Community Property Flashcards
(19 cards)
Community Property Presumption
CA = CP state, all property acquired during the course of marriage is presumptively CP, irrespective which name is on the title, same goes for earnings/wages, Frage: trace back the source of funding
SP:
1. property from prior marriage or after separation
2. a gift, will, inheritance, bequest (Vermächtnis)
3. property acquired with separate funds , auch grds. property acquired in exchange for SP AND
4. profits/fruit from separate property
Divorce/death: CP is divided equally, SP remains her own
Married woman’s special presumption: If property taken in wife’s name alone before 1/1/1975, presume SP (as gift)
EXCEPTION: Intent other than a gift is shown or where the wife controlled how title was taken
Ausnahmen zur hälftigen Teilung von CP
- misappropriation by one spouse
- separate debt
- educational debt = assigned to spouse who received education
- tortliabilites = assigned to tortfeasor if liability was not for benefit of community
- family home may be awarded to person who is given custodsy for minor children
- closely held corporations
End of Economic Community
Marital economic community: Legal “community” of married people. CP may be acquired only during this time.
Ends at death, or date of separation (a spouse expresses intent to end marriage + conduct is consistent with intent)
Quasi Community Property
QCP while living in a non-CP state that would be considered CP if the spouses had been living in California when the property was acquired
Divorce: QCP is treated like CP
Death: Surviving spouse has 1/2 interest in QCP title in decedent’s name, however decedent HAS NOT any rights in QCP titel in the surviving spouse’s name
Illusory Transer of QCP
surviving spouse may compel an inter vivos transferee of QCP to restore 1/2 of property value when:
1. decedent died while domiciled in CA
2. consideration of substantial value was NOT received
3. transfer was made without SS written consent or joinder AND
4. decedent retained some interest or control of the property (eg possession, enjoyment, right to income from property, had power to revoke or consume, invade or dispose of the princiapl for the decedent’s own benefit or held property with another that had a right survivorship
Duties of managing spouse
exclusive management of own SP and equal management of all CP
Grds. Spouse MAY sell, encumber or otherwise dispose of CP without the other’s consent!
Ausn.
1. personal property transfers of CP for less than fair and reasonable value (written consent required)
2. if one spouse is managing a business, he/she has primary management and control, but this person is obligated to provide prior written notice to the other spouse if intends to sell, dispose etc. all or substantially all of the property
3. transfer of community REAL property require both spouses to join the transaction (if not, non-consenting spouse can void within one year fi sold to bona-fide purchaser, otherwise voidable at any time)
4. inter vivos gifts of CP require written consent (non-consenting spouse can void during donor’s lifetime (donor = person who donates), may void half of the gift after the death of the donor)
Fiduciary Duties
marriage = confidential relationship with duty of the hightest good faith and fair dealing, neither shall take advantage
Bsp.
(1) an intentional, grossly negligent, or reckless dissipation or destruction of
property;
(2) a gain in financial advantage at the expense of the other spouse
ansonsten has to reimburse community, spouse who took advantage has burden to prove that transaction was entered freely etc.
Prüfungsschritte
- Valid marriage
- Characterization of property:
(1) source of asset
(2) presumptions
(3) partie’s actions
- Valid marriage
Prerequisite to application of CP: Valid marriage?
1. Legal capacity, over 18
2. performance of legal procedures
i. If a couple followed the rules in another state, the marriage will be recognized in CA as valid marriage
ii. Alternatives to marriage
1. Putative spouses: Either or both parties believed in good faith that the marriage was valid
a. Quasi-marital property (QMP) can be divided. QMP is property that would have been CP or QCP had the union been a valid marriage
2. Marvin action: Unmarried cohabitants can contract with each other to hold property as CP. K upheld as long as consideration does not violate public policy, e.g., no exchange of sexual services
3. Marriage by estoppel: If one induces another into marriage knowing the marriage was invalid, inducing party would be estopped from claiming it was not a marriage; CP protections can attach
4. registered domestic partnerships (RDPs): 2 people not related by blood, at least 18 years old, capable of consenting to RDP, not married to or in RDP with someone else. Not required: living together, same-sex couples, elderly couples.
(1) Source of Asset
A. Tracing: For commingled property (presumed CP), proponent of SP has burden of proving what is SP
1. Direct tracing: Proponent of SP attempts to identify with sufficiently accurate records
2. Exhaustion method: Show that at the time the asset was purchased, the community expenses exceeded the community funds. Funds used to purchase with is necessarily SP
3. If tracing not done/possible: Entire asset will be treated as CP, unless the community portion is considerably small in comparison to the amount of SP funds contributed (if CP «_space;SP → then SP)
B. When real property is being paid for with SP and CP funds (e.g., spouse acquires property before marriage, and CP funds are used to make mortgage payments), community and separate interests are determined by apportioning the property value by the respective contributions proportionally (= Moore principle, In re Marriage of Moore), if not possible, entire thing is CP
(2) Presumptions
a) Property acquired during marriage
b) Anything received in exchange for labor performed during marriage (e.g., wages, artistic work, copyright)
c) Commingled funds (e.g., in one bank account) or commingled property (acquired with commingled funds)
d) May rebut CP presumptions by showing SP source (tracing), SP character of asset (gift, etc.), or agreement
e) Assets in joint title. Divorce pre-1987: Property acquired by married couple in any joint title (JT, TIC) is presumed CP. No SP reimbursement under Lucas, unless evidence of title (written agreement or statement)
i. Anti-Lucas statute!: In divorce situations, property purchased in joint title from 1987 till now is still PRESUMED CP at divorce (rebut w/ writing) but SP is entitled to reimbursement (FMV at purchase) for contribution
ii. At death: Under Lucas, SP used to acquire the asset presumed gift, no SP reimb. allowed unless agreed
f) Title in SP alone does not necessarily control ownership (e.g., funds held in an account in one spouse’s name could still be CP if wages were earned during marriage or without transmutation or evidence of gift)
i. Rebut CP presumption by showing both spouses knowingly took title in form other than CP
g) Presumption that a property is CP rebuttable with tracing back to SP funds or transmutation to SP
Lucas und Anti Lucas
Original Lucas Rule:
The Lucas case established that if a married couple took title to property in joint and equal form, it was presumed to be community property, and any separate property used for the purchase was presumed to be a gift to the community. This meant the separate property contributor would not be reimbursed for their contribution.
Anti-Lucas Statutes:
The Anti-Lucas statutes, enacted in California, changed this rule in two ways:
Rebuttable Presumption: While the presumption of community property for jointly held property remains, it can be rebutted by a written agreement or statement in the deed that the property (or portion thereof) is separate property.
Reimbursement: If the separate property contributor can’t rebut the presumption of community property, they are now entitled to reimbursement for their contributions to the property (e.g., down payments, principal payments on the mortgage, or improvements) at the time of divorce or separation.
Partie’s Action to change Character
A. Premarital / prenuptial agreement (PMA): Agreeing before marriage character of a spouse’s earnings (typically what will be SP)
1. Starting 1985, statute of frauds: PMA must be in WRITING, but oral PMA is ENFORCEABLE if fully executed or detrimental reliance by promisee.
2. Nicht unconscionable: a) if terms are unfair or b) spouse did not know the extent of the other spouse’s property before signing
3. Nicht involuntary: 1986–2002: PMA must be voluntary. Starting 2002: It shall be deemed that PMA was not executed voluntarily unless the party against whom enforcement is sought: 1) had independent counsel or waived counsel in writing, 2) had at least 7 days to review the PMA, AND 3) was fully advised in writing of all the rights and obligations that attach to PMA AND 4) not executed under duress, fraud, undue influence, or lack capacity
4. Doesn’t encourage divorce
B. Transmutation: Agreeing during marriage to change the character of a particular asset
i. Starting 1985: Any transmutation must be (no consideration required)
1. in writing,
2. expressly declare a change in the ownership of property, and
3. be consented to by the spouse whose interest is adversely affected, UNLESS…
1. Insubstantial value: Gift of tangible property between spouses 1) for personal use of recipient spouse + 2) not of substantial value (as measured against the lifestyle of the parties)
2. Intent: Recipient spouse can otherwise offer proof of intent that the gift be SP
ii. prior 1985: oral transmutations were valid
Fallgruppen
a) Personal injury award against third-party tortfeasor: CP if the cause of action arose during the marriage, auch wenn nihct acting for benefit of community
i. At divorce, payments are treated as SP, unless economic hardship to other spouse or comingled
ii. If recovered against other spouse tortfeasor: always SP of injured spouse
b) SP business: If community labor (either spouse) improves value of a SP business, CP can share in increased value
i. Pereira accounting method where improvement stems mostly from management, LABOR, or special skills of spouse
= Original SP investment + reas rate (10%) per year to owner spouse is SP. Rest is CP (½ to owner)
ii. Van Camp accounting method where improvement is from unique CHARACTER of business or market forces
= (Reasonable FMV salary – community/family expenses paid from business earnings) × years married = CP. Remainder of the business = owner spouse’s SP
c) Business goodwill earned during marriage is CP. Valuation methods:
i. Market sales valuation: Price the goodwill would command in a sale of the business
ii. Capitalization of past excess earnings: Does not contemplate a sale. Ascertains the present value of the future stream of income that the goodwill developed during the marriage will generate in the business
d) Credit acquisition: Presumptively CP when credit or purchase money loans used to purchase property (weil personal credit belongs to community, also auch die Schulden!), UNLESS…
i. Lender’s intent test: Creditor relied primarily on SP when extending credit. If there is SP collateral to repay loan, asset likely SP. If lender looks at any CP asset, including credit or earnings of either party, asset is CP
e) Marital home: Both spouses must join in executing an instrument to sell, convey, encumber, or lease for more than a year any community realty. Need not get consent of both if 1) best interest of the community + 2) consent has been arbitrarily refused or cannot be obtained, or to grant as a family law attorney’s real property lien
f) stock options as employee compensation
(1) entirely CP only if they become exercisable during marriage
(2) if awarded during marriage but become exercisable after marriage, then:
a) if primarily rewarded for past services, CP value is Hug formula: time employed during marriage / time employed until the date the option becomes exercisable (favors CP)
b) if primarily rewarded to encourage employee to reamin with company, CP value is Nelson formula: time from date option was granted to the date the economic community ends / time from date the option was granted to the date the option becomes exercisable
g) Retirement pensions: Portion of benefits earned during marriage ist CP, even if actually received after divorce
h) disability pay/workers compensation/severance pay: CP to the extent pay is inteded to replace marital earnings, imaerial if insurance was purchased during marriage with CP
i) life insurance:
a) whole life insurance: buy-in rule: CP = number of premium payments with CP / total number of premium payments
b) term life insuarnce: final payment rule: designated CP or SP according to the characterization of the last payment made
Debts & Liabilites
Generally, assets will be valued at the time closest to trial. Spouse-managed business: time of permanent separation
Debts: A debt is incurred at the time of obligation to pay arises. Generally, the community estate (CP) is liable for debts incurred by either spouse before or during marriage, excluding when spouses were living separate and apart
i. After dissolution, courts have more discretion; liability depends on whether debtor spouse was acting for the benefit of the community: If so, CP first, then debtor spouse SP. If not, debtor spouse SP, then CP
Tort liability: If the tortious spouse acted for the benefit of the community when the liability arose, liability for personal/property injury is paid first from CP (remainder → SP). Not for benefit of the community → SP → CP
Pro rata rule
When CP pays loans for SP, community is entitled to pro-rata ownership share of the property (acquired as SP before marriage) for amounts that reduced the principal debt on the asset
Reimbursements to Community
a) Acquisition of property: Spouse who contributed SP to acquisition of CP or other spouse’s SP will be reimbursed to the extent traceable. If asset taken in joint title after 1987, SP may be reimbursed for contribution (anti-Lucas)
reimbursed for: 1 down payments, (2) payments for improvements, (3) principal payments
but NOT: (1) mortgage interest, (2) taxes, (3) insurance, (4) maintenance payments
b) Improvement by community or spouse
i. If CP is used to improve own SP, community entitled to reimbursement (greater of cost of the improvement or increase in value of the SP)
ii. If CP improved other’s SP, split authority: no reimbursement (gift presumed) OR reimbursement (modern)
iii. If SP improved CP, SP has right of reimbursement
iv. If SP improved other’s SP, SP has right of reimbursement
c) Education or training:
i. degree is SP of the acquiring spouse
ii. community is entitled to reimbursement when: 1. CP funds are used to pay educational expenses (auch loans) AND 2. education enhanced the spouse’s earning capacity
iii. AUSN.a) community has substantially benefited from education (presumed after 10 years), b) other spouse received community funded education or c) education lessens the need for spousal support
d) Payment of debts: May be waived with written waiver. Debts may be reimbursed if…
i. CP is applied to satisfy spousal support or child support from prior relationship (treated as debt incurred before marriage) and debtor spouse had SP available to pay the debt
ii. SP of non-debtor is used to satisfy debtor spouse’s separate debt for necessaries when his SP or CP share is available, non-debtor spouse is entitled to reimbursement
e) Child support & Alimony pay: CP should NOT be used to make child support payments from a prior marriage (dann reimburse) unless SP is not available (dann reimburse upon divorce)
f) Medical Expenses: reimbursement when he/she expends SP for the medical expenses of the other spouse if a) CP was available OR b) if debtor spouse had available SP
Disposition of Property
a) At divorce: CP is divided “in kind”; each spouse is entitled to receive one-half interest in CP asset
EXCEPTIONS: liabilities > assets, misappropriation by spouse, educ. debts & tort liab. assigned to spouse
b) At death: Amount surviving spouse (SS) receives based on whether there was a will or not
i. Death of a married person terminates the CP character of any of his property, but form of title controls
ii. By will, decedent may dispose of his half CP + all SP. SS is entitled to her half of CP
iii. SS of intestate decedent is entitled to all CP + at least one-third of SP, depending on # of issue and parents
Rights fo Creditors
i. creditor’s may reach CP to satisfy debts incurred before or during the marriage, including debts for child and spousal support
BUT non-debtor spouse’s earnings (generally CP) are protected if 1. debt occurred before marriage AND 2. earnings were held in a separate account to which the debot rdid not have access and no comingling occurred
ii. a person’s SP can only be reached to satisfy their personal debts, including debts after marriage
iii. Ausnahmsweise both CP and SP may be reached:
a) necessities: community is obligated to pay for necessities during marriage (food, shelter, and medical expenses) during marriage. When separated, the community is ONLY obligated to pay for a spouse’s necessities in emergency situations.
b) Tort Liability: If the debtor was acting to benefit the community when the tort occurred, then CP must be used before reaching SP. If debtor was not acting to benefit the community, then SP must be used before reaching CP.
iv. Creditors CANNOT reach CP awarded to a spouse after divorce UNLESS: (a) that spouse incurred the debt; OR (b) was assigned the debt by the court.
• A debt is incurred at the time the obligation to pay arises.
