Community Property Flashcards
Global Intro
CA is a CP state. All property acquired during the marriage is presumed to be CP, while all property acquired before marriage, after permanent separation, or by gift or inheritance is presumed to be SP. (Property acquired in a SP state by either H or W before they became domiciled in CA is QCP. QCP is treated like CP upon death/divorce.)
Characterization of an asset as either CP or SP depends on 3 factors: (1) the source of the asset, (2) any actions by the parties that may alter the character of the asset, & (3) any statutory presumptions that apply to the asset.
Generally, to determine the character of an asset, the courts will trace back to the source of the funds used to acquire the asset. A mere change in form does not change its character.
3 Guiding Principles
- Equality – spouses share an equal ½ interest in CP regardless of the actual contribution to the acquisition.
- Tracing – the tracing principle holds that the source of the property determines its character. When determining the character of an asset, the court will trace back to the source of funds used to acquire the asset. Equality is achieved through tracing or accounting. For that reason, the state is also interested in articulating tracing rules.
- Contractual Modification – parties retain the right to alter most default CP rules by agreement.
Legal Marriage
CA CP law applies when the parties (1) have a legal marriage & (2) are domiciled in CA. Req’ts for a valid marriage: Legal capacity, over 18 + performance of legal procedures. And if a couple followed the rules in another state, the marriage will be recognized as valid in CA.
QCP
is property acquired by either spouse that would have been CP had the spouse been domiciled in CA at the time of acquisition. QCP retains its SP nature when the parties become domiciled in CA. QCP is triggered by divorce/death of the titled spouse.
Marital Economic Community
The marital economic community begins upon marriage & ends at (1) divorce, (2) death of a spouse, or (3) permanent physical separation (actual separation w/ no intent to resume the marital relationship).
- When did the MEC begin?
- When did the MEC end?
- Compute the length of marriage if given #’s or dates.
C/L Marriage
CA does not recognize common law marraige that originated in CA. However, CA recognizes marriages from other jx’s if the marriage would be valid by the laws of that jx.
Putative Spouse Doctrine (PSD)
an innocent spouse w/ an objectively reasonable & good faith belief in a valid marriage has the same property rights as a lawful spouse upon dissolution of marriage or death of spouse. All assets acquired are QMP and are treated like CP or QCP.
Registered Domestic Partnerships
RDP’s are afforded the same rights and protections as married persons.
- 2 persons not related by blood
- at least 18 years old
- capable of consent
- neither person is married or in a RDP w/ someone else
Revocation of PS status
to remain a PS, one must maintain a good faith belief that the marriage is valid. Once a PS learns or has reason to know that her marriage is invalid, PS status is revoked & the PS becomes a meretricious spouse. The PS, however, retains all quasi-marital property rights acquired during her good faith belief of valid marriage. All property otherwise acquired is SP since unmarried cohabitants’ property rights are governed by K.
estoppel under the PSD
a spouse who knew or had reason to know the marriage was invalid (induced another into marriage) will be estopped from later claiming there was never a marriage & CP protections may attach.
unmarried cohabitants
K principles govern distribution of property acquired by unmarried cohabitants: (1) an express K will be enforced, unless based on meretricious sexual services, (2) if no express K, a court examines the parties’ conduct to determine whether they had an implied K or understanding, & (3) equitable remedies may be available.
premarital agreements
A premarital agreement avoids CA CP law.
pre - CA premarital agreement act
Before 1986:
- Case law allowed evidence of implied modification or retraction based on oral agreement or conduct
- Consideration came in the form of mutual consent
- Undue influence, duress, deceit or fraud made the K unenforceable for lack of consideration.
- Spousal support waivers were against CA public policy & unenforceable.
CPAA 1986
From 1986-2001, (1) must be in writing, (2) signed by both parties, AND (3) is enforceable w/o consideration. An oral agreement may be enforced when: (1) the promise is fully executed by the promisor, OR (2) the promisee relies to his/her detriment on the oral agreement.
CPAA 2002
An agreement made after Jan 1, 2002 must be (1) in writing, (2) signed by both parties, (3) voluntary, & (4) and not unconscionable (fair, reasonable, full disclosure of property or financial obligations of parties).
- To be voluntary, the party against whom enforcement is sought must be (a) represented by independent counsel at the time of signing OR advised to seek independent counsel & expressly waived in writing such representation, (b) had not less than 7 calendar days between time first presented w/ agreement & advised to seek independent counsel & the time signed, (c) did not execute under duress, fraud, or undue influence, & had capacity, & (d) informed of rights & obligations.
Enforceability of Spousal Support Waiver
Spousal support waivers will not be enforceable unless the party was actually represented by independent counsel at the time the agreement was signed. Even if independent counsel represented that party, spousal support provisions will still be held unenforceable if they are unconscionable at the time of enforcement. An unconscionable spousal support provision will never be enforced.
Challenging the Premarital Agreement
to protect the economically inferior spouse, premarital agreements can be challenged based on fraud, duress, or undue influence.
Undue Influence: taking a grossly oppressive & unfair advantage of another’s necessities or distress.
Child support waivers
always invalid and unenforceable
QMP
is property acquired during a void/voidable marriage, which would have otherwise been CP/QCP. property of a PS is QMP & treated the same as CP or QCP.
Defenses to enforcement of PA
equitable defenses limiting the time for enforcement, including laches (unreasonable delay & prejudical effect) & estoppel (detrimental reliance), are available to either party.
Transmutation
is an agreement between spouses, made during marriage, to alter the ownership characterization of property.
pre-1985 transmutations
prior to 1985, transmutations could be done by conversations, conduct, and even silence. (no formalities)
- The transmutation took effect as soon as the agreement or statement was made.
- If intended to apply to assets not yet acquired, the transmutation effect was the instant of acquisition.
- An oral agreement transmuting real property was valid, not w/standing the SOF! To create a joint tenancy, however, a writing was req’d. (anti-Lucas 1984)
transmutations since 1985
eff. Jan 1, 1985, the legislature requires an express declaration in writing, signed or accepted by the spouse whose interest is adversely affected, UNLESS the gift exception applies.
gift exception to transmutation statute
no writing req’d for insubstantial personal gifts between spouses. Gift limited to:
- A gift of clothing, wearing apparel, jewelry, or other tangible articles of a personal nature (no automobiles);
- That is used solely by the spouse to whom the gift is made; &
- That is not substantial in value, taking into consideration the circumstances of the marriage.
source rule
Tracing determines the source of a property’s acquisition to establish its character.
jointly titled bank account
Jointly titled accounts are presumed CP unless traced to SP and there is no contrary agreement.
direct tracing method (second)
Funds can be directly traced to SP if (1) there are SP funds available, & (2) the SP proponent intends to use the funds for an SP asset. (heavy burden to keep adequate records)
Exhaustion method (first)
The SP proponent proves the funds are SP if the CP funds are exhausted at the time of acquisition of the property.
family expense doctrine
Available CP funds are presumed to pay for family expenses. Absent a reimbursement agreement, a gift is presumed when SP funds are used to pay family expenses.
commingled property
When CP & SP are commingled, the contributing sources retain their character until they can no longer be distinguished from one another. At the point of confusion, the law transmutes SP into CP by operation of law.
pro rata apportionment
when the couple uses both community & separate funds to purchase or improve property, the portion of separate property is in direct proportion to the contribution toward the purchase price. (pro rata apportionment)
apportionment
refers to the process of determining the % character ownership of the asset.
The law requires that the proportional ownership shares be identified & separated out. Apportion methodologies can differ by asset & by context. In all cases, the law attempts to balance Family Code protections for community ownership w/ constitutional protections for SP ownership.
Rules of proportional ownership apply in 3 circumstances where property is acquired w/ both CP & SP:
- Untitled property;
- Property titled in one spouse’s name alone; &
3 Jointly titled property where there is an enforceable agreement to preserve a SP interest… only a writing can rebut a writing.
→ Look at how title is held to determine whether the rules of proportional ownership are applicable.
Apportionment Hypo #1- Zero Appreciation: Assume H&W buy an antique Tiffany lamp for $10k during their marriage. They use $6k for W’s inheritance & $4k from H’s earnings. Unfortunately, they are going through divorce proceedings & they both want the lamp.
Step 1 → Characterization of the lamp starts w/ the GCPP b/c the lamp was acquired during their marriage.
Step 2 → Rebuttal: Assuming W can rebut a portion of the CP presumption by tracing to her SP inheritance, the ultimate conclusion will be:
The lamp is 60% W’s SP ($6k of the $10k purchase price)
The lamp is 40% CP ($4k of the $10k purchase price: $2k to each spouse)
Step 3 → Apportionment: If the lamp is worth $10k at divorce:
W is entitled to $8k ($6k SP contribution to purchase + $2k as the ½ CP contribution to purchase)
H is entitled to $2k ($2k as the ½ CP contribution to purchase)
Apportionment Hypo #2 – Increase in Value: → Same facts as hypo #1 but assume the lamp is now worth $30k ($20k increase in value)
Step 4: Pro-Rata Apportionment:
Step one: Increase in value ($20k) is apportioned first: 60% W’s SP & 40% CP
CP’s Contribution = $20k increase in value times 40% CP Earnings Contribution = $8k then divide by 2 = $4k to each spouse
W’s SP Contribution = $20k increase in value times 60% W’s SP Contribution = $12k to W
Step two: add the proportional original contributions to the purchase
W’s Pro-Rata Apportionment = $6k SP purchase + $2k ½ CP purchase+ $12k SP increase + $4k ½ CP increase = $24K
H’s Pro-Rata Apportionment = $2k ½ CP purchase + $4k ½ CP increase = $6k
EXAMPLE: Exhaustion v. Direct Tracing Methods of Rebuttal
H receives $10k inheritance, his SP, & puts it into his checking account. H also deposits his $5k earnings, CP funds. H purchases a vintage car for $10k. The car is presumed to be CP.
The Exhaustion Method favors CP: SP proponent can rebut the CP presumption if, at the time of acquisition, all community income was exhausted by family expenses. Here, Hati cannot trace to the SP funds b/c the $5k CP funds were still in the account – they had not been exhausted. Thus the car was purchased w/ $5k community fund & $5k SP funds.
The Direct Tracing Method favors SP: Under the DTM, H would be allowed to prove: (1) P funds of $10k were available at the time of acquisition & (2) he intended to use those funds to purchase the car as his SP.
reimbursement
A spouse is entitled to reimbursement, w/o interest, for certain contributions that can be traced to his/her SP.
Includes: SP contributions to down payments, improvements, & reducing the principal of the loan. (Reimbursement is for “DIP”)
Exception: written waiver of right to reimbursement or a written transmutation.
Does not include: CP expenses (Family Expense Doctrine), payments of interest on the loan or payments for maintenance, insurance, or taxation of the property.
Cannot exceed the value of the property at the time of division.
SP used to improve other spouse’s SP
eff 2005 – a spouse who uses SP to improve the other spouse’s SP is entitled to reimbursement w/o interest or appreciation of the SP contribution.
SP used to improve CP
After 1984, when a spouse uses SP to improve CP, the spouse is entitled to reimbursement for the funds expended.
CP used to improve spouse’s own SP
When a spouse uses CP to improve his own SP W/O CONSENT, the community is entitled to the greater of (1) reimbursement of improvement costs, or (2) the enhanced value of the property.
When a spouse uses CP to improve his own SP W/ CONSENT of the other spouse, then the traditional rule is that the contribution is seen as a gift to the community w/ no right to reimbursement absent a contrary agreement. However, under Marriage of Wolfe, the court may still allow a right of CP reimbursement in the event of divorce w/o an agreement.
Under the Allen/Bono rule, where the CP contribution has made a capital improvement to the property, then the community has either a right to reimbursement OR a pro tanto interest in the SP asset.
Pro tanto interest formula –>
- based on the Total investment (SP and CP) in the property, determine the CP and SP ownership interests.
- Then, that ratio (expressed as a percentage) is multiplied by the appreciation in the property’s value during the marriage prior to separation.
CP used to improve other spouse’s SP
pre-2005 –> gift was presumed.
2005 to present –> When a spouse uses CP to improve the other spouse’s SP, there is a split of authority. Either (1) a gift is presumed, but may be overcome by evidence of an agreement to reimburse. OR (2) the community is entitled to the greater of (a) reimbursement of improvement costs, or (b) the enhanced value of the property.
Married Woman’s Special Presumption
the presumption is that if property was acquired prior to Jan 1, 1975, by a married woman in an instrument in writing, it is presumed to be her separate property. (FC 803) The title in the married woman’s name raises the presumption. The presumption is rebutted not by the source of the funds, but by the intention of the husband. If he did not intend a gift or if he did not intend to change the nature ofthe property, then his testimony can rebut the presumption that the property is the wife’s separate property.
