Community Property

Question 1

Statutory Definitions generally

Answer 1

apply UNLESS character of asset has been altered by 1. parties’ agreement, 2. Parties Conduct or 3. how title was taken

Question 2

Separate Property

Answer 2

1. Prop owned by either spouse BEFORE marriage OR
2. Prop acquired during marriage by GIFT, Will, or inheritance OR
3. Prop acquired during marriage by expenditure of Separate FUNDS
4. Rents, issue and Profits derived from separate property

Question 3

Community Property

Answer 3

Prop other than separate prop, acquired by either spouse DURING marriage.
Ex 1. Salary or wages, bonus, prize money, earned by either spouse AND
2. income from Community Assets

Question 4

Community Presumption

Answer 4

all assets acquired during marriage are PRESUMPTIVELY community property, even if taken in ANY joint form (JT tenants). Absent a showing of parties’ collateral agreement of SP or that title was taken in a way that overcomes the presumption. BOP that asset is Separate prop is on the party so contending

SAY:

1. CA is CP state
2. CP presumption where all assets acquired during M are presumptively CP
3. There are areas of Separate property remaining such as before marriage, gifts, sep funds spent, or income from sep property.

as of 2004, CA now extends CP system to REGISTERED DOMESTIC PARTNERS who file a declaration of Domestic Partnership w/ SoS, retroactive to Jan 1, 2000. Available ONLY to:

1. SAME SEX couple
2. elderly opposite sex couples receiving SS Benefits

Question 5

Termination of Economic community growth?

Answer 5

terminates before divorce when:
1. Permanent physical separation
AND
2. 1 party’s Intent not to resume marital relations

Ct has continuing jurisdiction to award CP not previously UNadjudicated at divorce. Will be 50/50 UNLESS “interests of justice require an unequal division”

Question 6

Distribution of CP and Alimony

Answer 6

(Disparity in earning power is considered ONLY as to Alimony and Child Support)

Absent agmt, EACH & EVERY ASSET MUST BE DIVIDED 50/50.
! doing non pro rata division to find result w/ = $ values is NOT Sufficient!

UNLESS
1. ECONOMIC CIRCUMSTANCES EXCEPTION - (equal division rule)
can non pro rata division of assets w/ each spouse getting 50% of total value IF:
-Family Residence (hurts kids)
-Closely Held Corp
-Pension (all P to H vs assets to W - they can each be independent)

2. STATUTORY EXCEPTIONS w/ 1 spouse ending w/ MORE than 50% of total value!
   -1 spouse MISAPPROPRIATES CP before or during divorce
   -1 spouse has incurred educational debts (treated separately carry w/ you)
   -1 spouse incurred TORT LIAB, NOT based on act for benefit of community
   -TP Tort Personal Injury award is CP,
   but at DIVORCE goes to victim only so long as:
3. can be traced and
4. not already spent,
   Unless interests of justice requires diff (econ need)

at DEATH - it is CP

• BUT, if spouse is tortfeasor, award is SP
• “Negative Community” - Community liabilities exceed assets and relative ability of spouses to pay debt considered to protect creditors.

Question 7

GIFTS of CP /Testamentary power of CP

Answer 7

NO POWER to make GIFTS of CP w/o WRITTEN CONSENT of spouse! 1/2 belongs to spouse!

Spouse can SET ASIDE gift in its entirety OR
on divorce/death take assets to recover her 1/2

FEDERAL PREEMPTION EXCEPTION - can Gift US Gov savings Bond, Fed Preemption

Question 8

Widow’s Election Will

Answer 8

Widow cannot read will selectively.
W must TAKE UNDER THE WILL as written
OR
Take AGAINST THE WILL and claim her 1/2 of community property. But then she relinquishes all testamentary gifts in her favor!

Question 9

Community Credit Presumption / Mortgage/Debt

Answer 9

Funds Borrowed during Marriage AND
Goods purchased during Marriage are presumptively CP.

BUT, TEST: borrowed funds and credit purchases are classified by PRIMARY INTENT of the LENDER. (where he looks to satisfy debt).

ex. credit standing, rep/standing in commty = CP
Sep land as security = SP

Question 10

Fiduciary Duties

Answer 10

Spouses have Fid duties that arise from their Confi relationship. Highest good faith & fair dealing w/ each other.

1 spouse cannot gain an advantage from a transaction or PRESUMPTION OF UNDUE INFLUENCE. Spouse has BOP To prove did NOT breach duty.
-Gross NEG or RECKLESS investment of Community prop is a breach of fid duty!

Question 11

OPT OUT

Answer 11

parties can opt out of statutory duties before or during marriage.

Question 12

transmutation

Answer 12

DURING marriage, character of property has changed by Gift or Agreement. (Ex. gift of inherited jewelry to spouse)

NO CONSIDERATION required for Pre-marital agmt or Transmutation.

BEFORE 1985 - could be ORAL, written, or inferred from conduct
vs
AFTER 1985 - All transmutations must be
1) in WRITING,
2) SIGNED by spouse whose interest is adversely affected and
3) must explicitly State that a change in ownership being made
Usual exceptions will NOT apply (Sof, Estoppel, partial performance)

1 EXCEPTION to 85 requirements-
gifts of tangible property of personal nature (jewelry) which are “NOT substantial in value taking into account the circumstances of the marriage”

CAREFUL! By statute, any proceeding started before death of person who made will/revocable trust or made statement about them is NOT ADMISSIBLE as evidence of Transmutation.

Question 13

PreMarital Agmt

Answer 13

Generally, MUST be

1. in Writing
2. Signed by both parties

2 Exceptions:
1. Oral Agreement is fully performed already (marriage is not evidence of performance)
or
2. Estoppel based on Detrimental Reliance (lack of writing won’t bar evidence of oral promise)

-Can pretty much agree to anything UNLESS it is void against public policy: limit on child support, sexual services

DEFENSES to Pre Marital Agmt:
1. NOT signed VOLUNTARILY

CA presumption INVOLUNTARY unless:
a. Representation by Indie Counsel
b. given at least 7 days to sign
and
c. if no indie counsel, fully informed in clear writing of terms and basic effect of agmt. and
d. party SIGNS doc declaring she got info and identifying who provided it.

2. Unconscionability -
   a. not enforceable if movant proves
3. unconscionable when executed AND
4. party did not and could not have Adequate knowledge of wealth of other party and
5. did not waive her right to disclosure of such wealth in writing

b. SPOUSAL SUPPORT Provision Unenforceable IF
1. Party challenging it did not have indie legal counsel OR
2. even if counsel, provision was unconscionable @ time of enforcement.

Question 14

Title and Married Woman’s Special Presumption

Answer 14

prop acquired BEFORE 1975:
where CP used to take written title in a “married” woman’s name
AND
title did NOT indicate STATUS - CP or JT, prop is PRESUMPTIVELY Wife’s SEPARATE Prop.
(even if another TP is listed too then T in common w/ Wife)
Policy: H was sole mgr of prop; must’ve intended as gift

• presumption IS rebuttable as to Husband - can show H had different intent, or W managed property
• presumption NOT rebuttable as to TP BFP who buys from W in reliance on her ownership

3 situations - before ‘75
1. title in W’s name ALONE, = W’s SP
2. Title in name of W&H, w/o marital reference (not taken in JT form, husband & wife, or MR/Mrs.
= 1/2W SP, 1/2 CP
3. Title in name of W and TP= W and TP Ten in Common

Question 15

Joint and Equal Form

& LUCAS

Answer 15

means title lists both spouses Names “H and W Smith” (CP Form),

LUCAS Statutes apply ONLY IF Joint & Equal Form (CP):
IF Death –> Marriage of LUCAS Rules:
If H/W take title in joint form, it is INCONSISTENT w/ preservation of SP. Any SP used to help acquire asset is presumed GIFT, unless ORAL/written agmt to contrary.
-NO SP ownership & NO claim for Reimbursement of improvements (subjective intent irrelevant)

**If NOT taken in Joint/equal form -TRACE, Source Rule

If Divorce - Jointly titled assets acquired BEFORE 1984 governed by Lucas.

vs
IF Divorce 1984 or AFTER- CA ANTI LUCAS Statutes (use both)

1. Ownership Fam §2581 - prop acquired during marriage in Joint and equal form is still PRESUMPTIVELY CP & subj to equal division on divorce, BUT REBUTTABLE BY:
   a. Express statement in deed/ or Title document that Prop (or portion) is SP (receipt NOT suff)
   OR
   b. in sep Written Agmt by parties that prop (or portion) is SP

**If no deed/Title Doc -CAN TRACE, use Source

2. Reimbursement Fam §2640 - spouse who made contribution of SP to acquisition or improvement of CP is entitled to Reimbursement w/o interest for contributions to DIP:
   Down payments,
   Improvements or
   Principal payments on mortgage. (NOT MIT maintenance, interest, taxes or)

Question 16

Trace or Source Rule

Answer 16

Determine where the funds came from to determine the type of property

Question 17

ProRation Rule

Answer 17

Installment Purchases, or WHOLE LIFE INSURANCE, or House BEFORE Marriage and Debt paid w/ CP DURING marriage w/ CP (or gift during marriage and DEBT/LIEN paid off during marriage w/ CP funds)

Use Moore Pro Rata Formula
=
Community takes Pro Rata Portion of Property measured by % of PRINCIPAL Debt Reduction attributable to the expenditure of community funds (NOT interest, taxes, or insurance)

ex. community paid 20% of debt, community owns 20% of value.
CP gets amount invested back + 20% appreciation
SP gets amount invested back + 80% appreciation

VS
TERM life insurance - LAST premium determines the Character!!

Question 18

Doctrine of Fixtures, Improvements

Answer 18

A. Must REIMBURSE if Feathered OWN Nest -
expends CP to improve OWN SP, Reimburse greater of CP or increase in value

Improvements (paid by CP funds) that BECOME part of SP Real Property, will NOT CHANGE ownership character of SP house. (house Bought before marriage); NO CP % share
BUT
Divorcing spouse CAN file for REIMBURSEMENT:
-Gets Greater of:
1) CP expenditures
OR 2) increase in value
(Anti Lucas won’t apply bc SP here!)

VS
B. Feather’s SPOUSE’S Nest
expends CP on Spouse’s SP - split

H’s Salary (CP funds) used to Feather W’s SP House; upon Divorce…
SPLIT
1. NO reimbursement - presumption of gift to Spouse’s SP; Can be overcome ONLY BY evidence of agmt to reimburse community
vs
2. YES REIMBURSEMENT - rejects presumption of gift and grants reimbursement

Question 19

Summary of Reimbursements

Answer 19

SUM -
1. expends CP to improve OWN SP, Reimburse greater of CP or increase in value

2. expends CP on Spouse’s SP - split
3. if SP on CP -
   Death (Lucas) vs Divorce (Anti Lucas Ownership and Reimbursement/DIP)

Question 20

accounting, commingling

Answer 20

Recapitulation -
add up all community funds and then subtract all community expenditures. The remainder or any items that were bought outside of the remainder funds are considered SP.
FAMILY EXPENSE PRESUMPTION -cp funds

BUT Problem - when CoMINGLING, does NOT show CP funds were UNavailable at time asset purchased.

• Mere fact that SP and CP funds were commingled does NOT make SP funds into CP.
• BOP on challenger to show EACH ASSET was purchased w/ SP funds. Can use:

1. EXHAUSTION Method - examining each transaction to show CP exhausted and SP had to pay each time
   or
2. DIRECT TRACING Method (quick in quick out)
   Deposit specific amount of SP funds and quickly use to pay something of same amount.
   REQUIRES:
   a. Sufficient Separate funds were available
   and
   b. H intended to use SP funds to buy asset

Question 21

FAMILY EXPENSE PRESUMPTION

Answer 21

Presumed that expenditures for Family expenses (food, clothing, housing, recreation) made w/ Community funds (to extent available) even if Separate funds were available.

IF CoMingling, some may have been paid w/ SP funds which are PRESUMED GIFT to community w/o Reimbursement.
UNLESS you have AGMT TO Reimburse.

Question 22

! Business that increased in value during marriage !! (started before marriage or w/ SP)

Answer 22

2 Tests that Favor Community,
Ct can select best for substantial justice betw parties
1. Pereira & 2. Van Camp AND 3. maybe Goodwill!

1. Pereira, think P: PERSONAL skills & Effort - *Owner keeps orig value PLUS, 10% Interest Annum on SP @ time of marriage;
   Balance is CP

Increase in business from Community Effort
-Spouse’s time, skill, effort are major factors in growth of business. Spouse had creative ideas, developed new techniques, long hours, modest salary, no vaca, spouse watched kids

2. Van Camp, think VC: Valuable Comp. or Asset
   *Value Community Labor; rest is SP
   *(Market Rate of Salary MINUS Family expenses PAID from CP funds) X yrs married = CP,
   Balance is SP

• Capital Investment is major factor in Biz growth, business itself has value bc of its nature; Not skill, spouse paid substantial salary, large bonuses (community compensated), lucky, good timing
  3. goodwill = CP (business started during marriage)

Question 23

Pension and Employment Payments

Answer 23

EE retirement benefits accumulated DURING marriage are CP, whether or not vested at time of DIVORCE (deferred compensation).

Use Proration Time Rule to determine division: 
CP =
Years Served while married 
       /
total yrs employed

Form (if NOT yet eligible/matured)
1. IF & WHEN received - spouse gets the share
or
2. Cash her out at divorce by awarding other assets of equal value

IF MATURED/ELIGIBLE in qualified plan -

FEDERAL LAW PREEMPTION - ERISA trump CP!
NO DEVISABLE right if Spouse predeceases Pension recipient, right terminated under ERISA.
-Non Participant Spouse gets Qualified Domestic Relations Order and receives payments from Plan

Disability and Worker’s Compensation -
CP ONLY IF intended to replace marital Earnings OR retirement benefits.
BUT these Wage Replacement classified WHEN RECEIVED, NOT when earned.
*Spouse CANNOT ELECT disability recovery rather than retirement in order to defeat CP interest

!!! SEVERANCE pay -
SPLIT
1. severance is SP bc replaced lost FUTURE earnings which after divorce/sep is SP
OR
2. severance is CP bc arose from collective bargaining and was thus earned by employment during marriage

Question 24

Stock Options !!

Answer 24

Form of EE compensation and are treated as CP or SP depending on when they were earned.

if awarded DURING marriage, but does NOT vest until AFTER marriage, use PRORATION Time Rule.

*FORMULA Depends on Primary Intent of EMPLOYER in granting option. (Hug v Nelson)

1. Marriage of Hug Proration Formula -
   if awarded primarily to reward for PAST services as deferred compensation (HUG for good job!)

subj to equal division on divorce; CP =

yrs FROM date of employment TO date economic commty Ended
/
yrs FROM date of employment TO date option becomes exercisable

VS

2. Marriage of Nelson Formula -
   If awarded to encourage X to remain with company (Nelson, you should stay!)

subj to equal division on divorce; CP =

yrs from DATE OPTION GRANTED TO date econ commty Ends
/
yrs FROM date option granted TO date option becomes Exercisable
x
# shares of stock avail for purchase

Question 25

Goodwill of Business

Answer 25

(Business started during marriage)
Qualities that generate income beyond that derived from labor and reasonable return on capital and physical assets.

CP, to extent acquired DURING marriage, subj to division upon divorce. Value established by expert witness

2 METHODS OF VALUATION!!
1. Market Sales Valuation -
the price goodwill would command in sale of business or profession
OR
2. Capitalization of Past Excess Earnings -
Values goodwill in earner’s hands - usually higher
ascertains present value of the future stream of income goodwill developed during marriage will generate in the business

-Cap on buyout by partners is only a factor for Ct, but not conclusive

Question 26

Educational Expenses

Answer 26

Professional degree is NOT Community asset divisible upon divorce.
BUT,
spouse entitled to REIMBURSEMENT for costs (including interest) of education costs/loan paid by CP IF education “enhanced spouse’s earning capacity.”

DEFENSES - Rebuttable Presumptions
1. Presumption Community has already substantially benefitted from earnings of educated spouse, IF More than 10 yrs elapsed since degree awarded. No reimbursement.
OR
2. Spouse also received CP funded education
or
3. need for Payor’s spousal support was reduced by education or training

*Loans assigned SOLEY to party who incurred Educational Debt.

Question 27

Tort Liability

Answer 27

-Tort Recovery from TP accident is CP, but SP upon divorce
Tort LIABILITY - Creditors
CP subject to tort liab of EITHER Spouse,

1. If W was performing Act FOR benefit of community (driving kids to school, to work)
   RESULT - recovers 1st from CP, THEN SP
   VS
2. If W NOT performing act for Community
   Result - recovers 1st from SP, then from CP

BUT, other spouse NOT involved can NOT be held PERSONALLY liable (SP).

Question 28

Management Rules

Answer 28

Generally, EQUAL and Separate Mgmt POWERS and Control over all CP, and full power to buy or sell CP and CONTRACT Debts W/O other spouse’s joinder or consent.

Exceptions
1. CP REAL PROPERTY - Conveyances Require JOINDER of BOTH spouses.
VOIDABLE, SOL = 1year; BFP is Out of Luck!
**if Buyer KNEW it was CP = NO SOL

CANNOT convey 1/2 CP REAL prop interest, only ENTIRE interest. UNLESS it is to pay family attorney for Divorce…

2. Personal Belongings Exception - 1 spouse cannot sell/encumber PERSONAL prop used in FAMILY DWELLING w/o written consent
   Result: VOIDABLE by spouse anytime
3. Business Exception - Spouse who has primary/mgmt & control of business interest that is all or substlly all Community PERSONAL property, can act alone but must give WRITTEN NOTICE if going to sell/lease or encumber substlly all of the personal prop used in business.
4. Bank accounts in name of 1 spouse alone

Question 29

Debts of marriage AND Protection Exception!

Answer 29

BEFORE marriage ONLY -
Creditor can STILL reach CP, (but NOT non debtor SP personally)
EXCEPTION - can’t reach CP IF:
1. earnings of NON debtor spouse held in SEPARATE account (debtor spouse has NO right of Withdrawal)
and 2. NOT commingled w/ other CP funds

Child Support from previous marriage? treated as Debt before marriage:
STATUTORY REIMBURSEMENT :
non debtor spouse can seek REIMBURSEMENT of CP Funds paid to debt so long as debtor had sufficient SP funds he could’ve used.

AFTER marriage -
After divorce, creditor CANNOT reach CP awarded to spouse UNLESS that spouse
1. incurred the debt
or 2. Assigned debt by court.

Question 30

Medical Bills

Answer 30

Under Family Code, EACH spouse has DUTY to support other spouse and minor children. So Spouses PERSONALLY liable for Contracts for Necessities (medical bills)
BUT, if CP funds are available to pay, spouse can be REIMBURSED from CP estate.

*OBLIGATION SURVIVES until DIVORCE! NOT @ separation w/o intent to resume….

Question 31

Multi State Rule, Quasi CP

Answer 31

Property acquired while spouses DOMICILED in NON CP state, which WOULD HAVE been CP if acquired under SAME circumstances In CA

NON Acquiring spouse of QCP does NOT get share unless survives/divorces spouse. IF predeceases - no right. So non acquiring spouse of QCP gets protection ONLY if survives acquiring spouse.

Divorce -
QCP Treated same as CP = 50/50.

Death -
“Foreign real property”= prop in other state, Foreign law controls Real Prop on Death of Acquiring spouse, NOT QCP.

QCP - non acquiring spouse who dies 1st has NO ownership interest to pass by will

IF prop from CP state, stays CP

• For purposes of Creditor Rights (no divorce/death) QCP is treated as CP!

Question 32

Property acquired OUTSIDE marriage

Answer 32

Lawful marriage requires both legal capacity and performance of legal procedures.

1.PUTATIVE SPOUSE - not lawfully married but g/f belief that she is legally married.
TEST -
whether she had objectively reasonable G/F belief that they were LAWFULLY married.
IF YES? “QUASI MARITAL Property” 50/50.
*1 ct says if lying spouse in b/f, he is NOT entitled to 1/2

2. NO CL Marriage- UNMARRIED COHABITANTS
   CA does NOT recognize CL marriage,

UNLESS CL marriage is Valid from ANOTHER state. So, Prop purchased together would be Tenants in common, 1/2 each.

• persons who reside together but who are neither lawful spouse nor pur putative spouses.

“SP unless CONTRACT law says otherwise (that doesn’t violate public policy) express or implied from conduct

Question 33

Equal Division Rule

Answer 33

if 1 spouse must get prop (like house) that shouldn’t be split, give other spouse equal prop value to even out.

Question 34

Personal Injury Awards

Answer 34

CP if C/A arose DURING marriage. Otherwise SP. At divorce, injury awards become SP to Victim Spouse UNLESS interest of justice requires otherwise. PI awards against spouse, are always SP.

Question 35

Federal Preemption

Answer 35

Under Supremacy clause, fed law preempts inconsistent state laws, including CA CP law.  
Preempted:
1. Fed homestead claims
2. military life insurance benefits
3. US Savings Bonds
4. Social Security benefits

NOT preempted
1. Railroad retirement benefits
2. Military retirement benefits
3. Copyrights
Royalty payments are measured at time of creation, NOT distribution.  So if wrote book Before marriage, royalties remain SP.

Question 36

Essay Approach

Answer 36

1. Basic Presumptions and Definitions
2. Identify Special Issues (transmutation, Death or Divorce or Creditor)
3. Separate each Item / Isolate Liabilities
4. Identify Character of each Item, special rules
   a. Source
   b. Actions to change
   c. Presumptions
   d. Disposition
5. Fed Preemptions

Question 37

Commingling of Funds, Probate

Answer 37

Probate Code refuses to make any gift presumption from form of title taken on commingled bank account. ALLOWS TRACING of sep funds unless parties agreed otherwise.
2 ways
1. Exhaustion Method - CP funds in acct already exhausted by payment of family expenses
2. Direct - Suff sep funds available at all times, quick in/out

Question 38

Form of Title

Answer 38

at death, stays that form (if JT, stays JT)
at divorce, JT is CP
Creditor, CT is CP