CP of putative spouse and former-bigamous-spouse |
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Income from Separate Property
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• Income from separate property IS community property
• UNLESS the spouses agree in writing that income from each party's SP shall be SP. |
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Premarital Agreements
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• Must be in writing and signed by BOTH parties
• NO consideration for the agreement is required • May partition between themselves all or part of their property, then existing or to be acquired, or exchange between themselves the community interest of one spouse or future spouse in any other CP then existing or to be acquired, where upon the portion or interest set aside to each spouse shall be and constitute a part of the SP and estate of the future spouse • May waive rights to spousal maintenance, agree that salary and wages will be SP, waive rights to homestead, exempt personal property, family allowance, etc • In a premarital agreement the parties CANNOT (1) Limit either party's child support obligation (2) Agree that after they marry one spouse's SP shall be CP. (this can be done after the marriage but NOT during premarital agreement) |
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Setting aside the Premarital Agreement
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Must show that the agreement was
(1) NOT voluntarily signed (2) Was "unconscionable when made" AND (a) there was no fair disclosure; (b) the right to disclosure was NOT waived in writing; AND (c) spouse had NO adequate knowledge of other spouse's property or financial obligations • Burden of proof is on the party trying to set aside the agreement • Unconscionability is a matter of law decided by the court • Neither pregnancy or planning for a big wedding is basis for having involuntarily signed |
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Conversion Agreement
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• The agreement between the spouses that SP will become CP
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Disadvantages of Conversion Agreement
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• If parties develop marital problems the property will be subject to the just and right division
• Some protection from creditor's claims will be lost • Spouse will lose the power of disposition over half of the property • Grants of deeds or gifts to the spouses as community property CANNOT be CP because not signed by both parties so they remain SP of both spouses |
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Can spouses make an unequal partition of community property
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• Yes
• The partition agreement is valid as against preexisting UNSECURED creditors, unless it was made with the intent to defraud the creditors • NOT valid against subsequent creditors of BFPs without actual notice |
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Community Property Survivorship Agreements
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• Must be in writing and signed by BOTH spouses
• Either spouse may revoke by written notice to other spouse |
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Palimony Agreements
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On consideration of nonmarital conjugal cohabitation must be in writing and signed by the party sought to be charged
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Gift's of Community Property
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• One spouse can make a "reasonable gift" of CP, as long as such gifts are not so disproportionate as to be "in fraud of the spouse's community rights."
• Factors Considered (1) Relationship of the donee to the donor (2) Amount of gift in relation to community estate (3) Whether spouse is adequately provided for out of remaining CP (4) Any special circumstances justify the gift (5) Whether the gift was of the donor's sole management community property • Gifts to relatives tend to survive • If no special circumstances are found the gift can be set aside in its entirety if challenged during donor spouse's lifetime, or as to 1/2 after donor spouse's death • Test also applies to a CP Life Insurance Policy not naming the spouse as beneficiary |
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Effect of Divorce on Preexisting Creditors
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• Divorce does NOT affect the rights of pre-existing creditors
• A spouse that does NOT sign a note entered into by ex-spouse is NOT personally liable if the spouse did not sign the note, UNLESS it can be proved that Ex-spouse was acting as spouse's agent • If spouse signed the note spouse would be personally liable just as ex-spouse who entered into the note • No judgment lien against spouse who did not sign because judgment liens are only valid against the debtor |
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What can Creditors do to seek Money from Spouse who did not sign the note
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Bring an in rem action seeking a constructive trust imposed on the property.
The action must be in rem against the property in Spouse's hands, because a personal action is not available |
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Classification of Marital Property for Management Purposes
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• W's Separate Property
• W's Sole Management Community--W's salary, income from W's separate property • Joint Management Community--subject to spouses joint management, control, and disposition • H's Sole Management Community--H's salary, income from H's separate property • H's Separate Property |
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Presumption of Sole Management Community
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• Property titled in one spouse's name (or in one spouse's possession), if asset is not subject to documentary evidence of title is presumptively subject to that spouse's sole management and thus protects BFPs
• A spouse cannot have a sell to a BFP set aside when one spouse who has apparent authority over the property sells it, even though the property was the other spouse's SP |
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Liability for Torts
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• All CP is subject to tort liability of either spouse; accordingly the tort judgment creditor can reach
(1) Tortfeasor's SP (2) Tortfeasor's Sole Management CP (3) Joint Management CP (4) Non-Tortfeasor Spouse's Sole Management CP • The only protected property is non-tortfeasor spouse's SP • If tort committed BEFORE marriage the judgment creditor can reach (1) Tortfeasor's SP (2) Tortfeasor's Sole Management CP (3) Joint Management CP |
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Liability on Contracts
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• Necessity Contracts--ALL property, both SP and CP, because both parties are PERSONALLY LIABLE
• Non-Necessity Contract and Credit Cards--the debt creditor can only reach assets over which the Contracting Spouse has MANAGEMENT POWERS over: Joint Management CP, Sole Management CP, and Contracting Spouse's SP. |
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Mortgages on Homestead
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• A homestead, even if a spouse's sole name or their separate property, CANNOT be mortgaged without JOINDER of the other spouse
• Spouse not joined can set aside the mortgage |
