Community Property

Question 1

CP Presumption

Answer 1

California (CA) is a community property (CP) state. There is a community presumption, meaning that all property acquired during marriage is CP by the labor or earnings of either spouse. There are areas of separate property (SP): (1) property acquired before or after marriage, (2) property acquired during marriage by either spouse through gift, will, bequest, devise, or inheritance, (3) Property acquired from SP funds, and (4) profits, rents, and issue of SP. The burden is on the spouse opposing CP to defeat the CP presumption. Courts use the source rule to determine the character of property by tracing the source of funds used to acquire the property.

Question 2

Martital economic community

Answer 2

begins at marriage and ends at death of either spouse, divorce, or with the intent of either spouse to not resume the marital relationship coupled with conduct indicating that intent. If spouses maintain the facade of marriage the MEC has not ended. Prior to 2017, a valid separation ending the community also required that the spouses lived separate and apart. However, this requirement is no longer necessary

Question 3

Generally on divorce CP is divided

Answer 3

equally in kind, meaning on a per-item basis unless a special rule requires deviation via a writing or stipulation by the court

Question 4

Pension is determined by the

Answer 4

time rule

Question 5

time rule

Answer 5

Courts consider the amount of time the spouse worked during marriage to get the pension divided by the amount of time total the spouse worked to get the pension.

EX: As such, if it takes 20 years to vest, and the marriage was for 10 years during the vesting period, the community property is 50%. Since community property is 50%/50%, the other spouse gets 25%.

Question 6

what is the rationale of the time rule

Answer 6

spouse’s labor during marriage is CP and any funding earned from spouse’s labor is CP.

Question 7

transmutation agreement

Answer 7

An agreement between spouses during marriage to change the character of an asset. No consideration is required, but this change must be in writing, signed and consented by the spouse adversely affected, and must expressly declare a change in ownership.

Question 8

Exception to writting requirement for transmutation

Answer 8

gifts that are not substantial in value, used in the home, tangible personal articles

Question 9

When property is acquired in joint and equal form, there is a presumption that the property is
CP and if any SP was used to purchase the property is subject to

Answer 9

Lucas and Antilucas

Question 10

Antilucas

Answer 10

• Jointly titled property acquired by a married couple (from 1987 to present) is presumptively community property at divorce, but any separate property used for the purchase is entitled to reimbursement of fair market value at the time of purchase.

Question 11

Before 1987 Lucas rule

Answer 11

Lucas Rule - separate property was presumed to be a gift to community property and not reimbursable. At death, separate property used to acquire jointly titled property is presumed to be a gift unless otherwise agreed.

Question 12

Lucas

Answer 12

Any SP used to purchase the
property was presumed to be gift and there was no right to reimbursement (unless there
was an agreement).

Question 13

When CP funds are used towards SP property, the character of the property does not
change. Rather, the community gets

Answer 13

pro rata ownership share in the property.

Question 14

Courts use the principal debt reduction method to discern the community’s ownership share in the
property. The community is entitled to the amount it

Answer 14

expended to feather the nest of CP and the pro rata increase

Question 15

with regards to the loan, what affects CP

Answer 15

If the lender looks to SP as security, the mortgage is likely SP.
However, if the lender looks to the spouse’s standing in the community or CP property as
security, the loan is likely CP.

Question 16

When there is CP and SP (Commingled funds) the burdent is

Answer 16

is on the spouse claiming that property acquired with funds from that account is SP to show that SP funds were used to acquire the property.

Question 17

How do you satisfy the burden for commingled funds

Answer 17

Direct-indirect out methood

Exhasuation rule

Question 18

Under the direct-in-direct-out rule the spouse claiming SP must
show

Answer 18

that there were sufficient SP funds in the account and that the spouse had the intent
to purchase the asset with SP funds

Question 19

Exhaustion rule

Answer 19

the spouse
claiming SP must show that all the CP funds were used in the account and all that was left
in the account was SP.

Question 20

family expense presumption for specific types of expenditures

Answer 20

expenditures for community
items, such as living, rent, food, etc. are presumptively made from CP

Question 21

how to defeat the family expense presumption

Answer 21

there are not adequate records and commingling occurs, it is presumed the SP funds used
for family expenses are a gift to the community

Question 22

What fiducary duties are placed on spouses

Answer 22

good faith and fair dealing and neither should take any unfair advantage over the other

Question 23

Fiducary duty as a spouse is breached when

Answer 23

breached with intentional, grossly negligent or reckless dissipation of property, or a gain in financial advantage at the expense of the other.

Question 24

. With regards to PI settlement awards, if
the cause of action arose during the MEC, the settlement award is CP, UNLESS the

Answer 24

settlement award is from the other spouse when the other spouse is the tortfeasor in order for them not to benefit too

Question 25

Although PI funds awarded from a cause of action that arose during marriage are CP, upon the divorce the court usually awards the funds .

Answer 25

exclusively to the injured spouse as SP unless a) funds were commingled b) there is economic hardship to the other spouse

Question 26

If title was taken in one spouses name,

Answer 26

court would not hold this as conclusive evidence that the house was the spouses SP absent some manifestation by the other spouse that the house was intended as a gift

Question 27

If H and W took the title to the house as JT w/ right of surviorship, each spouse has a

Answer 27

1/2 undivided interest during whole life and on death, title controls

Question 28

Under CA's anti-lucas statute, property is treated as CP with SP having a

Answer 28

right to reimbursement for any SP used by either spouse to improve the home

Question 29

All debts incurred by either spouse prior to or during the course of marriage are

Answer 29

community debts.

Question 30

Assignment of debts

Answer 30

court is free to assign CP debt to either spouse based on their relative ability to pay debt

Question 31

Tort Obligations are incurred when

Answer 31

tort occurs not when the judgement is handed down

Question 32

When does the tort order of payment come from the CP and wont touch SP

Answer 32

when it was committed for the benefit of the community

Question 33

When a tort is not committed during an activity for the benefit of the community, the debt will be satisfied first by

Answer 33

Tortfeasors SP then CP but not the other spouses SP

Question 34

Reimbursement to the CP for paying any obligation arising from a tort arises when

Answer 34

the tortfeasor's SP was available to pay

Question 35

Typically, a judge will allocate a tort debt to the tortfeasor spouse if

Answer 35

If the tort was incurred not during an activity for the benefit of the community. However, a judge may take into account ability to pay to effect a more just allocation of debts

Question 36

Equal Management

Answer 36

Each spouse generally has equal rights to manage community property

Question 37

Equal Management includes the

Answer 37

right to sell and encumber property

Question 38

Real Property and = Mangement

Answer 38

one spouse may not encumber community owned real property without the other spouse's consent. If one spouse, without consent, sells or encumbers community real estate, the non-consenting spouse has the power to void that transaction within 1 year.

Question 39

What can you be liable for post separation

Answer 39

necessities

Question 40

Necessities are

Answer 40

refer to food, shelter, and medical expenses.

Question 41

All property acquired during marriage while domiciled in a non-CP state that would be CP if domiciled in CA, is presumed to be

Answer 41

Quasi CP

Question 42

QCP remains separate property nature until

Answer 42

dissoultion or divorce death

Question 43

Personal Injury award is determined when

Answer 43

the cause of action arose, not when the spouse receives the settlement

Question 44

What happens to the personal injury award at divorce

Answer 44

it will be awarded entirely to the injured spouse unless the interests of justice requires

Question 45

Stock options depend on which formular is use and that depends on

Answer 45

what the intent was when granted

Question 46

Child support payments from a previous marriage are treated like a debt incurred before marriage. Who is liable for the debt

Answer 46

CP is liable and parent spouses SP is lable but the other spouses SP is not. Community is entitled to reimbursement made with community funds to the extent SP was not used

Question 47

Prenupital Agreement must be

Answer 47

voluntary, unconscionable, signed by both parties, and in writting

Question 48

A court will find a prenup unconscionable if

Answer 48

if the terms are unfair, or if a spouse did not know the extent of the other spouse's property before signing the agreement

Question 49

Prenupital agreements is not voluntarily executed if

Answer 49

if a spouse is not represented by counsel before signing the agreement, if they did not have more than 7 days before the wedding to review it, and they are not aware what the spouse is claiming as SP

Question 50

to rebut the presumptin of involuntariness w/o counsel

Answer 50

spouse not represented by counsel must be advised to seek the advice of counsel in writing, and must waive that right in writing.

Question 51

What happens when the spouse waives that right in writting

Answer 51

she must be allowed 7 days between the presentation of a prenuptial agreement and the signing of it, and she must also write, in a separate writing, that she understands the rights she is giving up, and from whom she received the information regarding what the extent is of her spouse's property.

Question 52

When title is taken in joint form presumption is that the property is

Answer 52

CP unless in the title doc states otherwise

Question 53

Lucas and Jointly titled property

Answer 53

a court will not allow tracing to determine the funds used to purchase a jointly titled home through the source rule and the property will be deemed CP

Question 54

Lucas does not apply to

Answer 54

bank accounts

Question 55

Bank account rule

Answer 55

a court will allow jointly titled bank accounts to be traced to determine the source of funds and how it should be characterized

Question 56

Proration rule

Answer 56

community property is used to pay an installment payment on separate property, the community gains an interest in the property.

Question 57

How do you calculate the proration rule

Answer 57

calculated by the expenditure of community property towards the installment payment over the total purchase price

Question 58

Pereira applies to

Answer 58

allotment to CP when the increase in the value of the SP business comes from the efforts of the spouse

Question 59

Under the pereira formula, SP is calculated as

Answer 59

[(FMV of business at marriage) * (fair rate of return) * (years of marriage)]. The CP is then calculated by subtracting the SP calculated above from the FMV at time of separation.

Question 60

Van Camp applies to the allotment of CP when the increase in the value of the business

Answer 60

due to reasons other than the spouse's efforts, such as market forces or characteristics inherent in the business, rather than the efforts of the spouse

Question 61

Van Camp Formula

Answer 61

1. Reasonable salary compensation – community expenses paid from business earnings = CP 2. Remainder of the business = owner’s SP

Question 62

Reverse Pereira applies to the alotment of CP when

Answer 62

increase in the value of the business comes from the efforts of the spouse The SP is then calculated by subtracting the CP calculated above from the FMV at time of divorce.

Question 63

Reverse Pereira

Answer 63

(FMV of the business at separation) + [(FMV of business at separation) * (fair rate of return) * years of separation)]

Question 64

Reverse van camp applies to the allotment of CP when

Answer 64

the increase in the value of the business is due to reasons other than the spouse's efforts, such as market forces or characteristics inherent in the business, rather than the efforts of one spouse

Question 65

Reverse van camp forumla

Answer 65

Reasonable salary compensation – community expenses paid from business earnings = SP 2. Remainder of the business = CP

Question 66

Goodwill of CP business

Answer 66

refers to its community reputation and future business prospects and earning potential. If the goodwill of the business is earned during marriage, then it will be a CP asset.

Question 67

When separate property and community property are commingled, a spouse may establish that the source of funds was separate property through and how many types are there

Answer 67

tracing Direct and Indirect

Question 68

Direct Tracing

Answer 68

A spouse may trace the source of funds to separate property by directly linking a deposit of separate property to a purchase, so long as the spouse had intent to purchase the property as separate property.

Question 69

Exhausting

Answer 69

CP funds in commingled acct were exhausted

Question 70

When a spouse receives disability or other payments, the court will first look to whether

Answer 70

the payments are intended to compensate for past work or to replace future earnings

Question 71

When disability payments that replace future earnings are received by a spouse after permanent separation,

Answer 71

those payments are that spouse's SP

Question 72

Clawback Rule

Answer 72

Where quasi-community property owned by a deceased spouse and given away without paid-for consideration, but while retaining some ability to exercise ownership or control over the property (such as a trust or joint tenancy property ownership), the surviving spouse may "claw back" the property to their own possession as community property at the death of the spouse.

Question 73

Pre-Marital Agreement

Answer 73

avoids CA CP

Question 74

If a PMA was made on or after 01.01.1986 it is required to be

Answer 74

1) must be in writing; 2) be signed by both parties; 3) and is enforceable without consideration.

Question 75

A PMA van be invalidated if

Answer 75

unconscionable or involuntary

Question 76

involuntary factors for a PMA

Answer 76

before execution there was no fair disclosure of property, no voluntary and express written waiver of any right to disclosure, inadequate knowledge of financial obligations of the other party, or no 7-day period for outside counsel review

Question 77

Putative spouse

Answer 77

person that has a good faith reasonable belief that they are married but in fact are not.  Entitled to QMP, but the right ends once the person learns they are not lawfully married.  However, the person retains rights to previous QMP acquired while the person had the good faith belief they were married.

Question 78

Meretricious relationship

Answer 78

Property is governed solely by the agreement of the unmarried parties.  Here, two persons are not holding themselves out as a married couple, but their cohabitation is more than a roommate agreement.

Question 79

Rights of each spouse

Answer 79

Each spouse has equal rights to manage and control CP. A spouse may sell, encumber, or otherwise dispose of CP without the other’s consent. 

Question 80

Exceptions to Spouse rights

Answer 80

Exceptions: when a spouse transfers personal property for less than fair market value, if one spouse is managing a business, or transfer of community real property (both spouses and written consent).  Inter vivos gifts of CP require written consent.

Question 81

What fiducary duties are placed on spouses

Answer 81

good faith and fair dealing and neither should take any unfair advantage over the other

Question 82

Married woman special presumtion

Answer 82

Before 1975, assets in a married woman’s name alone are presumed separate property.  Exception – A husband could rebut by showing clear evidence that he did not intend to create a gift.

Question 83

*Creditor Access to Property - Generally, creditors may reach community property to satisfy debts incurred before or during marriage. However, a non-debtor spouse’s earnings (generally CP) are protected if

Answer 83

1) the debt occurred before the marriage; and 2) the earnings were held in a separate account to which the debtor did not have access and no comingling occurred. Generally, a person’s SP can only be reached to satisfy their personal debts, including debts incurred after marriage.

Question 84

Exceptions to creditor access to property

Answer 84

1) Necessities – CP pays for necessities during marriage (if separated, CP is only available to pay necessities in an emergency); and 2) Tort Liability – if the debtor is acting to benefit the community, then CP before SP.

Question 85

Loans – In order to determine the character of a loan, the court will look to the intent of the lender.  If based on income, the loan will likely be

Answer 85

CP

Question 86

when would a loan switch to SP

Answer 86

based on security consisting of separate property assets, it may be deemed SP.

Question 87

Community property used to increase value of SP

Answer 87

The CP is entitled to a pro-rata percentage of the increase.  For example, loan 10%, then take 10% of the increase and add it to the CP.

Question 88

Creditors cannot reach CP of the other spouse after divorce unless

Answer 88

1) that spouse incurred the debt; or 2) the debt was assigned to that spouse by the court.

Question 89

Gifts of substanital value must be accompanied by

Answer 89

a writing, memorializing the gift from one spouse to the other.

Question 90

What happens if you do not have this writting for gifts of substantial value

Answer 90

presumption will be that it remains the gifting person’s SP.  This presumption may be rebutted.

Question 91

Medical bills

Answer 91

A spouse is entitled to reimbursement if they expend SP for medical expenses of the other spouse if 1) CP was available; or 2) the debtor spouse had available SP.

Question 92

Education expenses - Professional degrees acquired during marriage are the SP of the acquiring spouse.  However, reimbursement is due when

Answer 92

1) CP funds are used to pay tuition; and 2) the education enhanced the spouse’s earning capacity.

Question 93

when would a spouse not need to be reimbursed for education expenses

Answer 93

if 1) community substantially benefited from the education (10-year rule); 2) the other spouse received community funded education; or 3) the education lessens the need for spousal support.

Question 94

Child support and CP

Answer 94

CP should not be used to make child support payments (for children outside of the MEC) unless SP was not available.  When CP was used and SP was available, the community is entitled to reimbursement.

Question 95

For the stock rule, you should use

Answer 95

the nelson rule or hugs

Question 96

Nelson rule

Answer 96

Used when options are compensation for future performance and retention - #years grant to divorce / # years grant to vest = community property.

Question 97

Hugs

Answer 97

Used when options attract people to the job and reward past services - #years from hire to divorce / #years hire to exercise of options = community property.

Question 98

CA presumption for Joint tenancy property

Answer 98

Under CA law, property that is acquired during marriage is given as property for JT for both spouses and would likely be presumed a CP even if such property were to be from SP

Question 99

Dissolution

Answer 99

generally CP during dissolution allows both spouses to receive 50% of CP value

Question 100

Gift exception

Answer 100

Gifts from one spouse to another spouse would generally be presumed to be that of the community. However, courts would analyze factors such as the value of a certain gift. If the value of the gift is worth a great amount of value, this would be considered separate property of the spouse that gave the gift at the time of dissoultion.

Question 101

Individiual account

Answer 101

Under CA law, unless there is a valid transmutation of such asset or prenup, any income or earnings acquired are CP. Even if a spouse were to open an account in their name alone, it would not be sufficient in order to deem such property as separate property of spouse

Question 102

Fiduciary duties

Answer 102

Spouses owe fiduciary duty to the other spouse, including the right 2 properly manage CP as well as the right to disclose certain info. Such breach or violation of the duty may cause a reduction in the amount entitled to the CP for violating spouse.

Question 103

Special Title Presumption

Answer 103

The special title presumption, which applies only at death, presumes that the form of ownership on the title represents the form of ownership interests of the spouses. If the asset is untitled or titled in only one spouse’s name, then the asset may be considered SP if the source of the funds used to purchase the asset is SP. The special title presumption can be rebutted by clear and convincing evidence that both spouses did not intend to hold the property as stated in the title.