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3L > Community Property Midterm > Flashcards

Community Property Midterm Flashcards

1
Q

Community Property

A

Assets owned in common by husband and wife as a result of having been acquired during the marriage by means other than an inheritance or a gift to one spouse, each spouse generally holding a one-half interest in the property.

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2
Q

Separate Property:

A

Property that a spouse owned before marriage or acquired during marriage by inheritance or by gift from a third party, and property acquired during marriage but after the spouses have begun living separate and apart.

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3
Q

3 PRINCIPLES OF CALIFORNIA CP LAW

A
  1. Equality: Spouses share an equal one-half interest in CP, no matter their actual contribution to acquisition.
  2. Tracing: Purchases take on the character of purchase funds, and other acquisitions take on the character of their source, whether labor, investment or whatever.
  3. Contractual Modification: The parties to a marriage retain the right – before, during, and at the end of marriage – to alter most (but not all) of the default CP rules by agreement.
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4
Q

Commingling

A

CP and SP can be mixed together. The term commingled property communicates that an asset is partially owned as CP and as one/both spouses’ SP.

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5
Q

Title Doesn’t Matter

A

When an asset is acquired during
marriage and titled in one spouse’s name only, the
unnamed spouse obtains an equitable ownership interest
in the acquisition. CP assets are owned by both spouses.

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6
Q

Domiciled In State

A

Outside state is quasi cp

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7
Q

Tracing

A

by a preponderance of the evidence, that the property was
purchased by or derived from SP.

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8
Q

Lender’s Intent Test

A

In a dispute between the spouses, the general presumption characterizes borrowed funds as CP unless the lender extended the loan solely on one spouse’s SP information and assets.

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9
Q

Lucrative Acquisition

A

SP: The result of gratuity or a windfall received during marriage. Gifts received for no consideration whatsoever.

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10
Q

Inheritance and Gifts

A

SP unless specifically to both

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11
Q

Possession

A

Proof of possession during marriage is not
sufficient to raise a CP presumption. Nor is possession
during marriage necessarily determinative of acquisition
during marriage.

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12
Q

Joint Title Presumption

A

For the purpose of division of property on dissolution of marriage or legal separation, property held in one of these forms is presumed to be CP

Rebuttal:
* A clear statement in the deed that the property is SP.
-OR-
* Proof that the parties have made an enforceable written agreement that the property is SP.

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13
Q

Profits of SP

A

rents, issues and profits of SP are also
characterized as SP

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14
Q

Engagement or Wedding Gifts

A

Before marriage, an engagement or wedding gift is
received by the prospective spouses as individuals, not as
spouses. They own it as concurrently held SP.

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15
Q

Revocability of Wedding Gifts

A

Generally, an engagement gift made by a
third party is irrevocable. The donor can change this
outcome by expressly making the gift conditional upon the
occurrence of marriage.

a wedding gift titled in one
spouse’s name raises the general CP presumption.
Rebuttal is by tracing. If rebuttal is successful, the spouse
whose name is not on title retains an equitable interest in
the wedding gift as concurrently owned SP.

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16
Q

WEDDING GIFTS BETWEEN WOULD-BE
SPOUSES

A

Between parties to a contemplated marriage, gifts made
during the engagement period (i.e. before marriage) are
the recipient’s individual property. Upon marriage, these
gifts get redefined as the recipient’s SP.

If They Break-up:
1. Where either party to a contemplated marriage
makes a gift of money or property to the other on the
basis or assumption that the marriage will take place,
2. In the event that the recipient refuses to enter into the
marriage as contemplated
-OR-
That it is given up by mutual consent,
3. The donor may recover such gift.

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17
Q

Living Separate and Apart Test

A
  1. The spouse has expressed to the other spouse his or her intent to end the marriage.
    -AND-
  2. The conduct of the spouse is consistent with his or her intent to end the marriage.
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18
Q

Do The Spouses Need to Move-Out?

A

Not necessarily anymore:

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19
Q

Premarital Agreement

A

Prospective spouses may execute premarital agreements that include SP clauses. A SP clause can provide, for example, that specifically identified assets or streams of assets are or become the SP of the acquiring spouse upon acquisition during marriage. Or, it can incorporate by reference a SP inventory into the contract. Or, it can provide that a certain asset be characterized as SP upon dissolution or the death of a spouse.

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20
Q

Transmutation

A

A change in the character of property that
takes place during marriage. Spouses may change the
character of property from SP to CP, CP to SP, or from the
SP of one spouse to the SP of the other spouse.

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21
Q

TENANCY IN COMMON

A

Each TiC has an undivided, fractional interest in the property. doesn’t necessarily have to be ½.
* Each TiC may transfer his/her interest to another person; it is freely alienable, devisable, and descendible.
* At Dissolution: TiC property is presumed to be CP.
* At Death: TiC property is characterized as concurrently held SP.

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22
Q

JOINT TENANCY

A

Each JT has an undivided, fractional interest in the property. must each have ½ when the JT is for spouses.
* If a JT transfers his/her interest to another person, the JT is
severed and converts to a TiC.
* At Dissolution: JT property is presumed to be CP.
* At Death: JT property is characterized as concurrently held SP.
At the death of a JT, the surviving JT automatically becomes
the owner of the titled asset by the right of survivorship.

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23
Q

COMMUNITY PROPERTY (title form)

A

Each spouse/DP has an undivided, one-half interest in the property.
* Each spouse/DP may devise his/her one-half interest to a third-party. converts title to TiC.
* Intestacy: The deceased spouse/DP’s one-half CP share will descend to the surviving spouse/DP.
* At Dissolution: CP is presumed to be CP.
* At Death: CP property is characterized as CP.

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24
Q

COMMUNITY PROPERTY WITH THE RIGHT OF
SURVIVORSHIP

A

Each spouse/DP has an undivided, one-half interest in the
property.
* At Dissolution: CP with right of survivorship is presumed to be
CP.
* At Death: CP with the right of survivorship property is
characterized as CP. At the death of a spouse/DP, the
surviving spouse/DP automatically becomes the owner of the
titled asset by the right of survivorship.

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25
Q

PERSONAL INJURY RECOVERIES

A

Personal injury claims and recoveries against a third-party
that arose during marriage are characterized as CP.

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26
Q

PERSONAL INJURY RECOVERIES AT DISSOLUTION

A

But different from other types of CP, at dissolution,
damages and recoveries from personal injury claims are
assigned to the spouse who suffered the injuries.

Use tracing for lump sums gained during marriage and their use (ie buy property using sp)

The court may also deviate from this rule in “the interests
of justice,” but “at least one-half of the damages shall be
assigned to the party who suffered the injuries.

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27
Q

LOTTERY/GAMBLING WINNINGS

A

If bought with SP, then winnings SP. But winnings bought with CP are CP because SP contribution (skill) is far less than CP contribution (money).

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28
Q

DEGREES

A

When a marriage dissolves, only the educated spouse walks away from the marriage with a property right to the human capital that his or her income-enhancing degree represents. (no right to earnings from the degree even if gained during marriage)

But, the community can seek reimbursement for “community contributions to education or training of a party that substantially enhances the earning capacity of the party.”

Contributions means “payments made for CP for education or training or for the repayment of a loan incurred for education or training.” It includes tuition, fees, and books.
Reimbursement for loan payments from community funds includes loan payments on an education that took place long before the marriage.

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29
Q

If degree is not income-enhancing

A

the trial court has discretion to deny the reimbursement.

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30
Q

Substantially benefitted from a degree

A

Notable Exception: When the community has already substantially benefitted from the education, reimbursement is limited. If the community contributions were made 10 or more years before the divorce filing, the presumption is that the community has substantially
benefitted from the education or training.

10 YEARS OR MORE

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31
Q

RETIREMENT ACCOUNTS

A

Deferred compensation – such as a pension, IRA, or 401(k) – is characterized by the employee’s marital status during the period in which the deferred compensation was earned. When deferred earnings are earned entirely during a period when the employee is married, benefits are entirely CP.

The nature of pensions varies based on the employer.
While occasionally tied to the length of employment, other
facts may dictate the pension’s value. A court will
apportion a pension by the time rule if they can – SP or
CP based on the ratio of time worked during the marriage.
Otherwise, the court will apportion to reach a reasonable
and fair outcome relative to the contributions of the
community and separate estates.

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32
Q

SOCIAL SECURITY

A

Social Security is a public benefit, not a piece of property. As such, it is characterized as separate property.

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33
Q

Introduction to use

A

California is a CP state. CP is defined as all
property, real or personal, wherever situated, acquired by
a married person during the marriage while domiciled in
the state. SP is property acquired before marriage or
during marriage by gift, bequest, devise, or descent.

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34
Q

COMMINGLED PROPERTY

A

Commingling occurs when property of one
character is mixed with property of a different character.
Commingling can involve the admixture of:
* SP with CP,
* the SP of one spouse with the SP of the other spouse,
or
* standard CP and CP from a personal injury suit.

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35
Q

Sole Account

A

An account which only has one person’s name on the bank account contract.
* Who can the bank work with: only the named person.
* CP implications: If deposits in the account are CP, they remain subject to the beneficial ownership of both spouses, even if only one spouse has access to the account.

36
Q

Joint Account with Right of Survivorship

A

Default account that incorporates the right of survivorship. Sometimes referred to as a payable on death account.

37
Q

Joint Account without Right of Survivorship

A

Analogous to a tenancy in common. At death, each party’s interest in the account passes according to the account contract or through the decedent’s estate.

38
Q

Joint Account held by [spouses] with Right of Survivorship that
cannot be changed by will

A

Basic CP account with right of survivorship.

39
Q

Joint Account held by [spouses] that is specifically designated
as a ‘CP’ account

A

Default CP account under CAMPAL.

40
Q

Titling Matters at Death

A

When a contract of deposit designates a “CP” account, the spouses retain all testamentary rights to the sums on deposit unless:
* The bank agreement expressly provides otherwise.
–OR–
* The spouses expressly describe the account – in the
bank agreement itself – as “CP with the right of
survivorship.”

41
Q

OUTLINE OF COMMINGLED ACCOUNT RULES

A
  1. All sums on deposit are presumed to be net CP contributions.  CP Presumption.
  2. Once proved, net SP character contributions are owned as net SP deposits.  Basic Rebuttal/Tracing Rule.
  3. A commingled account is made up of net contributions of different characters. Net character deposits retain their character despite being commingled.  Basic Commingling/Tracing Rule.
42
Q

CAMPAL rebuttal

A

Rebuttal by SP Claimant:
* The sums on deposit can be traced from SP.
-OR-
* The married persons made a written agreement, separate
from the deposit agreement, that expressly provided that
the sums on deposit are SP.
* Burden of Proof: Clear and Convincing Evidence

43
Q

Why CAMPAL

A

Gets back money, while SP tracing can get back property. Hence why Campal is “clear and convincing evidence” standard

44
Q

beneficial ownership

A

over funds in a commingled account, means theyre your SP or CP

45
Q

FAMILY EXPENSE EXCEPTION

A

During marriage, the spouses have a duty to support each other. Family support presumptively is paid for by the CP. If there are insufficient funds to pay for family expenses, the SP of either spouse becomes liable.
* The SP spouse is presumed to have made a gift to the community to support the family. (no reimbursement for SP paying for family expense)
* Family expenses include: food, housing, clothing, medical costs, recreation, etc.

46
Q

See v. See Rule

A

SP Rebuttal by Exhaustion: The SP claimant must show that, on the date of purchase, the CP sums on deposit in the account were exhausted (there wasn’t enough CP $ available to pay for the whole purchase).

If not completely exhausted, then at least some of the ownership percentage is SP

47
Q

Requirements for Rebuttal by Exhaustion (See v See)

A
  • Track the character of deposits, as they are made.
  • Track the character of withdrawals, as they are made.
  • Keep a running balance of SP and CP sums on
    deposit, including “family expenses.”
  • Rebuttals are specific to individual disputed items.
48
Q

Hicks-Mix Direct Tracing Rebuttal

A

Requirements for Hicks-Mix Direct Tracing Rebuttal:
* On the date of the disputed purchase, both CP sums on deposit and SP sums on deposit were sufficient to make the disputed purchase.
* On or near the date of the disputed purchase, the SP proponent declared an intention, in a writing separate from the account records, to make the purchase with SP sums on deposit.
* Immediately after the purchase, the amount of that purchase was withdrawn from the SP sums on deposit.
-AND-
* Records prepared in anticipation of litigation are disallowed.

49
Q

CP Presumption

A

Need to prove something is SP with tracing and maybe CAMPAL

50
Q

Mortgages and loans secured with SP downpayment

A

Are CP

51
Q

Aufmuth Formula

A

CP Contribution/Purchase Price = CP%

SP Contribution/Purchase Price = SP%

Even on increase in value, use formula on increase amount

52
Q

Aufmuth Clues

A

On an exam, look for:
1. The existence of the marriage.
2. A purchase on credit.
3. Commingling of SP and CP fund sources.

53
Q

WHOLLY SP CREDIT PURCHASES

A

Starting point: An entirely (100%) SP asset is not a
commingled asset. When a SP asset is purchased prior
to marriage with a loan that is repaid during marriage with
SP, that asset remains entirely SP.

54
Q

Vieux Rule Explained

A
  • Before marriage, H and W “discussed and considered the purchase of real estate, and together viewed said property, and it was agreed between them that said property would be desirable to purchase.”
  • H paid the down payment (about 10% of the purchase price), and got a loan for the rest of the price. (all SP)
  • H and W married.
  • H and W used community funds to repay the loan, paying
    off about 20% of the purchase price.

Community established an equitable ownership right in the property
by its contributions to purchase.

55
Q

MOORE FORMULA What to look for

A

Spotting the Issue:
1. SP down payment.
2. SP loan.
3. Property purchased shortly before the marriage.
4. CP contributions to loan principal payments.
5. H+W divorce.

56
Q

Moore Formula

A

SP down payment + (SP loan - CP contributions) / Historic Purchase Price = SP%

CP contributions / Historic Purchase Price = CP%

  • Adding in the Value of the Appreciation:
  • Appreciation = Fair Market Value at Divorce - HPP
  • SP% X Appreciation = SP Appreciation = SP%
  • CP% X Appreciation = CP Appreciation = CP%
57
Q

MARSDEN FORMULA What to look for

A

Spotting the Issue:
1. SP down payment.
2. SP loan.
3. Property purchased further from marriage.
4. Property value appreciates before marriage, and the SP proponent can provide an appraisal report dated on or near the date of marriage.
5. CP contributions to loan principal payments.
6. H+W divorce.

58
Q

MARSDEN FORMULA

A
  • Start with the Moore formula.
  • Adding in Premarital Equity and Appreciation:
  • Equity = SP payments made before marriage
  • Appreciation = Fair Market Value at Marriage - HPP
59
Q

SP CONTRIBUTIONS TO AN ENTIRELY CP ASSET

A
  • At dissolution, the SP contributor to a CP asset shall be reimbursed for the SP contributor’s contribution without interest or appreciation.
60
Q

CP IMPROVEMENTS TO SP PROPERTY

A
  • When the non-owning spouse consents to the use of CP to improve the other spouse’s SP, no gift is intended.
  • If the improvement is a CAPITAL IMPROVEMENT, the CP estate is entitled to an equitable ownership interest in the property.
    A capital improvement is one that increases the SP’s fair
    market value.
  • If the improvement is a NON-CAPITAL IMPROVEMENT, the CP estate is entitled to reimbursement without interest for its contributions to construction costs.
61
Q

SEPARATE PROPERTY BUSINESSES Process

A

Analytical process:
1) SP claimant has the burden of proving that the business is in fact a SP business.
2) Then the community can show that community labor contributed “more than minimal effort” to the growth of the business’s value during the marriage.
3) The Court applies either Pereira or Van Camp, based on whichever furthers substantial justice between the parties.

62
Q

Choosing between Pereira and Van Camp:

A
  • Pereira: The growth of the SP business is attributable to CP labor.
  • Van Camp: The growth is not attributable to CP labor, so the Van Camp formula reimburses the community for its labor, minus family expenses.
    The business at issue was a seafood company,
    with H as a significant stockholder. H’s stock value
    increased over time, but not due to his work.
63
Q

Pereira Formula

A

Fair Market Value @ Dissolution – (Fair Market Value @ Marriage + Fair Rate of Return) = CP excess profits

  • Fair Rate of Return = Principal X Interest X Time
    The FRR represents what the SP business owner would have made
    on his/her investment, had the value of the business been invested
    in reasonably safe securities (stocks and bonds) over the course of
    the marriage.
  • 10% interest usually applies, unless told otherwise.
        (ie. Fair Rate of Return = $100K X 4% X 10 years = $40K)
64
Q

Van Camp Formula:

A
  • Fair Market Value @ Dissolution – (CP Labor – Family Expenses) = SP
  • Labor = Annual Benchmark Salary X Years
  • Expenses = Annual Expenses X Years
65
Q

Judge Choosing Pereira or Van Camp

A

A judge has discretion to decide whether to apportion (Pereira) or reimburse the community (Van Camp) depending on which approach achieves substantial justice between the parties. Practically speaking this would require the judge to exercise discretion in favor of the approach that produces the better result for the party who prevails on the issue of what contributed – community labor or market forces – to the business’ growth.

66
Q

Personal property defined:

A

“Every kind of property that is not real is personal.” Civil Code § 663.

67
Q

Examples from the book of Personal Property

A

Accounts, businesses, cars, cash, debts, emails, investment accounts, loans, rents, tax refunds

68
Q

MANAGEMENT AND CONTROL OVER COMMUNITY PERSONAL PROPERTY

A
  • Either spouse has the power to manage and control
    community personal property with the same absolute
    power of disposition, other than testamentary, as the
    spouse has over their own SP.
  • Testamentary Exception: Testamentary matters are
    excluded because a spouse only has the power to
    dispose of his or her one-half of a CP asset at death.
69
Q

MAKING GIFTS OF COMMUNITY PERSONAL
PROPERTY

A
  • Neither spouse can make a unilateral gift of community personal property without the written consent of the other spouse. Gifts can be ratified after the fact.
  • This rule doesn’t apply to gifts mutually given by both spouses to third-parties.
  • Gifts between spouses are governed by transmutation rules.
70
Q

Voiding a gift to 3rd party by one spouse after dissolution

A

Can recover half of gift value (CP apportionment)

71
Q

Voiding a gift to 3rd party by one spouse after death.

A

entitled to a one-half CP share of the gift as against deceased’s estate or as against deceased’s inter vivos gift donee.

72
Q

SELLING COMMUNITY PERSONAL PROPERTY

A

Neither spouse can sell community personal property without the written consent of the other spouse. These sales can be ratified after the fact.

  • The no-sale rule specifically applies to:
  • Sales for less than the fair and reasonable value of the asset.
  • The Family Dwelling, or the furniture, furnishings, or fittings of the home.
  • Clothing or wearing apparel of the other spouse or minor children. (includes trade tools)
73
Q

COMMUNITY PROPERTY BUSINESSES

A
  • One spouse may have primary management and control over a community property business.
  • If that spouse wants to sell, lease, exchange, encumber, or dispose of all or substantially all of the community personal property in the business (all the money or assets), the manager-spouse must give prior written notice to the other spouse.
74
Q

COMMUNITY REAL PROPERTY

A
  • Either spouse has the power to manage and control the community real property, but both spouses, either personally or by a duly authorized agent, must join in executing any instrument by which that community real property or any interest therein is leased for a longer period than one year, or is sold, conveyed, or encumbered.
  • Remedy: The non-joined spouse has one year from recording of the transaction to void it.
74
Q

COMMUNITY REAL PROPERTY LEASE

A
  • Either spouse has the power to manage and control the community real property, but both spouses, either personally or by a duly authorized agent, must join in executing any instrument by which that community real property or any interest therein is leased for a longer period than one year, or is sold, conveyed, or encumbered.
  • Remedy: The non-joined spouse has one year from recording of the transaction to void it.
75
Q

QUASI-FIDUCIARY DUTIES AMONG SPOUSES

A
  • Either spouse has access at all times to any financial/accounting books kept regarding a transaction for the purposes of inspection and copying.
    There is no obligation to keep books, but if you do, they must be
    open and accessible.
  • Either spouse must render upon request accurate and full information affecting any transaction that concerns the CP.
  • Either spouse holds as a trustee of any benefit or profit derived from any transaction by one spouse without the consent of the other spouse which concerns the CP.
76
Q

Withholding evidence of income and assets (duties)

A

The unlawful withholding of evidence of income and assets closes the door to the party’s rights of appeal on related issues. After a trial court exercises its discretion, the nondisclosing party cannot later complain that a related order is not based on the evidence that he or she refused to disclose in the first place.

Could also be sanctioned + attorneys fees for opponent

77
Q

DUTY OF CARE AMONG SPOUSES

A
  • The duty of care owed between spouses for the
    management and control of their CP requires them to
    refrain from engaging in grossly negligent or reckless
    conduct, intentional misconduct, or a knowing violation of
    the law.
78
Q

Undue Influences (duties)

A

Duties are not necessarily breached when one spouse furthers his or her own interest. However, in any transaction in which one spouse obtains any unfair advantage over the other spouse, undue influence is presumed in favor of the adversely affected spouse. Duty of good faith.

Rebuttal is by the benefitted spouse who must show that the nonacting spouse consented to the transaction after disclosure was made.

79
Q

Grolemund Principle (debts)

A

Since both spouses have the legal right to manage and control CP, either spouse can obligate the CP to the claims of creditors. A creditor can reach any property over which the debtor-spouse has the legal right to manage and control.

At marriage’s end, unpaid liabilities like the mortgage, any credit cards that maintain a balance, and educational loans, etc., are assigned to one or both spouses, depending on when the debt was incurred and which of the spouses incurred the debt.

80
Q

CONTRACT LIABILITIES

A
  • A contract liability is incurred when the contract is made. For example, when you sign the credit card receipt when you make a purchase, you’re creating a contract to repay that debt to the credit card company.
  • If made during marriage, the community estate, the debtor-spouse’s SP estate, and the non-debtor-spouse’s SP estate are all liable for any contract debt that was incurred by one or both spouses during marriage for “necessaries of life.” <-like family expenses
81
Q

NECESSARIES OF LIFE DOCTRINE

A
  • A married person is personally liable for debts incurred for necessaries of life of the person’s spouse while the spouses are living together or separately.
  • “Necessaries of life are expenses necessary… considering all the circumstances – his station in life, his particular type of employment, etc.”
  • The community is liable for family expenses. If and when the community funds are exhausted, the SP becomes liable for family expenses without reimbursement.
  • During a period of separation, absent a court order otherwise, the non-debtor-spouse is personally liable only for the other spouse’s common necessaries of life.
82
Q

Contract Debt Rule

A

If made during marriage, the community estate, the debtor-spouse’s SP estate, and the non-debtor-spouse’s SP estate are all liable for any contract debt that was incurred by one or both spouses during marriage for necessaries of life.

83
Q

Contract Debts During Separation Rule

A

During a period of separation, absent a court order otherwise, the non-debtor-spouse is personally liable only for the other spouse’s common necessaries of life.

84
Q

TORT LIABILITIES

A
  • Tort Liabilities: A tort liability is incurred when the tort occurs.
  • For a tort that occurs during marriage, if both spouses are tortfeasors, then the CP and SP estates of both spouses are liable for that obligation.
  • If the tort is the obligation of only one spouse, then the CP and the SP of the tortfeasor are liable. Tort creditors can reach the CP first if the tort was committed while performing an activity for the benefit for the community.
    ** Otherwise, they must exhaust the SP estate first.
  • **Includes almost every tort except domestic violence,
    gross negligence, or criminal activity.
85
Q

OTHER OBLIGATIONS

A
  • Any other obligation that isn’t a contract or tort obligation can be charged against the CP estate when incurred before or during marriage by either spouse.
  • This includes:
  • Premarital child support obligations
  • Extramarital child support obligations.
  • Spousal support obligations to a former spouse.
  • Parental support obligations for an indigent parent or parents.
  • Support obligations are presumably paid by SP, but can be paid by CP with the right of reimbursement (except for parental support).
86
Q

PROTECTING THE NON-DEBTOR-SPOUSE FROM THE PREMARITAL DEBTS OF THE DEBTOR-SPOUSE

A
  • The non-debtor spouse must continuously meet both elements:
    1. The non-debtor-spouse must hold his or her CP earnings in a sole account that the debtor spouse has no right to withdraw from.
    2. The non-debtor-spouse must keep those CP earnings uncommingled.
  • Avoids Grolemund by taking away the debtor-spouse’s management and control abilities.

3L (5 decks)

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