Comm Prop Flashcards
(22 cards)
Stock Options (CP)
- Stock options do not vest until exercised
- If Option is awarded during marriage but vests after community ends apply one of two proration formulas depending on Employer’s INTENT in granting option
1) Intent to reward spouse for past services:
Formula: Yrs of employment until Comm ends divided by Yrs of employment until Option is exercisable times share of stock under the Option
[(Yrs start to end of Comm/Yrs start to exercise of Option) x #Share w/in Option] = CP
2) Intent to keep employee:
Formula: Yrs from Option is granted until Comm ends divided by Yrs from Option granted to Option becomes exercisable times share of stock under the Option
[(Yrs from Option grant to end of Comm/Yrs from Option grant to Exercise of Option) x #Share w/in Option] = CP
Community Funds and SP to improve SP
1) CP to improve owns SP:
- No transmutation of interest
- Reimburse CP the GREATER of: a) Comm expenditure, or b) increase in value
- Purpose: so SP does not benefit from CP
- CP to mortgage of SP (pro-ration rule): (CP paid to mrtg PRINCIPAL/Purchase price)xFMV=CP
- CP to SP’s Whole Life Ins (apply pro-ration when Death OR divorce): Number of CP payments/Tot payments (SP+CP)=CP
- Term LI: Las premium determines character SPvsCP
2) CP to improve other spouse’s SP:
- Make TWO ARGUMENTS:
a) No reimbursement: presumption of Gift to SP arises BUT can be overcome by written agreement for reimbursement
OR
b) Reimbursement: Some cases reject presumption of Gift, thus reimburse
3) SP to improve (or buy) CP + title holding presumption:
- At Death:
Marriage of Lucas: SP to buy/improve CP AND holding title as JT raises CP presumption thus CP distribution (SP is a Gift to the CP) and no SP interest and no SP reimbursement UNLESS otherwise agreed in writing
- Upon Divorce or separation (anti-Lucas):
A) Ownership: SP to buy/improve CP AND holding title as JT, or TIC, or TE raises a REBUTTABLE presumption of CP thus equal division
Rebut by: Express statement of SP interest in the Deed or other instrument of title, OR Written agreement
B) Reimbursement: SP contributions to acquisition OR improvement of CP gives right to reimbursement w/o interest for DIP (Down payment, Improvements, Principal payments on mortgage)
4) SP to improve other spouse’s SP: reimbursement
Premarital Agreement (CP)
- Agreement for ANYTHING (e.g. limit claim for family allowance, disposition of prop, character of salary as SP)
Exception: NO limitation to furnish child support (prohibited by Statute)
Elements:
- Writing: (e.g. K, or deed) Will or Revocable Trust is INADMISSIBLE as evidence while S is alive (operative at death)
Exceptions: a) Fully executed oral agreements, OR b) Estoppel based on detrimental reliance
- Signed by BOTH parties and a) each Rep by IC, and b) AT LEAST 7days to sign AFTER Rep by IC, and c) if no IC, MUST be fully informed in SEPARATE writing to obtain separate IC (BOP of voluntariness and unconscionability is on proponent of valid prenup)
- Express declaration of intent to change character
- NO consideration is required
- Defense:
1) Not signed voluntarily
2) Unconscionable Waiver of Spousal Support because a) not represented by IC, or b) provision are unconscionable at time of enforcement, decided BY the Ct as matter of law (not jury)
3) Unconscionable Waiver of anything else because a) unconscionable terms when made AND b) not full and fair disclosure of prop
Lifetime Gifts (CP)
- NEITHER S can gift CP w/o other S’s written consent during lifetime
- At death S cannot devise more than CP share to TP + SP
- If one S2 gifts CP to TP, S1 can set aside the ENTIRE gift
– Divorce: S1 can set aside and recover S1’s CP share
– Death (w/o will): S1 can set aside and recover S1’s CP share from EITHER donee or S2’s estate
E.g. S2 insured w/CP funds sets Ben a TP, upon death, S1 can recover from Ben or S2’s estate
– Exception: Gov savings bonds gifted to TP cannot be recovered because Fed Law preempts CA’s CP law
Disability Pension, Pension, and Workers Comp (CP)
- Disability Pension (disability retirement payments) AND Workers Comp (from injury on the job) are WAGE REPLACEMENTS. Therefore, classified when received NOT when earned (e.g. S is divorced = SP, still married = CP)
- If employee spouse has option between Disability Pension and regular Pension, divorcing Spouse has CP claim for her share (cannot defeat CP)
- Severance pay: make TWO ARGUMENTS
1) Severance pay is SP because replaces lost earning paid after divorce thus SP
or
2) Severance pay earned by employee spouse during marriage thus CP
Economic benefit of CP ends
- Economic community ends by:
1) Permanent physical separation
AND
2) Intent NOT to resume marital relation (by one S) - Otherwise on legal filing of divorce
- CP may be payable after divorce (e.g. royalty fees payable months after divorce)
- Written Title holding controls on death vs CP presumption controls (regardless of title holding) on separation w/parties assent to the title holding
CP Management
- Each spouse has EQUAL management and control over ALL CP thus EITHER spouse may buy or sell personal CP w/o other spouse’s consent
Exceptions:
1) Personal Belongings: One spouse cannot sell or encumber personal prop in family dwelling (furniture, etc) w/o written consent. Transaction is VOIDABLE by nonconsenting spouse
2) CP Buss: EITHER can act alone for ALL transactions BUT to sell or encumber substantially personal prop used in Buss MUST first obtain written consent - Real Prop: NEITHER spouse can transfer or encumber their share interest in RealProp CP. ONLY entire interest can be transferred or encumbered (joint consent)
If wrongfully conveyed, nonconsenting spouse can void and recover RealProp but must reimburse purchase price to TP
SOL: 1yr after FILING of doc of TRANSFER, after spouse cannot void transfer (except if TP knew RealProp is CP)
Exception: Spouse may encumber share in CP to pay family attorney
Separate Prop (CP)
1) Prop owned by either S before marriage
or
2) Prop acquired during marriage by Gift, Will, or Inheritance
or
3) Prop acquired during marriage w/the expenditure of SP (by tracing)
or
4) Rents, issue, and profits derived from SP
- Character may be altered by:
Agreement by the parties (prenup or postnup)
Conduct of parties
Form of title taken by the parties
Apportionment of Pension Benefits (CP)
DIVORCE
- Employee retirement Benefits accumulated during marriage whether or not vested at time of divorce are CP (like deferred compensation to CP)
Formula: Yrs of work while married divided by Tot Yrs of employment
(Yrs of work in marriage/Tot yrs of work) = CP
- If employee spouse is not yet eligible for retirement when divorced:
1) If and when amount: Spouse waits for her CP share when spouse retires
OR
2) Cash out: award other assets in equal value - If employee spouse is eligible to retire: Other Spouse get her CP share
DEATH
Governed by ERISA which trumps CA’s CP laws thus surviving spouse takes her share + deceased share
If she predeceases employee spouse, her interest is terminated
Educational Expenses (CP)
- CP gets reimbursement if CP used to pay for edu/training or to repay loan incurred for edu/training, AND edu/training SUBSTANTIALLY enhances the earning capacity of one spouse
- Reimburse even if edu loan is incurred before marriage but paid w/CP
- Balance on Loan is SOLELY assigned to educated spouse
- Defense: CP has substantially benefited from earnings of educated spouse
Fiduciary Duty and Undue Influence (CP)
S owe each other S fiduciary duties arising from their confidential relationship, imposing duty of good faith and fair dealing w/each other.
- Presumption of undue influence: presumption of UI if one S gains an advantage from a transaction. S has BOP to show no UI
Apportionment of Buss growth and profits (CP)
- For Buss owned BEFORE marriage and there is increase in value, apply BOTH formulas
1) Pereira: Personal Skill and Effort is primary cause of Buss’ substantial growth
Formula: Pay Interest 10% of Buss initial value x Yrs of marriage + Initial value = SP
[(10 x IValue) x Yrs + IV] = SP
Remainder is CP
2) Van Camp: Value of Community Labor is primary cause of Buss’ substantial growth
Formula: Value of Spouse’s service FMV x Yrs of marriage - Family expenses paid from CP Buss income x Yrs of marriage = CP
[(FMV x Yrs) - (CP expenses x Yrs)] = CP
Remainder is SP
- Goodwill of professional practice acquired during marriage is CP (established by EW)
Cannot limit by K outside of marriage
Tort and K liability (Comm Prop)
- S1 injures S2 = SP
- TP injures S1 = CP while married BUT
1) On divorce awarded ENTIRELY to injured Spouse so long as it was not already spent
2) On death: CP - S1 injures TP + judgment against S1: CP is subject to tort liab of EITHER spouse
Satisfy judgment: recovery (not imposition of liability)
1) If performing act for the benefit of the community (e.g. driving to work, kids) TP recovers from CP, then SP
2) If not performing act for benefit of community (e.g. driving to SP prop) TP recovers from SP then CP
– Cannot reach other Spouse’s SP (not personally liable)
Quasi-CP (RP)
- All prop (personal or RP) acquired by either spouse that would have been CP had the spouse been domiciled in CA at the time of acquisition.
- All prop treated as SP BEFORE decedent’s death OR BEFORE divorce (thus surviving spouse cannot dispose of quasiCP while acquiring spouse is alive), treated as CP AFTER death
- After divorce all prop is treated as QCP thus division equally by EITHER awarding similar asset in value OR order acquiring spouse to execute any conveyance necessary (because Pjx)
- On Death of acquiring spouse, personal prop is treated as QCP, RealProp is divided or not divided according to other State law where Prop is located (non-CP state = SP and no division)
Surviving spouse also may assert rights on QCP when T makes an illusory transfer to TP (T retains interest or control) and thus reclaim 1/2 of QCP
Prop acquired outside of marriage (CP)
- CL marriage (living together and taking title of prop as married couple w/o actual marriage) is NOT recognized in CA
Ownership: own prop as TIC
Exception: couple’s CL is recognized in original State then move to CA - P1 promises P2 to give all benefits of marriage but not form marriage = analysis based on K law
- P1 deceives P2 into believing marriage is valid + acquire prop = P are putative spouses AND Quasi marital prop (follow QCP rules)
Exception: Parties knew it was not a valid marriage
Acquisitions on credit during marriage (CP)
- CP funds to acquire prop = CP prop
- Comm Credit Presumption: Funds borrowed during marriage + prop purchased during marriage w/borrowed funds
- Debt acquired during marriage for SP + Creditor’s intent of debt to be SP (creditor relied on S’s SP) = SP debt BUT prop not covered by the debt is CP (e.g. during marriage S1 borrows $10K from bank as SPDebt to buy $20K prop = Prop is 50% SP and 50% CP)
Transmutation during marriage (CP)
- Change of character of assets from SP to CP, CP to SP, or SP of one spouse to SP of other spouse
- Transmutation can be made by:
1) Gift
or
2) Agreement: MUST in writing
Elements: - Writing: (e.g. K, or deed) Will or Revocable Trust is INADMISSIBLE as evidence while S is alive (operative at death)
Exceptions: NONE (no SoF, Estoppel, partial performance, etc) unless 1) nominal gift of personal nature under the circumstances of the marriage, or 2) Before 1985 Oral agreements are valid - Signed by spouse whose interest is adversely affected
- Express declaration of intent to change character
- NO consideration is required
- Defense:
1) Not signed voluntarily
2) Unconscionable Waiver of Spousal Support because a) not represented by IC, or b) provision are unconscionable at time of enforcement, decided BY the Ct as matter of law (not jury)
3) Unconscionable Waiver of anything else because a) unconscionable terms when made AND b) not full and fair disclosure of prop
Commingled Bank Accts (CP)
- Family Expense presumption: Expenditures for family expenses (food, housing, clothing, etc) are presumed to have been made w/CP funds even though SP were available
- BOP is on Spouse who commingled funds to show funds are SP by
1) Exhaustion method: account for CP balance and show expenditure exhausted CP funds and SP was used after
2) Tracing method: show sufficient SP funds were available AND spouse intended to use SP funds to buy the asset
Testamentary Gifts of CP
- NEITHER S can gift CP w/o other S’s written consent during lifetime
- At death S cannot devise more than CP share to TP + SP
- Widow’s election: When T attempts to dispose of more than 1/2 of CP or QCP in a will, it MUST be read as a whole or not at all:
1) Survivor spouse may accept gift in will in lieu of statutory share (taking under the Will)
OR
2) Renounce all benefits in Will and take ONLY S’ share of CP or QCP (taking against Will)
Community Prop (CP)
CA is a Comm Prop state. There is a Comm Property presumption that all assets acquired during marriage is presumptively CP
Other assets are classified as SP like:
1) Prop owned by either S before marriage
or
2) Prop acquired during marriage by Gift, Will, or Inheritance
or
3) Prop acquired during marriage w/the expenditure of SP (by tracing)
or
4) Rents, issue, and profits derived from SP
- Character may be altered by:
Agreement by the parties (prenup or postnup)
Conduct of parties
Form of title taken by the parties (Lucas case and anti-Lucas Statutes)
Community Property on Divorce
- EACH and ALL prop MUST be divided 50/50 (regardless of situation)
- Exceptions:
1) Economic Circumstances exceptions gives one asset to S and “cash out” other S w/other comparable assets
a) Fam Home: to prevent uproot of minor Cs (e.g. custodial parent keeps home, other assets to other S)
b) Closely Held Corp: (e.g. S is shareholder and on the BOD)
c) Pension: (e.g. award all of H’s pension to H and other assets to W)
2) Statutory exception:
a) Misappropriation: One S misappropriates CP before or during divorce
b) Edu debt: S incurs edu debt (treated as separate incurred debt)
c) Tort liab: if based on activity NOT for the benefit of the Community
d) PI award: award is CP, but on divorce awarded to injured spouse
e) Negative Community (comm liab > assets): relative ability of spouses to pay debt is considered
Creditor’s Reach (CP)
- Creditors of premarital debt can reach CP
Exception: Creditor of pre-marital debt cannot reach nondebtor spouse’s income if funds held in 1) separate acct, and 2) not commingled w/CP funds, and 3) debtor spouse has no right to withdrawal - Creditors of marital debt cannot reach SP (nondebtor spouse is NOT personally liable)
- K for necessities (e.g MD bills): Creditors of one spouse can reach CP until divorce (not just legal separation) then other’s SP (duty to support other spouse). SP can be reimbursed from Comm Estate
- After divorce: Creditor cannot reach CP awarded to spouse unless spouse 1) incurred debt, or 2) assigned debt by the Ct (debtor and spouse assigned debt are both liable)
