COMMUNITY PROPERTY Flashcards
1
Q
Separate Property is: (statutory definition)
A
- Property owned by either spouse before marriage; or
- Property acquired during marriage, by gift, will, or inheritance; or
- Property acquired during marriage with the expenditure of separate funds.
- The rents, issue, and profits derived from SP.
2
Q
Wi inherits $10,000 from mother’s estate, which she uses to buy IBM Stock. Is the IBM stock SP or CP?
A
SP because of the tracing or source rule. Because she used the inheritance which was SP to purchase the IBM stock it is SP.
3
Q
What is the statutory definition of community property?
A
Property, other than SP, acquired by either spouse during marriage.
Most common examples=
• salary or wages earned by either spouse
• income from community assets
4
Q
Prize money won by W on quiz show is ____. Bonus paid by H’s employer which was wrapped in gift box is _________.
A
Both = CP
- prize money was acquired from wife’s labor
- bonus= compensation, not a gift.
5
Q
What is the community presumption?
A
All assets acquired during marriage are presumptively CP. Absent a showing of the parties’ agreement or that title was taken in a form that overcomes the community presumption, the burden of proof that a particular asset is separate property is on the party so contending.
6
Q
As of 2004, the community property
system applies to registered domestic partners upon filing a Declaration of Domestic
Partnership with the Secretary of State, retroactive to January 1, 2000. It is available only to (i)
____________, and (ii) __________________.
A
same-sex parties; elderly opposite-sex couples receiving social security benefits.
7
Q
Because the In re Marriage cases of 2008 deemed that banning same-sex marriage was unconstitutional and came before Prop 8, ____.
A
Same-sex couples married after the In re Marriage cases in 2008 and before Prop. 8, may claim community property rights as spouses, not domestic partners.
8
Q
Every community property answer should start with:
A
- CA is a commnity property state.
- There is a community presumption where all assets acquired during the marriage are CP,
- There are areas of SP like:
• Property owned by either spouse before marriage; or
• Property acquired during marriage, by gift, will, or inheritance; or
ª Property acquired during marriage with the expenditure of separate funds.
• The rents, issue, and profits derived from SP.
9
Q
When does the economic community end?
A
- Permanent physical separation
2. Intent not to resume the marital relationship (only need one party).
10
Q
Hal and Wynn, having difficulties in their marriage, agree to a trial separation for six
months. Hal moves into his own apartment on May 10, 2005. When the trial period ends
November 10, 2005, Hal and Wynn discuss their future. Hal, who still is in love with Wynn, begs
her to “give me another chance,” but Wynn tells him that “the situation is hopeless.” Wynn
files for divorce in March 2006. Between May 10 and Nov. 10, 2005, Wynn invests $15,000 of
her earnings to buy 300 shares of Able stock. Between November 10 and the time of filing for
divorce, Hal invests $10,000 of his earnings to buy Baker stock.
When did the economic community end?
Characterize the stock:
A
Economic community ended Nov. 10.
Able stock (acquired between May 10 and Nov. 10) is CP
Baker stock (acquired after Nov. 10 and before divorce filing) = SP
11
Q
Doctor Harry leaves Wanda and moves in with his nurse. Harry and the nurse set up
housekeeping on a houseboat in Marina Del Rey. Thereafter, Harry never had sex with Wanda.
But Harry occasionally went home to eat with Wanda and the kids, took Wanda to dinner on
several occasions, took Wanda along to medical association meetings, and (classy guy) regularly
took his laundry home.
o Does this show the intent of either party not to resume marital relation?
A
No, court held that they had upheld the facade of marriag.e Until they filed for divorce, CP.
12
Q
During marriage to Hal, Wendy (a law professor) wrote a casebook published by West
Publishing Co. The book was not mentioned in the divorce proceeding. Six months after the
divorce Wendy receives an $8,000 royalty payment from West. Wendy contends that the
$8,000 is her SP because she owned the copyright and she now owns the book. Is she correct?
A
No. The copyright and all royalty payments were CP because she wrote the book during the marriage.
** But if Wendy wrote the book before marriage, royalty payments would be SP,
even if received during the marriage.
13
Q
For community property not divided on divorce, the court retains ___________
to award CP that was not previously adjudicated, and on motion the omitted or
unadjudicated CP will be divided 50-‐50 unless the court finds that the interests of justice require an unequal division.
A
continuing jurisdiction
14
Q
At the time of their divorce, H & W own the following assets as community property:
• a house ($300,000);
• furnishings, cars, and other tangible personal property ($20,000);
• and stocks and bonds ($500,000),
for a total of $820,000. H is an engineer; W (who has only a high school education) has not worked since their first child was born.
Citing the disparities in earning power and career potential of the parties, and the fact that W was awarded custody of the couple’s minor children, in making a division of CP the trial court (a) divides the tangible personal property equally; (b) awards the house to W; and (c) awards $200,000 of the securities to W and $300,000 to H. As a result, W takes property worth $510,000 and H takes property worth $310,000. Proper?
A
No. Absent a property settlement agreement, all community property must be divided equally. 50/50
Disparity in earning power can be considered only as to spousal support (alimony) & child support.
15
Q
Disparity in earning power cannot be considered for ____________ and can only be considered as to ___________ and __________.
A
division of community property; alimony (spousal support); child support
16
Q
Suppose that the court divided the tangible property upon divorce equally ($10,000 each),
awarded the house ($300,000) to W, and awarded securities worth $100,000 to W and
$400,000 to H, with the result being that each ends up with assets worth $410,000.
Was this non-‐pro rata division proper?
A
General rule = no. Each an devery community asset (and liability) must be divided 50/50.
Exceptions:
• Economic circumstances exception
• famly residence
• closely held coporation
• pension
• Statutory exceptions
• one spouse misappropriates CP
• educational debts of one spouse
• tort liabilit not based on activity for the
benefit of the community
• Personal Injury award given to injured
spouse
• Negative community: community
liabilities exceed assets; relative ability
of spouses to pay debt is considered
(concern is to protect creditors)
17
Q
What are the exceptions to the general rule that all communitiy property must be divided 50/50 meaning each piece of property must be divided 50/50?
A
- Economic circumstances: can give particular asset wholly to one spouse and cash out other spouse with other assets (each spouse gets 50% of total value). E.g.:
• Family residence (very common) (children)
• Closely held corp.
• Pension: allows them to go separate ways - Statutory: Where one spouse ends up with more than 50%:
• 1 spouse misappropriates CP, whether
before or during pendency of divorce
• 1 spouse has incurred educational debts
• 1 spouse has incurred tort liability not
based on activity for benefit of the \
community
• personal injury award on divorce is
awarded to injured spouse (unless
interests of justice require otherwise).
• negative community: community liabilities
exceed assets; relative ability of spouses
to pay debt is considered (to protect
creditors)
18
Q
Unbeknownst to Winkie, Hobie gives Apple stock (CP) worth $40,000 to his deadbeat
brother Buddy. When Winkie finds out about the gift (the stock is then worth $100,000), what
are her options?
A
- Winkie can set the gift aside in its entirety because neither spouse can make a gift of CP without the other spouse’s written consent.
- Alternatively, on divorce, W can take equal offsetting CP assets to recover her 1/2 CP.
3.
19
Q
Unbeknownst to Winkie, Hobie gives Apple stock (CP) worth $40,000 to his deadbeat
brother Buddy. When Winkie finds out about the gift (the stock is then worth $100,000), what
are her options if she only learns about the gift after H’s death?
A
- W can set the gift aside as to her 1/2 community property.
- W’s recovery will be either from the donee or H’s estate; whichever is easitest.
The same result would apply if Hobie, the insured under a $100,000 CP life insurance
policy, names a third party as a beneficiary (e.g., girlfriend). Winkie can recover her
½ CP, from either the beneficiary OR Hobie’s estate.
20
Q
Generally, the power to manage CP is not equal to the power to give it away. What is the exception?
A
When US gov’t savings bonds are involved.
Here, there is federal preemption.
So even if Hobie uses $20,000 CP to buy United States Series EE Savings Bonds in the name of “Hobie, payable on death to Buddy,” Winkie cannot recover her ½ community interest in bonds.
21
Q
Harry buys Blackacre with community funds. Not being totally familiar with
California’s community property system, and because the deed conveying Blackacre names
Harry as grantee, Harry thinks Blackacre is his SP. He dies leaving a will that says:
- I, Harry, own Blackacre as my separate property. I devise fee simple title therein to
my sister Sally. - I give and bequeath all the rest, residue, and remainder of my property to my wife
Wanda if she survives me, otherwise to my brother Bob.
At the time of H’s death, Blackacre is workth $100,000. H & W owne other community property worth $400,000.
A
No. Each spouse has the power of testamentary disposition over all of his SP, but only over 1/2 of the CP.
No. Widow’s Election Will.
Harry’s will purports to bequeath the entire interest in a community asset. Wanda has therefore been put to a choice (an election) she cannot read the will selectively ( I’ll take the residuary estate under ¶ 2, but protest the gift of ¶ 1). Rather, she has to read all of the
will. If Wanda elects to take under the will and receive her residuary estate, she will take 1//2 of Harry’s CP ($200,000), but she has to allow
the will to operate to devise Blackacre to Sally.
Alternatively, Wanda can elect to take against the will, by claiming
her ½ CP in Blackacre. But she then must relinquish all testamentary
gifts in her favor. In this case, Harry’s will is read as though Wanda died before him, meaning that Wanda does not take Harry’s 1/2 CP in residuary estate under ¶ 2 of the will.
Wanda should take under the will. If she takes under the will, she will wind up with $400,000 (her
1/2 CP ($200,000) + Harry’s 1/2 CP ($200,000). If she elects against the will, she will wind up with $250,000 (her ½ CP ($200,000) + ½ Blackacre ($50,000).
22
Q
Hal buys a lot near Big Bear Lake for $50,000, paying $10,000 in community funds and
$40,000 with a loan from Bank. At the Bank’s insistence, Willow signs the note for the loan along with Hal. The deed to the lot names Hal as the grantee.
At the time of purchase, the lot is at least _______ CP.
A
20% becuase of the $10,000 down payment from community funds.
23
Q
Funds borrowed during marriage and goods purchased during marriage are _________________. This is the _____________. However, borrowed funds (and credit purchases) are classified according to the ________________. We look at where the lender is looking for satisfaction of the debt.
A
presumptively community credit; community credit presumption
primary intent of the lender
24
Q
Hal buys a lot near Big Bear Lake for $50,000, paying $10,000 in community funds and
$40,000 with a loan from Bank. At the Bank’s insistence, Willow signs the note for the loan along with Hal. The deed to the lot names Hal as the grantee.
What would be the result if the lender was primarily relying on Hal or Willow’s general standing in the community, or was relying primarily on Hal’s personal creditworthiness or reputation?
A
The note would be a CP obligation, and the lot would be CP.
25
Hal buys a lot near Big Bear Lake for $50,000, paying $10,000 in community funds and
$40,000 with a loan from Bank. At the Bank's insistence, Willow signs the note for the loan along with Hal. The deed to the lot names Hal as the grantee.
What would be the result if the loan was secured by a mortgage on land in Los Angeles
worth $50,000 which Hal owns as his SP?
The note would likely be a SP obligation; the lot would be 20% CP and 80% SP.
But remember, the controlling test is the primary intent of the lender. Thus it still coudl be shown that (e.g.) the Bank was primarily looking to Hal's credit standing, in which case the note and lot would be CP.
26
Spouses are subject to __________ that arise from their confidential relationship, imposing
a duty of the highest good faith and fair dealing with each other. If one spouse gains an
advantage from a transaction, a ___________________. That spouse has the
_______________to show she did not breach her fiduciary duty.
fiduciary duties; presumption of undue influence arises; burden of proof.
• Under a 2002 statute, a grossly negligent and reckless investment of community funds is
a breach of a spouse's fiduciary duty.
•Example: if H invests community funds in Alchemy, Inc., a start-‐up company with a
"sure-fire formula to turn lead into gold," it would be a presumptive breach of the H's fiduciary duty.
*This can't just be something stupid--it's gotta be fucking absurd.
27
Under a 2002 statute, a __________________ is
| a breach of a spouse's fiduciary duty.
a grossly negligent and reckless investment of community funds
28
Absent any contrary agreement, the statutory definitions of SP and CP control. But California
has always allowed the parties to opt out of the CP and SP characterizations by agreement,
either as to _____________ or as to ______________.
particular assets; all acquisitions
29
Agreements can be made before marriage, and thus governed by the _________; or be made during the marriage.
When, by agreement during the marriage the
character of an asset is changed (from SP to CP, from CP to SP, or from one spouse's SP to the
other spouses SP), this results in a __________. Transmutation can be by _______ (e.g., H gives
jewelry inheriited from his mother to W on her birthday, jewelry is W's SP), or by ___________.
Uniform Premarital Agreement Act
transmutation
gift
agreement
30
What is a transmutation? In what 2 ways can one occur?
Transmutation is when during the marriage the character of an asset is changed (from SP to CP, from CP to SP, or from one spouse's SP to the other spouse's SP).
Can occur by gift or agreement.
31
What is the general rule for premarital agreements?
Premarital agreements must be in writing, signed by both parties. Oral agreements are invalid.
Exceptions:
1. Where oral agreement is executed (fully performed)
2. Estoppel based on detrimental reliance.
32
What are the 2 exceptions to the general rule that premarital agreements must be in writing and signed by both parties?
1. Where oral agreement is executed (fully performed)
2. Estoppel baed on detrimental reliance.
E.g. of #1:
To induce Winkie to marry him, Hobie orally agrees to name her as beneficiary of his
$100,000 life insurance policy. The parties marry, and Hobie changes the beneficiary
designation to make Winkie the beneficiary. Later, after a heated argument, Hobie changes his
policy to make his sister Sue the beneficiary. Hobie dies shortly thereafter. Winkie now sues
Sue, offering proof of the oral agreement; Sue contends that evidence of the agreement is
barred by the writing requirement for premarital agreements.
Winkie argues that her marrying Hobie in reliance on the agreement is sufficient
performance of the oral contract to make it an exception to the writing
requirement. Is she correct?
• No. Marriage alone is not sufficient performance to make it an exception to the writing requirement because that would eliminate the writing requirement in every case.
E.g of #2
Wanda (who is single) executes a will leaving all of her property to her nephew
Norman. Wanda later meets Howie. Howie agrees that if Wanda marries him, he will make no
claim against W's estate at the time of W's death. They marry. Wanda dies, and
Howie brings a claim for his share of the of the will against W's estate (which he would otherwise get under CA's omitted spouse statute)
• In probate court, evidence of Howie's oral promise is offered by independent witnesses. Howie argues that the evidence is inadmissible because of the premarital agreement writing requirement. Is the evidence admissible?
Yes. Wanda relied on Howie's promise, and he is now estopped from asserting the writing requirement.
33
To induce Winkie to marry him, Hobie orally agrees to name her as beneficiary of his
$100,000 life insurance policy. The parties marry, and Hobie changes the beneficiary
designation to make Winkie the beneficiary. Later, after a heated argument, Hobie changes his
policy to make his sister Sue the beneficiary. Hobie dies shortly thereafter. Winkie now sues
Sue, offering proof of the oral agreement; Sue contends that evidence of the agreement is
barred by the writing requirement for premarital agreements.
Winkie argues that her marrying Hobie in reliance on the agreement is sufficient
performance of the oral contract to make it an exception to the writing
requirement. Is she correct?
Winkie argues that evidence of Hobie's actions is still admissible to prove the
existence of a premarital agreement as to the insurance. Is she correct?
1. No. Marriage alone is not sufficient performance to make it an exception to the writing requirement because that would eliminate the writing requirement in every case.
2. Yes. By naming her as beneficiary, Hobie did what he promised and acted consistently with the existence of a contract. This conduct substitutes for requirement of writing.
34
In a premarital agreement, what can parties agree to? What is the exception?
Just about anything.
Exception: parties cannot agree to limit either party's contribution to furnish child support. Prohibited by statute.
35
In a premarital agreement, what can parties not agree to?
to limit either party's contribution to furnish child support. It is prohibited by statute.
36
What are the 2 defenses to enforcement of a premarital agreement?
1. Not signed voluntarily
| 2. Unconscionability
37
What is the background to the "not signed voluntarily" exception to the enforcement of premarital agreements?
Marriage of Bonds (Cal. S. Ct. 2000): in 1987, on trip to Montreal, BB meets Swedish masseuse. Whirlwind courtship; BB's lawyer drafts premarital agreement saying each keep earnings as SP. She was told she should get an attorny; declines, saying "that is the way we do it in Sweden." Flew to Vegas and married next day. Marriage doesn't last, she tries to render agreement unenforceable, saying not signed voluntarily. Court held agreement enforceable, reasoning it was an informal wedding and she could have postponed it if she wanted attorney to review the agreement. Court suggested that it would have been different if she was presented with take-‐it-‐or-‐leave it agreement 30
minutes before formal wedding. California legislature not happy.
2001 statute (response to Bonds) -‐ A premarital agreement shall be deemed not
voluntary (and thus unenforceable) unless court finds that party challenging
agreement:
i. Was represented by independent legal counsel at time agreement signed (or waived in separate writing); AND
ii. Was given at least 7 days to sign; AND
iii. If not represented by independent counsel, was fully informed in writing (in language in which party proficient) of terms and basic effect of agreement. Party must execute document declaring that they got information and identifying who provided it.
38
A premarital agreement shall be deemed not voluntary (unenforceable) unless court finds that party challenging the agreement:
1. Was represented by independent legal counsel at the time agreement was signed (or waived in a separate writing); AND
2. Was given at least 7 days to sign; AND
3. If not represented by independent counsel, was fully informed in writing (in language in which party proficient) of terms and basic effect of agreement. Party must execute document declaring that they got information and identifying who provided it.
39
What are the 2 tests for unconscionability?
1. For spousal support: While generally, spousal support can be waived or modified in premarital agreements, it will be unenforceable if:
a) party challenging was not represented by
independent legal counsel; OR
b) provision is unconscionable at the time of
enforcement (even if party represented by
independent legal counsel).
2. For anything else:
Agreement is unconscionable if it was unconscionable when made AND
(i) no full and fair disclosure of the other party's
property or finanaical obligations;
(ii) right to disclosure not yet waived in writing;
and
(iii) party challengin had no adequate knowledge
of other party's property or financial
circumstances.
40
By statute, unconscionability is a __________ to be decided by the ______, not a question for the ________.
matter of law; the courrt; jury
41
After 1985, what are the requirements for 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 is being made
42
T/F? Usual exceptions to the writing requirement (e.g. estoppel, partial performance, etc) do apply to the writing requirement for transmutations.
False. They do not apply!
43
What is the only exception to the transmutation requirements?
Gifts of tangible property of personal nature (e.g. inherited jewelry) which "are not substantial in value taking into account the circumstances of the marriage."
*A $15,000 painting didnt count here.
44
Hal owns AT&T stock worth $80,000; Wendy owns Exxon stock worth $20,000. Over
breakfast one day in late 1984 or early 1985, Hal says, "I think it would be a good idea for all of our stock to be owned as CP." Wendy says, "Great!"
If 1984, what result?
If 1985, what result?
1984: This is a valid oral transmutation agreement and all stock is now CP.
1985: Oral agreement is not valid, each retain their stock as SP.
45
H executes a will that says, "I own no SP. All of my property, real and personal, is CP or my wife and me." H&W get divorced. In proceedings, H claims that some of his assets are SP.
W rpocures Xerox copy of H's will, saying it shows a transmutation. Is H's will admissible in
divorce proceeding as evidence of a written transmutation agreement?
Nope. By statute, in any proceeding commenced before the death of the person who made the will or created a revocable trust, a statement in a will or revocable trust as to the character of the property is not admissible as evidence of transmutation.
46
By statute, in any proceeding commenced before the death of the person who made the will or created a revocable trust, a statement in a will or revocable trust as to the character of the property is ________________________.
not admissible as evidence of transmutation
47
What is the married woman's special presumption?
Where CP was used to take written title in a married woman's name before 1975, and the title did not indicate CP or joint tenancy was intended, the property is presumptively the wife's SP.
*This is an exception to the general principle that an asset titled in one spouse's name does not overcome the community presumption.
Rationale: paternalism: before 1975, except for W's earnings, H had sole management of CP. So if title taken in W's name, H must have intended a gift.
48
Is the married woman's special presumption rebuttable as against a third-party bona fide purchaser who buys asset from W in reliance on fact that its titled in W's name and therefore must be W's SP?
Is the presumption rebuttable as between H & W?
No.
Yes. E.g. could rebut presumption by showing he did not intend to make a gift to W; but had some other reason for taking title in her name
49
Hobie and Winkie Gates are married. Before 1975, and with Hobie's participation, community funds are used to purchase Greenacre. Does the special presumption arise...
1. If title is taken in the name of "Winkie Gates (or Winkie Gates, a "married woman?")"
2. If title is taken in the anme of "Winkie Gates and Sam Slade" (Winkie's brother)?
3. If title is taken in the name of "Hobie Gates and Winkie Gates, husband and wife" (or "Mr. and Mrs. Hobie Gates")?
4. If title is taken in the name of "Hobie Gates and Winkie Gates, as joint tenants with right of survivorship?"
5. If title is taken in the name of "Hobie Gates and Winkie Gates" (w/ no reference to marital status)?
1. Yes. Greenacre is W's SP.
2. Yes. Winkie and Sam hold as tenants in common.
3. No. Greenacre is CP.
4. No. Greenacre is held by HG and WG as joint tenants.
5. Yes, although H & W hold Greenacre as tenants in common.
• Hobie's 1/2 is held as CP
• Winkie's 1/2 is held as her SP.
• At divorce, W winds up with 75% (her 1/2
plus 1/2 of H's CP) and H winds up with 25%
(1/2 of CP)
50
What are the 3 situations in which the married woman's special presumption applies?
1. title is taken in W's name alone before 1975 (property is W's SP)
2. Title in name of W & H before 1975, but title is not taken in joint tenancy form and not as "husband and wife" or "Mr & Mrs." (property is 1/2 W SP, 1/2 CP)
3. Title in name of W and some third party before 1975 (W would be tenant in common w/ 3rd party).
51
What are the presumptions that arise from taking title in joint and equal form?
If death: Marriage of Lucas governs and there is an agreement, taking title in CP form must have intended a gift to the CP. No separate ownership interest and no claim for reimbursement.
If divorce:
• ownership: need an express written agreement by the parties that portion of property is SP, or an express statement in the deed or other instrument of title that prop is SP
•reimbursement: Spouse who made contributions of SP to the acquisition or improvement of CP is entitled to reimbursement without interest for contributions to Down Payment, Improvements, or Principal payments on the mortgage. (DIP)
* No reimbursement for SP used to pay interest on mortgage, taxes, insurance, or maintenance.
52
In 1978, H & W purchase a home for $60,000, using $15,000 of W's SP and $45,000 of CP. Title is taken as "Harry & Wanda Smith." W later contributes $10,000 of her SP for improvements.
1. When H dies, W seeks to trace and show that the house is 1/4 SP because of her down payment. W also seeks reimbursement for improvements made with her SP. Will she be successful?
2. If H & W divorce, will she be successful?
1. Marriage of Lucas* held that absent proof of an agreement that W was to have a SP interest, by taking title in CP form, W must have intended a gift to the community. Unless such an agreement is established, W has no separate ownership interest and has no claim for reimbursement.
2. Two statutes replace Lucas (anti-Lucas statutes) for divorce proceeding.
• Ownership: property acquired during marriage and in join and equal form is presumptively CP. CP presumption can be rebutted by:
• Express statement in deed or other instrument
of title that the property (or portion thereof) is
SP.
• Written agreement by the parties that the
property (or portion thereof) is SP.
• Reimbursement: Spouse who made contributions of SP to the acquisition or improvement of CP is entitled to reimbursement without interest for contributions to Down payment, Improvements, or Principal payments on the mortgage. (DIP)
• Not for interest on mortgage, taxes,
insurance, or maintenance.
So, if H & W divorce, W would not be able to claim 1/4 of the house as SP because of the down payment, but would receive reimbursement (without interest) for her contributions to DIP.
53
Using $25,000 of CP funds and $25,000 of his SP funds, Harry purchases a vacation
property for $50,000 cash. On divorce several years later, property is worth $90,000.
1. If the deed names, "Harry and Wanda Smith, husband and wife," as grantees, then upon divorce what happens?
2. If the deed names, "Harry Smith," as grantee, then, what happens?
1. Because the deed names Harry & Wanda in joint & equal form, and its a divorce case, the anti-Lucas statutes apply. Presumptively CP unless deed or written agreement saying otherwise. H is entitled to reimbursement for DIP.
2. The anti-Lucas statutes do not apply because property was not taken in joint and equal form. Under the source rule and tracing, the property is 1/2 CP and 1/2 H's SP.
54
Using $5000 in CP funds and $5000 of W's CP, H & W purchase a Picasso painting for $10,000. Although the receipt names, "mr & mrs. Harry Smith" as the buyers, there is no title document. The parties later divorce. What happens to the Picasso?
1. The Picasso is 1/2 CP and 1/2 W's SP under the source rule.
2. The anti-Lucas statutes do not apply because no title document or deed is involved. A receipt is not enough.
55
What is the pro ration rule?
When there is an installment purchase before marriage, and payment with CP funds after marriage (or during marriage W inherits land subject to mortgage and pays off note with CP funds), the community estate takes a pro rata portion of the property, measured by the amount (percentage) of principal debt reduction attributable to the expenditure of community funds.
principal debt reduction attributable to CP
---------------------------------------------------
purchase price
56
Wanda, who is single, buys house for $100,000, paying $20,000 down and signing a
note (secured by a mortgage) for the $80,000 balance. Thereafter, until her marriage to
Harold, Wanda makes mortgage payments that reduce the loan balance by $10,000 (to
$70,000). After the marriage, Wanda continues to make the mortgage payments out of her salary (CP until the note is paid in full. Wanda dies leaving a will that devises "all my property" to her nephew Norman. The house is now worth $500,000. Who takes what?
1. Apply the pro ration rule.
• the community estate takes a pro rata
portion of the property, measured by the
amount (percentage) of principal debt
reduction attributable to the expenditure of
community funds.
2. Numerator= principal debt reduction attributable
to CP= $70,000.
3. Denominator: purchase price = $100,000
4. So $70,000/ $100,000
5. The house is 7/10 CP, 3/10 SP. House ($500,000) is $350,000 CP; $150,000 Wanda's SP. Norman winds up with $325,000 (1/2 of W's CP $175,000 + W's SP $150,000).
57
Wanda, who is single, buys house for $100,000, paying $20,000 down and signing a
note (secured by a mortgage) for the $80,000 balance. Thereafter, until her marriage to
Harold, Wanda makes mortgage payments that reduce the loan balance by $10,000 (to
$70,000). At the time W & H get divorced, the house is valued at $500,000 and the principal balance of the note has been reduced to $50,000. Principal balance has been reduced $20,000 with CP (Wanda's salary). Between W & H, who takes what?
1. Same proration rule. Community estate takes a pro rata portion of the property, measured by teh amount (percentage) of principal; debt reduction attributable to the expenditure of community funds.
2. principal debt reduction attributable to CP/ purchase price = $20,000/ $100,000
The house was 2/10 CP and 8/10 SP. House ($500,000) is $100,000 CP, $400,000 Wanda's SP. Wanda ends up with $450,000 (her SP $400,000 + her 1/2 CP $50,000); Harold ends up with $50,000 (his 1/2 CP).
58
In 1994, Hugh, while single, takes out a $100,000 whole life insurance policy (cash
value; investment feature) that names his mother as beneficiary. Hugh pays the first annual
premium of $2,000 and all subsequent premiums out of his salary. Hugh marries Wilma in 2000
(having made six premium payments before the marriage), and dies in 2004 (having made four
additional premium payments during the marriage) without changing the beneficiary
designation. Who takes the policy proceeds?
In classifying ownership of whole life insurance policies, the pro ration rule applies.
Therefore, the life insurance policy was 6/10 SP and 4/10 CP. Wilma will get $20,000.
6 payments made before marriage= 6/10
4 payments made after marriage= 4/10
Total payments made = 10
59
In 1994, Hugh, while single, takes out a $100,000 term life insurance policy (cash
value; investment feature) that names his mother as beneficiary. Hugh pays the first annual
premium of $2,000 and all subsequent premiums out of his salary (or ER pays them).
Hugh marries Wilma in 2000
(having made six premium payments before the marriage), and dies in 2004 (having made four
additional premium payments during the marriage) without changing the beneficiary
designation.
The term insurance policy was 0% SP and 100% CP.
Rule for term life insurance is that the last premium determines the character.
60
Whole life insurance policies use the ________, but term life insurance polices' character is determined by the ______________.
pro ration rule; last premium
61
Hobie owns a house at the time of his marriage to Winkie. Thereafter, Hobie spent
$50,000 out of his salary (CP) to add a family room to the back of the house, to put in a
swimming pool, and to build a redwood deck around the pool. These improvements increase
the value of the house from $200,000 to $280,000. Winkie has filed for divorce. Do these expenditures for improvements give the community a proportionate share of the ownership of the house?
What are Winkie's rights?
No. This situation is governed by the real property doctrine of fixtures. The improvements become part of the property. Expenditure of CP does not change the ownership character of the house.
2. Winkie can bring a claim for reimbursement for the ocmmunity. The community gets the greater of the community property expenditure or the increase in value. Here, Winkie can be reiumbursed for $80,000.
62
Winkie owns a house at the time of her marriage to Hobie. Thereafter, Hobie spent $50,000 out of his salary (CP) to add the family room, swimming pool, and redwood deck. The improvements increased the vlaue of the house from $200,000 to $280,000. In a divorce proceeding, is Hobie entitled to assert a community reimbursement claim for th expenditure of community funds on Winkie's separate property?
Split of authority: argue both!
1. No reimbursement: These facts (CP expended other spouse's SP) give rise to presumption of gift to W's separate estate; presumption of gift can be overcome bonly by evidence of an agreement to reimburse the community estate.
2. Reimbursement: Other cases rejected presumption of gift and granted reimbursement.
63
H & W own a house as CP. The deed names "Henry & Wanda Harris" as grantees. Thereafter, Henry spends $50,000 of his SP to add a family room, swimming pool, and redwood deck. The improvements increase the value of the house from $200,000 to $280,000. In a divorce proceeding, can Henry assert a reimbursement claim?
Yes. This is governed by the anti-lucas statutes. When asset is held in joint and equal form, and SP is expended to improve CP, upon divorce, the party who expended SP would get reimbursement (without interest) for DIP (down payment, improvements, principal payments).
If issue arises on death of one of the spouses, the situation would be governed
by Lucas, and there would be no reimbursement unless there was proof of an agreement to reimburse.
64
What are the rules triggered by improvements?
• If H expends CP to improve own SP (feathering his nest), community has reimbursement
claim for the greater of the cost of improvements or the enhanced value.
• If H expends CP to improve the other spouse's SP, there is a split of authority on whether
there is reimbursement or not.
• If H expends SP to improve community property, we are governed by anti-‐Lucas statutes
(divorce) or Lucas (death).
65
Herb owned substantial SP at the time of his marriage to Wilma, including $200,000
in a savings account on which Herb was the only authorized signatory. During the marriage
(which ended in divorce after 15 years), Herb deposited his salary checks and additional
separate funds into the account. From time to time, Herb made withdrawals and wrote checks
to pay family living expenses, and also to buy various assets, title to which was taken in Herb's
name. At the time of the divorce action, the amount on deposit is $60,000. Herb seeks to prove that all assets purchased from teh account are his SP by recapituation accounting: he totals all faimly living expresnes over 15 years of marriage, and show that family living expenses exceeded 15 years of community income by a substantial margin. Therefore, Herb argues, that all CP must have been exhausted and he must have used SP to purchase assets.
1. Is Herb correct?
2. Where is the burden of proof?
3. How can Herb meet burden?
1. No. Mere fact that SP funds are commingled with CP funds does not transform or transmute the SP into CP, but the burden of proof is on H to show that each asset was purchased with SP funds.
2. Burden on H to show that each asset was purchased with SP funds.
3. Herb can use one of the following 2 accounting methods:
• Exhaustion Method: Herb's records show that on 9/20/95 the account balance dropped to $3,000; that H deposited $20,000 of his separate funds on that date; on 9/22 Herb wrote a $5000 check to pay his daughter's tuition bill at (exhausting CP), and that on 9/24 Herb withdrew $10,000
to buy 200 shares of stock.
• Direct tracing method (quick in, quick out): At a time when $15,000 was in account, Herb deposited $12,000 of SP funds; two days later he wrote a $12,000 check to buy 200 shares of
stock. Direct tracing requires that (a) sufficient separate funds were available, and (b) that H intended to use SP funds to buy the asset.
66
Does the mere mingling of SP funds with CP funds transform or transmute the SP into CP?
No, but the burden of proof is on person claiming that assets purchased from the commingled account are SP. Must show that each asset was purchased with SP funds.
67
What are the accounting methods ok to use to show that assets bought from a commingled account are SP? What won't work?
• Exhaustion Method: Herb's records show that on 9/20/95 the account balance dropped to $3,000; that H deposited $20,000 of his separate funds on that date; on 9/22 Herb wrote a $5000 check to pay his daughter's tuition bill at (exhausting CP), and that on 9/24 Herb withdrew $10,000
to buy 200 shares of stock.
• Direct tracing method (quick in, quick out): At a time when $15,000 was in account, Herb deposited $12,000 of SP funds; two days later he wrote a $12,000 check to buy 200 shares of
stock. Direct tracing requires that (a) sufficient separate funds were available, and (b) that H intended to use SP funds to buy the asset.
• Recapitulation theory does NOT work. It does not show that CP funds were unavailable when each asset was purcahsed.
68
What is the family expense presumption?
It is presumed that expenditures for
family expenses (food, housing, clothing, recreation, etc.) were made with
community funds (to the extent they were available), even though separate
funds were available.
69
What do you do if a business owned before marriage greatly increases in value during the marriage?
Apply either the Pereira or Van Camp test to determine what is SP and what is CP.
70
Wendy owned a computer software company in San Jose worth $100,000 at the
time of her marriage to Hal in 1986. When the couple divorce in 1996, the business is worth $4
million.
Hal contends that a substantial portion of the business is CP. He points out that because of the increased volume of business in the 1990s, Wendy worked long hours and on weekends; they rarely took vacations; that Hal stayed home to watch their daughter; that Wendy drew a modest salary; and thus the great increase in the business was from W's labor (CP).
Wendy contends that the increase in value stemmed from her incredibly good fortune and
timing; that only an idiot couldn't have made a fortune when the computer and microchip
business exploded in San Jose in the 1990's; that she had 2 Cal Tech grads whose ideas contributed to the business's growth; and that the salary and bonuses she drew out of the business were substantial; far above the going rate for similar positions. Therefore, since the
business was her SP at the time of the marriage the business is entirely her SP.
Discuss 2 tests:
1. Pereira (Personal Skills & Effort): Pay interest (legal rate of 10% annum) on the value of the business at time of the marriage. That is SP. The rest is CP.
Here, if H & W had been married for 10 years, W is entitled to the intiial $100,000 (value of business at the time of marraige) plus $100,000 in interest (10 yrs x. 10,000 (interest at 10%). Therefore, the business is 5% her SP ($200,000/ $4,000,000) and the balance is CP.
2. Van Camp (Valuable Company/ Asset):
Value of spouse's services at market rates (how much would executives in similar positions be compensated on the market?) - family expenses paid from commuity funds = community component. The rest is SP.
Here, if H& W were marreid for 10 years, the market rate for executives in comparable positions was $100,000 and living expenses were $80,000/ year, the value of the community component would be $200,000.* The business would be 5% CP ($200,000/ $4,000,000) and the balance W's SP.
* $100,000 x 10 years = $1,000,000 value of labor-
$80,000 x. 10 years = $80,000 family expenses.
= $200,000 of CP.
71
What is the Van Camp formula?
```
Van Camp (Valuable Company/ Asset):
Value of spouse's services at market rates (how much would executives in similar positions be compensated on the market?) - family expenses paid from commuity funds = community component. The rest is SP.
```
*Use where capital investment was the major factor in the business's growth, and spouse's skills and efforts were less of a factor. Look for instances where spouse was paid substantial salary and large bonuses (meaning the community was compensated).
Here, if H& W were marreid for 10 years, the market rate for executives in comparable positions was $100,000 and living expenses were $80,000/ year, the value of the community component would be $200,000.* The business would be 5% CP ($200,000/ $4,000,000) and the balance W's SP.
* $100,000 x 10 years = $1,000,000 value of labor-
$80,000 x. 10 years = $80,000 family expenses.
= $200,000 of CP.
72
What is the Pereira formula?
Pereira (Personal Skills & Effort): Pay interest (legal rate of 10% annum) on the value of the business at time of the marriage. That is SP. The rest is CP.
* Use where spouse's time, skill, and effort are major factors in growth of business. Look for instances where spouse contributed creative ideas ordevelops new techniques, and/or worked long hours and only drew modest
salary.
Here, if H & W had been married for 10 years, W is entitled to the intiial $100,000 (value of business at the time of marraige) plus $100,000 in interest (10 yrs x. 10,000 (interest at 10%). Therefore, the business is 5% her SP ($200,000/ $4,000,000) and the balance is CP.
73
The court can select whichever of the Pereira or Van Camp formula it would like to ______________.
achieve substantial justice between the parties.
74
What are some examples of assets that are particularly difficult to divide?
1. business owned before marriage that substantially increases in value
2. pensions
3. stock options
4. goodwill of a professional practice
5. educational expenses
75
EE retirement benefist accumulated during marriage, whether or not vested at the time of divorce are ___________.
community property (form of deferred compensation)
76
H had worked for Shell Oil Co. for 10 years at the time he married W in 1982; the
marriage ended by divorce in 1992, and H will be eligible to retire in 2002. In all of these years, H was a participant in Shell's qualified pension plan, where the pension benefit is measured by
years of service. H was not eligible for retirement at the time of the divorce action. W
contends that a portion of the pension benefit is CP.
1. Is she right?
2. Given that H is not yet eligible for retirement, in awarding W a share of the benefit,
what form should the decree take?
1. Yes. EE retirement beneifts accumulated during marriage, whether or not vested at the time of divorce are community property.
Divide the years of service while married by the total years employed to retirement.
Here 10/30= 1/3 CP.
2. Two options:
• If and when decree: if and when received,
she gets her share (1/6: 1/2 of CP)
• Cash her out: by awarding other assets of
equal value.
77
H had worked for Shell Oil Co. for 10 years at the time he married W in 1982; the
marriage ended by divorce in 1992, and H will be eligible to retire in 2002. In all of these years, H was a participant in Shell's qualified pension plan, where the pension benefit is measured by
years of service. H WAS eligible for retirement at the time of divorce action but he has not retired. W seeks payment of her community share of H's pension benefit, though. Is she entitled?
Yes. Since H could have retired at the time of the divorce, his retirement benefit had matured.
H's election not to retire cannot defeat his wife's present right.
78
If a non-participant spouse ("NPS") in a qualfied pension plan divorces a participant
spouse, her community property interest is recognized; under federal law she can get a
qualified domestic relations order ("QDRO") and receive payments from the plan.
What if the marriage ended by death rather than divorce. Does the NPS have a devisable interest in a qualified plan if she predeceases the participant?
No. There is a federal preemption under ERISA, which trumps CP laws. Her interest is terminated when she predeceases the participant.
79
H had worked for Shell Oil Co. for 10 years at the time he married W in 1982; the
marriage ended by divorce in 1992, and H will be eligible to retire in 2002. In all of these years, H was a participant in Shell's qualified pension plan, where the pension benefit is measured by
years of service as well as Shell's disability insurance program. Shortly before divorce, H suffers an on-the-job injury and is given disability retirement; under teh Shell plan, H received disability pension of $900/ month. Also H is awarded workers' compensation beneift of $150/ week. W claims a commuinty interest in the disability and workers' compensation benefits, arguing that these benefits were derived from H's labor, and shoudl be treated the same as pension benefits. Is W right?
What if H could elect to take, at his option, either a regular retirement benefit at $1200/ moth or disability retirement at $900/month; H chooses disability retirement. Does W have a CP interest in H's retirement benefit?
No. Disability retirement benefits and workers' compensation benefits are treated as wage replacement. Thus, they're classified according to when they are received, not when they're earned.
* After the divorce, they are H's SP.
2. yes. H cannot elect to defeat her community interest.
80
How is severance pay characterized?
Split: argue both ways:
1. H's severance pay is SP because it replaced lost earnings which after a divorce or permanent separation would be H's SP; OR
2. H's severance pay is CP because it arose from a collective bargaining agreement and was thus earned by employment during marriage.
81
A stock option gives an employee (typically an executive) an option to purchase shares of the
company's stock at a set price on a certain date in the future. Stock options typically provide
that they are not "vested" and that hte option‐holder must be employed by the company as of
the date the option becomes exercisable for the option to vest. If the option is awarded during
marriage but does not vest until after the economic community has ended, the proration formula that is used in determining what portion of the option is CP and what portion is SP depends on ___________________.
the primary intent of the employer in granting the option.
Will use either the Marriage of Hug or the Marriage of Nelson proration formula.
82
Hank, married to Wynn, was employed by the Ajax Company on June 10, 1998. On
June 10, 2004, Ajax Company granted Hank a stock option entitling him to purchase 5,000
shares of Ajax common stock if he is still employed by the company on June 10, 2008. Hank
and Wynn are divorced in 2006; the economic community ended when Hank and Wynn
permanently separated (with an intent not to resume the marital relation) on June 10, 2006.
1. If primarily deferred compensation, use Marriage of Hug proration formula:
Numerator: years from date of employment to date economic community ends
Denominator: years from date of employment to date options become exercisable.
Here 8/10, so 8/10= community property
The 8/10 is subject to equal division upon divorce.
2. If stock options were primarily awarded to encourage Hank to remain with the company, use Marriage of Nelson. Starting point for both numerator and denominator is date the options are granted. Fraction si multiplied by the number of shares of stock that can be purchased under the option.
Numerator= years from date option are granted to date economic communiity ends
Denominator= years from date options are granted to date options become exercisable.
Here,
2 years from date option granted to date economic community ends
4 years from date option granted to date option becomes exercisable.
1/2 CP subject to equal division on divorce.
83
If the divorce court determines that stock options were awarded primarily to reward Hank for his past services as a form of deferred compensation, they should apply the __________ proration formula.
If the court determines that the stock options were awarded primarily to encourage Hank to remain with the company, the court should employ the _______ proration formula.
Marriage of Hug; Marriage of Nelson
84
T/F: Good will of a professional practice (to the extent acquired during the marriage) is communitiy property subject to division on divorce.
True.
85
What is goodwill?
Those qualities that generate income beyond that derived from (1) the professional's labor; (2) reasonable return on capital and physical assets.
Goodwill is primarily established by expert witness testimony as to its value.
86
Winkie is a CPA with a solo practice. At the time of her divorce from Hobie, she is
netting $100,000/year after expenses. If she went on the job market, she could earn
$60,000/year as an assoicate. Winkie's firm has $100,000 in capital assets; at a 10% return,
these assets would earn $10,000/year. Hobie contends that the "goodwill" of Winkie's professional proactice, which Winkie opened a year after marriage to Hobie, is community property. Is Hobie right?
Yup. Goodwill of a professional proactice is community property to the extent it was acquired during the marriage.
87
Winkie is a partner in a small firm. The partners have a buy-‐sell agreement which
provides that any partner who dies or leaves the firm will receive $5,000 for his or her interest
in the partnership. Winkie contends that the buy-‐sell agreement puts a $5,000 cap on the value
of her goodwill in the partnership for purposes of division on divorce. Is she right?
No. It is a factor but is not conclusive.
88
Hobie and Winkie are married shortly after Hobie graduates from USC with a degree
in history and Winkie graduates from nursing school. They both want to go to medical school,
, but realize they cannot both do so at the same time. Because Winkie's prospects for employment as a nurse are better than Hobie's, they decide that Winkie will work the night shft at the ER while Hobie gets his MD. Four years (and $120,000 in GSL ) later, it is graduation day. Hobie tells Winkie he has good news and bad news. The good news is that he will finally be a doctor. The bad news is he is filing for divorce. Is Hobie's professional degree "property" that is subject to division on divorce?
2. What about the $120,000 in GSL loans used to finance H's education?
No. Winkie is entitled to reimbursement for the cost of education if the education enhanced his earning capacity.
2. They are assigned solely to the party who incurred the educational debt.
89
Is reimbursement available if the educational expense were incurred before marriage and the loans were paid with community funds after the marriage?
Yes.
90
What are the defenses to reimbursement of community estate for educational expenses?
1. Community has already substantially benefited from the earnings of the educated spouse. If more than 10 years have elapsed since the degree was
awarded, the presumption is that the community has substantially benefited, meaning that unless presumption is rebutted, no reimbursement.
OR
2. If the other spouse also received a CP-funded education.
91
During marriage, Winkie is injured in an automobile accident in which her husband
Hobie was the negligent driver. Winkie collects $75,000 in a settlement with Hobie's insurance
company.
Where the other spouse was the tortfeasor, the tort recovery is ___________. Why?
Separate property
Otherwise, he would benefit from his wrongful act.
92
1. Suppose, instead that Winkie was injured in an automobile accident in which a third
party was the negligent driver. Two years later, Winkie collects $100,000 in a settlement with
the driver's insurance company. Where damages are recoered from a 3rd party, the tort recovery is ________.
2. However, in a property division on divorce or legal separation, the $100,000 will be awarded _______________, so long as the $100,000 can be _____________.
3. This will be the result unless the ____________________.
4. On either spouse's death, the $100,000 will be treated as ___________.
1. Community property
2. entirely to the injured spouse; can be traced and was not already spent
3. interest of justice, including economic need, require otherwise.
4. community property
93
Winkie was in a car accident and was the negligent driver. She suffered a judgment of $200,000, of which $100,000 was covered by liability insurance. In recovering the remaining $100,000, what assets can the judgment creditor reach, and in what order?
Rule: CP is subject to the tort liability of either spouse.
* If W was performing an act for the benefit of the community (e.g. driving to work, or driving the kids in a car pool), then the liability is first satisfied from CP, and then from her SP.
* If W was not performing an act on behalf of the community (e.g. driving to SP vineyard to talk to foreman, or driving to liaison with her boyfriend), then the liability is first satisfied from her SP, then from CP.
Can a judgment creditor reach H's SP? No, husband is not personally liable.
94
Can a judgment creditor reach H's SP if W was negligent and has a judgment against her?
Nope.
95
If W was performing an act for the benefit of the community (e.g. driving to work, or driving the kids in a car pool) when she got in an accident which led to negligence finding, then the liability is first satisfied from _______ , and then from _______.
CP; her SP
96
If W was not performing an act on behalf of the community (e.g. driving to SP vineyard to talk to foreman, or driving to liaison with her boyfriend) when she got into an accident which led to a negligence finding, then the liability is first satisfied from ________ , then from _________.
Her SP; CP
97
What is the general rule for management power over CP?
Exceptions?
Each spouse has equal management and
control over all community property, and thus has full power to buy or sell CP and contract debts withou the other spouse's joinder or consent.
1. Personal Belongins Exception: One spouse cannot sell or encumber personal property used in family dwelling (furniture, clothing, etc.) without written consent of other spouse. Transaction voidable by other spouse at any time.
2. Business exception: Applies when a spouse operates a business interest that is all or substantially all community personal property and has primary management and control of all the business. While this spouse can act alone in
all transactions, if the spouse sells, leases, or otherwise encumbers substantially all of the personal property used in the business, must give written notice to other spouse.
3. Real property exception: For conveyances of CP real property, joinder of both spouses is required. There is a one year statute of limitations.
98
For conveyances of CP real property, ______________ is required. There is a _________ statute of limitations.
joinder of both spouses is required; 1 year
99
Hank and Winona own a ranch as CP, but title to the ranch is in Hank's name. Hank sells the ranch to Bob (or leases it for more than one year), telling Bob that he is single. Winona learns about the sale 10 months after the sale. She demands that Bob reconvey the ranch to Hank and Winona, and offers to refund the purchase price. Can Winona void the transfer?
2. What about Bob's rights as a bonafide purchaser?
3. What if Bob knew or should have known that Hank was married?
Yup. For conveyances of CP real property, a joinder of both spouses is required. There is a 1 year statute of limitations.
2. Too bad, so sad for Bob.
3. Then, no statute of limitations.
100
Neither spouse can transfer or encumber their 1/2 interest in real CP. Only the ______________ can be transferred or encumbered.
2. Exception?
1. entire interest
2. Family Attorney's Real Property Lien: A spouse can unilaterally encumber her 1/2 interest in CP to pay the family attorney representing her in a divorce action.
Laywers gonna get paid.
101
During marriage, H incurs debts of $40,000 owed to various suppliers in connection
with his business, and incurs $30,000 in medical expenses (not covered by insurance) by reason
of illness.
1. Can CP be reached in satisfaction of $40,000 of business debt?
2. Can CP be reached if debt was incurred by H before marriage to W?
3. Can W's SP be reached in satisfiaction of $40,000 business debt?
4. Can W's SP be reached in satisfaction of H's $30,000 medical bills?
5. Can W's SP be reached in satisfaction of $30,000 in medical bills if (when debt incurred), W & H had separated and economic community had ended?
1. Yes. Spouses have equal managment powers and either spouse can enter into contracts and/or incur debt.
2. Yes, with one exception: The earnings of a nondebtor spouse cannot be reached for premarital debts if held in a separate account (in which the other spouse has no right of withdrawal) and not commingled with other CP funds.
3. No. W is not personally liable.
4. Yes. The Family Code provides that each spouse has the duty to support the otehr spouse and minor children. This means that each spouse is personally laible for the other spouse's contracts for necessities (medical bills, hospital stays, etc).
• If there is CP available to fund medical bills,
wife can be reimbursed from CP.
5. Yes. For the Family Medical Code, still husband and wife until divorce. Not typical end of community.
102
In a property settlement agreement entered into by Hobie and Winkie as part of their divorce, stocks and bonds (which were CP) are awarded to Winkie. At the time of the divorce, H owed $40,000 to a supplier. After the divorce, the supplier obtains a judgment against Hobie, but only collects $10,000 from him. The supplier then seeks to reach the
securities awarded to Winkie. What result?
After divorce, a creditor cannot reach CP awarded to a spouse unless that spouse
• incurred the debt, OR
• was assigned the debt by the court
103
Henry and Wynn, married in Kansas (a non-‐community property state) in 1990,
moved to California in 1998, bringing with them 2,000 shares of IBM stock which Henry had
acquired from his salary. They also own a farm in Kansas (the deed names Henry as grantee)
acquired from Henry's salary. Wynn has never been employed. After their move to California,
they get divorced. At the time of divorce, there are 2400 shares of IBM stock in Henry's name (resulting from stock dividends) and the Kansas farm is worth $40,000.
1. The 2400 shares of IBM stock are:
2. The farm in Kansas is:
1. quasi community property--treated the same as true community property
2. quasi community property, subject to 50/50 division.
104
Property acquired while the couple was domiciled in a non-‐community property state, which would have been classified as community property had it
been acquired under the same circumstances in California, is __________________.
quasi community property
105
On divorce, quasi community property is treated the same as __________, and divided 50-50.
true community property
106
How do we get over the jurisdictional issue of dividing land in another state?
In making 50-50 division, California court could award the Kansas land to Henry and other assets of equal value to Wynn, OR require
Henry to execute any conveyances that are necessary (court does have personal jurisdiction over Henry).
*Different if death is division. Then Kansas law applies.
107
Henry and Wynn, married in Kansas (a non-‐community property state) in 1990,
moved to California in 1998, bringing with them 2,000 shares of IBM stock which Henry had
acquired from his salary. They also own a farm in Kansas (the deed names Henry as grantee)
acquired from Henry's salary. Wynn has never been employed. After their move to California,
Henry dies. At the time of death, there are 2400 shares of IBM stock in Henry's name (resulting from stock dividends) and the Kansas farm is worth $40,000. Henry leaves a will that bequeaths "all my property" to the couple's daughter Dorkie. H is survived by W & Dorkie. What distribution?
1. IBM stock?
2. Farm in Kansas?
1. Treated the same as true community property, so he can only devise his 1/2 to Dorkie.
2. For purposes of division on death for foreign real property, Kansas law controls and it all goes to Dorkie.
108
Does the non-‐acquiring
| spouse have any power of disposition over quasi-‐CP if she dies before the acquiring spouse?
No. The quasi CP system gives protection only if the non-acquiring spouse survives the acquiring spouse.
109
Same facts as Hypo with Harry & Wynn moving from Kansas, except that the couple moved to California not from Kansas
but from Texas (another CP state). Are the IBM stock and Texas ranch quasi CP, meaning that
Wynn, as the non-‐acquiring spouse, has no ownership interest to pass by will?
No. Both are true community property and treated as such.
110
Hobie Gates and Winkie Waters are living together in California, but they are not
married. Pooling their resources 50-‐50, they buy a house, taking title in the name of "Hobie Gates and Winkie Waters, husband and wife." How is title held?
2. Do Hobie and Winkie hold title to the house as CP?
California does not recognize common law marriages.
Exception: Where common law marriage is validly contracted in another state.
2. Only spouses and registered domestic partners can have CP. They own it as tenants in common, owning 1/2 each.
111
T/F: California does not recognize common law marriages.
True
Exception: Where common law marriage is validly contracted in another state.
112
Marvin and Michelle have gone out for five years. When Michelle asks about
marriage, Marvin replies, " Out of the question. I'll tell you what though, if you move in with me, cook, and clean for me and provide other services, we can have all of the benefits of marriage anyway."
Michelle does so, even though it means forsaking a promising acting career. Ten years later, they split. In the meantime, Marvin has accumulated assets worth $400,000 from selling tax shelters. What are Michelle's rights?
The property relationships between Marvin and Michelle are governed by contract law--either express or implied by conduct.
Would need to do a contract analysis to determine whether a contract existed on these facts.
*As long as contract is not based solely on sexual services.
113
After Daphne moved from Texas to California, she met and fell in love with Luther,
an attorney. When Daphne asked about marriage, Luther (knowing it to be false) told Daphne that they did not need to go through a ceremonial marriage because California recognizes
common law marriages. On that basis, Daphne moved in with Luther, and they lived together
as husband and wife for ten years -- when Daphne learns the truth and moves out. During their
ten years together, Daphne and Luther acquired property worth $200,000 from Luther's earnings.
What's going on here? Can Daphne do anything?
In this relationship with Luther, Daphne is called a putative spouse.
The test is whether she had an objectively reasonable and good faith belief that they were lawfully married.
If so, the assets acquired by Luther and Daphne are called quasi marital property and when they split, the assets are spllit 50-50--the same as true CP.
*One CA Court of Appeal has held that if Luther was "bad faith partner," he is not entitled to 1/2 property earned by her labor (which would otherwise be CP, subject to 50-50 split).
If Daphne was aware that they were not lawfully married, their relationship is characterized as unmarried cohabitants. Absent a contract (express or implied), Luther keeps what he acquired an Daphne keeps what she acquired.
114
What is the test to determine whether putative spouse?
Whether she had an objectively reasonable and good faith belief that they were lawfully married.
If she knew they were not lawfully married, they are just unmarried cohabitants. No CP, they each keep their own shit.
