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Texas Bar Exam: Essays > Community Property > Flashcards

Flashcards in Community Property Deck (69)
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1

What factors do courts look at to find if a couple has held themselves out to be common law married?

Joint tax returns, children, use of last names, co-ownership of property, shared bank accounts, credit cards, and debts. This list is not exclusive.

2

Can courts take marital fault into account in dividing community property?

Yes. Fault is just one factor though a judge can consider in the division of community property. Fault can also be a factor in child custody actions.

3

What is the standard for dividing property at divorce?

Courts SHALL divide community property in a "JUST AND RIGHT" manner. THIS DOES NOT MEAN 50/50. The court has BROAD DISCRETION IN DECIDING WHAT IS JUST AND RIGHT.

4

What is a putative spouse? What are they entitled to?

This is where the spouse has an OBJECTIVE, REASONABLE BELIEF that the parties are legally married. However, the other spouse is in fact already married to someone else.

The "putative spouse" will be given the same rights as if the parties had been legally married. He or she will get 1/2 of the community estate. The other half will go to the deceptive party to split with their legal spouse.

5

What are meretricious partners?

People who are unmarried and cohabit with each other. They do not hold themselves out as being married. Thus, they are both single for legal purposes and CANNOT have community property.

6

What are registered domestic partners?

May arise with same-sex couples or with opposite-sex couples. This is only allowed in Travic County. The couple can register as a couple.

7

What are the two types of property? Define each.

Separate Property - Property acquired before marriage or after divorce; by gift or inheritance; OR acquired as a result of personal injury recovery (except for lost earning capacity and medical expenses).

Community Property - Property acquired during the marriage.

8

What is the rule that Texas follows in classifying property?

THE INCEPTION OF TITLE RULE - property is classified when it is acquired.

9

How is a gift to the community classified?

50% SP gift to the husband and 50% SP gift to the wife.

10

How is income gained during the marriage from separate property classified?

General rule - Community Property

Exceptions:

1) Parties have entered into an agreement to the contrary; OR

2) The SP is a gift from the spouse.

Example - You receive an apartment building from your spouse that generates $10k a month. The income from the rentals will remain your separate property.

11

What can a spouse do if he/she objects to a property's classification?

They can prove that it is another type of property by CLEAR AND CONVINCING EVIDENCE.

12

If you acquire an asset over a period of time, as in a layaway plan, how is that asset classified?

The Inception of Title rule says that it is classified whenever the claim to the title is first made (which would be the first payment). If the payment is made before marriage, the asset is SP. If during, the asset is CP.

13

How do parties rebut a community property presumption, especially when they have commingled bank accounts?

Tracing.

Community Out First Rule - If both SP and CP funds are poured into one bank account, Texas presumes that the community property funds are spent first.

Lowest Intermediate Balance Rule - If the balance in the account drops below the SP amount poured into the account, then the court determines that the lowest balance between when the SP funds were deposited and the date of the divorce is the SP amount.

14

What is the rule when you have separate property that is acquired before the marriage but paid off during the marriage? Are there any exceptions?

Economic Contribution "Old Rule" - APPLIES TO ALL CASES FILED BEFORE SEPTEMBER 1, 2009. The community gets a percentage of the current equity in the property based on the community contribution that went towards debt reduction (doesn't include interest, taxes, or insurance payments. Only the community funds that INCREASED THE EQUITY IN THE PROPERTY count.

Reimbursement "New (current) Rule" - APPLIES TO ALL CASES AFTER SEPTEMBER 1, 2009. THIS IS THE SOLE REMEDY FOR COMMUNITY CONTRIBUTIONS TO SEPARATE PROPERTY (THERE IS NOTHING ELSE). Consider the payments from CP to the principle on the mortgage and any capital improvements on the property.

NOTE: A spouse can also contribute TIME, TOIL, and TALENT to help improve value in SP such as a business. The community will be entitled to reimbursement for this.

EXCEPTIONS (things that CP payments are not reimbursable for):

1) Living expenses;

2) Payment of child support, maintenance, alimony from prior marriages;

3) Student loan payments; OR

4) Financial contributions toward a professional degree.

15

How is separate property stock treated?

1) Cash Dividends earned during the marriage are classified as CP.

2) Stock dividends/splits are treated as appreciations in value of the stock and are thus classified as SP.

3) Proceeds from the sale of SP stock remains SP.

4) Stock Options follow the "Time Rule" which states that courts will apportion the value of the stock options based on the amount of time involved during the marriage and the time when the parties are separated. That ratio is applied to the number of shares that can be exercised. That proportion is the amount attributed to the community estate.

16

How is trust income classified?

A trust is SP, and the income from the trust is also SP.

Exception: If the spouse has an unrestricted right to invade the trust corpus, income from the trust will be deemed CP.

17

How are mineral interests classified?

SP mineral interests that generate income remain SP income.

Exception: Delay Rentals are classified as CP.

18

How is livestock classified?

Even if livestock are deemed SP, the offspring of that livestock BORN during the marriage will be deemed community property.

19

How is property that was acquired by a couple while they were domiciled outside the state of Texas treated? What is this property called?

This is QUASI-COMMUNITY PROPERTY. The rule is: If the property would have been CP had the married couple been domiciled in Texas when the property was acquired, it is now considered Quasi-Community Property. This concept ONLY applies at divorce (not during the marriage).

20

T/F - An asset acquired on credit during marriage falls under the CP presumption.

True

Exceptions:

1) Agreement to the contrary between the parties; OR

2) THE CREDITOR RELIED ON ONE SPOUSE ONLY IN EXTENDING THE CREDIT.

21

How are gifts during the marriage classified?

If the gift is purchased with SP funds and placed in the other spouse's name, it is considered a SP gift to that spouse, and all income out of that SP will remain SP.

If the gift was purchased with CP and placed in the donee spouse's name, it is PRESUMED TO BE CP. Only slight evidence is needed to show it was intended to be a gift.

If the gift was purchased with CP but the title is stated as SP of only ONE spouse, and BOTH SPOUSES HAVE PARTICIPATED IN THE TRANSACTION, the property is deemed SP of the donee spouse (whoever's name is on the title).

22

How does the Inception of Title Rule apply to Life Insurance Policies?

The characterization is determined by the classification of the FIRST PREMIUM PAYMENT MADE ON THE POLICY.

HOWEVER, CP estate is entitled to reimbursement for any premium payments made out of the community property assets.

23

How are retirement and pension benefits classified?

Defined Benefit Plans - Employee Spouse's years of service while married / total years of service at the time of divorce = CP Fraction applied to the plan.

The value of the benefits is frozen at the time of divorce. The value of a retirement plan is determined by a JUST AND RIGHT division.

A spouse can have his/her interest in one of two ways:

1) Cash Out - establishes a present cash value of the CP's share of the benefit; the non employee spouse is then cashed out; OR

2) "If, as, and when received" decree - Contingent upon employee actually retiring. The court determines the benefits to be paid out to the non-employee spouse "if, as, and when" the employee spouse actually retires and begins collecting retirement benefits.

24

How are defined contribution plans classified?

The value of the plan is determined by the actual amount contributed by the employee spouse. Here, we use tracing to see what was contributed before and during marriage. Before = SP / During = CP.

25

What is a QDRO?

You can set up a separate account for an ex-spouse, into which an employer can put money for that spouse. If the non-employee spouse pre-deceases the employee spouse, all interests of the non-employee spouse would also die with that spouse.

26

How are military benefits classified?

Military retirment benefits are CP. HOWEVER, military disability benefits are SP.

27

How is worker's compensation classified?

Follow the "Time Rule:"

1) If lost earning capacity occurred before the marriage or after the marriage, those benefits are SP.

2) If lost earning capacity occurred during the marriage, the workers compensation benefits are CP.

28

How exactly is time, toil, and talent that is put into a spouse's SP business during marriage calculated for community reimbursement?

The amount of reimbursement is calculated using the VALUE of the time, toil, or talent EXPENDED, LESS the VALUE of time, toil, or talent REASONABLY NECESSARY TO MAINTAIN THE BUSINESS, and LESS ANY COMPENSATION already received by the operating spouse.

29

How are Personal Injury Awards classified upon divorce?

Generally, personal injury recoveries are the SP of the injured spouse.

EXCEPTIONS:

1) Lost earning capacity during marriage;

2) Lost wages otherwise attributable to community during marriage; and

3) Medical expenses paid by the community during the marriage.

30

Can couples agree to alter the characterization of assets after they have been classified?

Yes through a separate agreement called a Conversion Agreement. THIS IS NOT A PRENUTIAL AGREEMENT.