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Flashcards in Community Property Deck (56):
1

Preamble

California is a community property state. In a community property state, the marital economic community begins upon marriage and ends at divorce, the death of a spouse or a permanent physical separation with an intent not to resume the marital relationship. Property acquired during the marriage is community property (CP). All earnings during the marriage and all property acquired with those earnings are considered CP. All debts incurred during the marriage are CP debts. Property that either spouse acquired before the marriage or after death, divorce of living separate and apart is presumed to be separate property (SP). During the marriage property acquired by gift or inheritance is SP, as well as any other property that is traceable to SP. Quasi-community property (QCP) is property acquired by a married couple while living in a non-CP state that would be characterized as CP if the couple had been living in California at the time the property was acquired. The QCP classification is triggered by divorce or the death of the titled spouse.

2

Married couples

Consent of two parties (over 18) who have legal capacity to enter in to the contract of marriage and formal legal procedures (license, solemnization, authentication)

3

Voidable marriage

Can be annulled if one party is under 18, prior existing marriage, unsound mind, consent obtained by force or fraud (vital to the relationship) and physical incapacity

4

Unmarried cohabitants

Distribution of property governed by K principles; express K enforced unless based on meretricious sexual services; if no express K, examine the conduct of parties for an implied K or understanding

5

Putative spouse

a party with a good faith belief (subjective state of mind) that she is validly married; considered in the totality of the circumstance; determine whether belief was genuinely and honestly held

6

Putative Spouse Doctrine

A putative spouse may rely on quasi marital property (all property that would have been CP or QCP is labeled QMP) principles to divide property but property rights stop accruing when putative spouse discovers marriage is invalid.

Some courts have held that when only one spouse knows of invalidity of marriage, the knowing spouse is treated similarly to unknowing spouse, despite lack of good faith. Can obtain ownership interest in QMP of good-faith spouse.

7

Premarital agreement

Writing, signed by both parties, enforceable without consideration; oral agreement enforceable if promise fully performed or a party detrimentally relied on oral promise; can be unenforceable if not voluntarily executed or unconscionable at time of execution

8

Premarital agreement (not voluntary)

Voluntary requires (1) separate legal representation, unless expressly waived in writing; (2) not less than seven days to sign; (3) no fraud, duress or undue influence; (4) if unrepresented by counsel was fully informed of terms and effects of agreement

9

Premarital agreement (unconscionable)

(1) not provided a fair, reasonable and full disclosure of property or financial obligation of the other party; (2) lacked adequate knowledge of the property/obligations and did not expressly and voluntarily waive disclosure in writing

10

Transmutation

In writing by an express declaration of spouse whose interest is adversely affected; exception: gifts not substantial in value between spouses used solely or principally by the receiving spouse

11

Separation agreements

can settle property rights, custody, and spousal support; cannot alter martial status unless fraud, mistake, breach of fiduciary duty or failure to disclose

12

Special community property presumption

Applies only at divorce; jointly held property acquired during marriage is CP, contrary intent must be evidenced by clear statement in deed or other writing since 1984 (before could use parol evidence)

13

Presumption of title

only at death; form of ownership on title represents the ownership interests of the spouses; if title in one spouse's name (or no title), SP if purchased with SP; if titled in manner that indicates intent to hold as SP, cannot benefit from tracing unless spouse purchasing asset titled it in his own name

14

Commingled bank accounts

burden of proof on SP proponent to show SP funds used to purchase assets; direct tracing or indirect tracing allowed

15

Direct tracing

sufficient SP funds available at time of purchase and intent to use SP funds to purchase

16

Exhaustion method (indirect tracing)

CP funds in account already exhausted by payment of family expenses at time of purchase

17

Goodwill of CP business

treated like CP if created during marriage; market sales valuation through expert testimony or capitalization of past excess earnings created by goodwill

18

Education degrees

Not CP, but CP reimbursement for tuition, fees and books (not living expenses if (1) CP funds used to pay for education costs/premarital educational loans; (2) educated spouse's earning capacity was substantially improved; (3) married couple did not contractually waive right to reimbursement in writing

19

Education degree (defense to reimbursement)

(1) divorce occurred more than 10 years after education was received and community substantially benefited from it; (2) other spouse also received CP education during marriage; (3) education reduced need for spousal suppport

20

Educational loans

At divorce, outstanding educational loans assigned to spouse who incurred it

21

Retirement pensions (eligible for benefits on divorce)

treated like CP; (time rule) divide years spouse was employed during marriage by total number of years participating in retirement plan

22

Retirement pensions (not eligible on divorce)

Division in kind: when spouse retires, other spouse receives CP percentage of each pension check, using "time rule"

Cash-out: non-participant spouse is cashed out upon divorce and awarded assets of equal value to pension benefits using an actuarial evaluation

23

Stock options

CP (if replacing earnings during marriage); SP (if replacing earnings after divorce/separation

Time rule: divide years spouse employed during marriage by total number of years before stock option can be exercised

24

Disability pay

CP: if intended to replace marital earnings/retirement benefits

SP: if intended to replace earnings after dissolution

25

Severance pay

CP: if structured like retirement benefits

SP: if meant to replace lost earnings after divorce/legal separation

26

Insurance (whole life)

Divorce: CP in proportion to number of premium payments made with community funds

Death: (mixed funds) calculated like divorce; (CP funds) one half go to surviving spouse; one-half to beneficiary

27

Insurance (term life)

Divorce: no value b/c no investment component

Death: apportion community interest; or look to final premium payment to determine whether SP or CP

28

SP business

Income from SP business is SP; but if spouse contributes labor to SP, court must determine how much of business is CP and how much is SP

29

Pereira

increase in value due to personal skills/effort of managing spouse; how much increase in value is due to normal appreciation of SP, rest is CP

SP = Value of SP business at time of marriage + (Value of the SP Business at time of marriage x Fair rate of return x Years of marriage)

CP = FMV of Business at divorce – SP

30

Van Camp

increase in value is due to character of SP business; allocates reasonable value of spouse's effort to CP, rest goes to SP

CP = reasonable value of services x Years during marriage – (Family expenses + salary received)

SP = FMV of business at divorce – CP

31

CP business during separation

A CP business continues to be operated by one of the spouses during separation; if business appreciates in value, then court determines CP and SP shares

32

Reverse- Pereira

CP = Value of CP business at time of separation + (Value of CP business at separation x Fair Rate of Return x Years of separation)

SP = Value of business at divorce – CP

33

Reverse-Van Camp

SP = Reasonable value of services during separation – Family expenses paid during separation

CP = Value of business at divorce – SP

34

Credit purchases and loan proceeds

presumed to be CP when lender does not rely "soley"/"primarily rely" on purchaser's SP in extending credit

35

Capital improvements

SP to improve other spouse's SP: reimbursement for contribution, unless transmutation/waiver (since 2005)

SP to improve CP: reimbursement

CP to improve either spouse's SP: community entitled to reimbursement or enhanced value of property (whichever is greater)

36

Personal injury recovery

CP at death of either spouse;

Divorce: (injury before marriage) recovery is SP, injured spouse must reimburse community and other spouse's SP for any injury related expenses; (injury during marriage) recovery is CP, but awarded to injured spouse upon divorce if not already spent or commingled with CP funds. Some recovery may be awarded to non-injured spouse in interest of justice (no more than half)

37

Debt

liability in K, tort or other obligations; incurred at time a K is made, tort occurs or obligation arises

38

CP liability for debt

liable for debt incurred by either spouse before/during marriage; upon divorce, right to reimbursement; non-debtor spouse can protect CP earnings from liability for pre-martial debt by depositing them in separate bank account that is not accessible to debtor spouse

39

SP liability for debt

liable only for debts incurred before/during marriage (not for other spouse's debt)

40

Necessaries of life (living together)

Spouse's Cp and SP are liable for other spouse's debts related to necessaries of life; non-debtor spouse can be reimbursed for any SP funds used, if CP or SP of debtor-spouse was available at time debt was paid

41

Common necessaries of life (living apart)

Spouse's CP and Sp are liable for other spouse's debts for common necessaries of life (required to sustain life); non-debtor spouse can be reimbursed for any SP funds used if Cp/SP of debtor spouse was available at time debt was paid

42

Tort obligations

Acting for benefit of community: liability first satisfied from CP; the tortfeasor's SP

Not for benefit of community: liability satisfied from tortfeasor's SP then CP; assigned to tortfeasor at divorce

If order not satisfied, non-tortfeasor spouse may seek reimbursement from tortfeasor spouse

43

Liability fo child support/spousal support

treated like debt incurred before marriage; can shield; CP can seek reimbursement if debtor had SP at the time to pay for debt

44

Management (gifts to third party)

gifts/disposal of community personal property for less than fair and reasonable value must have written consent; non-consenting spouse can ratify gift/revoke and sue to recover property; after donor spouse's death, non-consenting spouse can ratify gift or void 1/2 value of it

45

Management and control

Equal management and control over personal property/real property

46

Management (household goods)

may not sell/convey/encumber household goods without written consent of the other spouse

47

Management (CP business)

managing spouse has primary management and control; managing spouse must give prior written notice to other spouse for major actions (sale, lease, exchange, encumbrance or other disposition of all or substantially all of personal property used in operation of business)

See remedies for breach of fiduciary duty

48

management (real property)

both spouses must execute an instrument leasing for longer than one year, selling/conveying/encumbering community real property

Title held by one spouse: transaction presumed valid if purchaser, in good faith, did not know seller was married

Remedy: void unilateral transfer of community real property within 1 year; upon set-aside a refund to innocent purchaser required

49

Fiduciary duty

Highest duty of good faith in management/control of CP (duty to disclose, to account, to obtain consent)

Disclose: all material facts/info regarding existence, characterization and valuation of assets and liabilities

Account: provide equal access to info/records

Consent: when making gifts/conveying/encumbering property

50

Divorce (separate debts)

Debts incurred before marriage assigned to debtor; debts incurred in marriage not for benefit of community or common necessaries

51

Divorce (community debts)

debts incurred during marriage divided equally; if debts exceed assets, may be assigned in equitable manner; debts incurred for common necessaries of life may be assigned to either according to parties' respective needs and abilities to pay at time debt was incurred

52

Anti-Lucas legislation

Before 1984, when property was purchased with SP and CP funds, property was presumptively CP and SP funds were a gift; presumption can be rebutted with parol evidence

Anti-Lucas: CP presumption rebuttable by express statement in the deed that property was held as separate property or collateral writing evidence intent to hold as SP; and SP contribution has right of reimbursement, without interest

53

SP down payment on CP

Sp used to make down payment on CP loan, presumption of CP controls. If not rebutted, SP limited to right of reimbursement.

If rebutted by writing indicating SP interest in property is intact, SP acquire pr-rata interest in property in proportion that down payment bears to purchase price

54

CP mortgage payment on SP

When CP used to make mortgage payments on SP, CP acquire pro-rata interest in property in proportion that CP payments bear to total purchase price, including appreciation in value during time of CP payments

55

Married woman's special presumption

Before January 1, 1975, if a married woman was the title owner to property without her husband or if she was on the title with a third party, then the property was presumptively her SP.

56

Remedy for breach of fiduciary duty

right to accounting; adding name to title; greater share of CP; attorney's fees and costs