Quick Remember CP Flashcards
Opening Sentence
California is a community state. Community property is defined as all property, real or personal, wherever situated, acquired by a married person during the marriage while domiciled in the state. Separate property is property acquired before marriage or during marriage by gift, bequest, devise, or descent.
Unilateral Gifts pre and post dissolution/death
If parties no longer married, other spouse can take their CP share(50%) from the gift
If married, can void if not ratified
Common Necessaries of Life
During a period of separation, absent a court order otherwise, the non-debtor-spouse is personally liable only for the other spouse’s common necessaries of life. These are the necessaries of life that are typical for most families, not specific to the family in question.
RETIREMENT ACCOUNTS and Deferred Compensation
Deferred compensation – such as a pension, IRA, or 401(k) – is characterized by the employee’s marital status during the period in which the deferred compensation was earned. When deferred earnings are earned entirely during a period when the employee is married, benefits are entirely CP.
The nature of pensions varies based on the employer.
While occasionally tied to the length of employment, other
facts may dictate the pension’s value. A court will
apportion a pension by the time rule if they can – SP or
CP based on the ratio of time worked during the marriage.
Otherwise, the court will apportion to reach a reasonable
and fair outcome relative to the contributions of the
community and separate estates.
Term Life Insurance
Term Life Insurance covers the insured for only a specified period. It pays a fixed benefit to a named beneficiary upon the insured’s death but is not redeemable for cash value during the
insured’s life.
Premium Payments
The premium payment is a contract debt that the policy owner owes the insurance company to keep the policy in force. The Last Premium Rule holds that the character of the last premium payment determines the character of any insurance proceeds that pay out during that term.
Nonspousal Beneficiaries
A married person has the right to name a nonspousal beneficial designee on his or her life insurance policy. The policyholder can use community property funds tor pay for premiums, but may still name a nonspousal beneficiary.
SP Premium Payments but had used CP
Reimbursement: Wife paid five years of $500 premium payments from community property earnings while her mother was the beneficiary. Husband can seek reimbursement of his one-half of those community property payments from Wife’s estate, or $250 for five years.
See v. See Rule
SP Rebuttal by Exhaustion: The SP claimant must show that, on the date of purchase, the CP sums on deposit in the account were exhausted (there wasn’t enough CP $ available to pay for the whole purchase).
If not completely exhausted, then at least some of the ownership percentage is SP
Mortgages and loans secured with SP downpayment
Are CP
Hicks-Mix Direct Tracing Rebuttal
(i) On the date of the disputed purchase, both CP sums on deposit and SP sums on deposit were sufficient to make the disputed purchase.
(ii) On or near the date of the disputed purchase, the SP proponent declared an intention, in a writing separate from the account records, to make the purchase with SP sums on deposit.
(iii) Immediately after the purchase, the amount of that purchase was withdrawn from the SP sums on deposit.
Records prepared in anticipation of litigation are disallowed.
Moore Formula (close to marriage)
SP down payment + (SP loan - CP contributions) / Historic Purchase Price = SP%
CP contributions / Historic Purchase Price = CP%
- Adding in the Value of the Appreciation:
- Appreciation = Fair Market Value at Divorce - HPP
- SP% X Appreciation = SP Appreciation = SP%
- CP% X Appreciation = CP Appreciation = CP%
MARSDEN FORMULA (further from marriage)
- Start with the Moore formula.
- Adding in Premarital Equity and Appreciation:
- Equity = SP payments made before marriage
- Appreciation = Fair Market Value at Marriage - HPP
CP IMPROVEMENTS TO SP PROPERTY
- When the non-owning spouse consents to the use of CP to improve the other spouse’s SP, no gift is intended.
- If the improvement is a CAPITAL IMPROVEMENT, the CP estate is entitled to an equitable ownership interest in the property.
A capital improvement is one that increases the SP’s fair
market value. - If the improvement is a NON-CAPITAL IMPROVEMENT, the CP estate is entitled to reimbursement without interest for its contributions to construction costs.
Pereira Formula
Fair Market Value @ Dissolution – (Fair Market Value @ Marriage + Fair Rate of Return) = CP excess profits
- Fair Rate of Return = Principal X Interest X Time
The FRR represents what the SP business owner would have made
on his/her investment, had the value of the business been invested
in reasonably safe securities (stocks and bonds) over the course of
the marriage. - 10% interest usually applies, unless told otherwise.
(ie. Fair Rate of Return = $100K X 4% X 10 years = $40K)
Van Camp Formula
- Fair Market Value @ Dissolution – (CP Labor – Family Expenses) = SP
- Labor = Annual Benchmark Salary X Years
- Expenses = Annual Expenses X Years
Contract Liabilities
- A contract liability is incurred when the contract is made. For example, when you sign the credit card receipt when you make a purchase, you’re creating a contract to repay that debt to the credit card company.
- If made during marriage, the community estate, the debtor-spouse’s SP estate, and the non-debtor-spouse’s SP estate are all liable for any contract debt that was incurred by one or both spouses during marriage for “necessaries of life.” <-like family expenses
Marvin relationship
A Marvin relationship is one where two adults choose to share their lives with each other in an intimate and committed sexual relationship, and cohabitate. The existence of a Marvin relationship must be proven by clear and convincing evidence. Wife will assert that her relationship with Husband constitutes a contract for mutual support
Summary Dissolution
Some requirements:
* No children.
* Marriage is < five years.
* No real property.
* No debts > $4,000.
* CP is < $25,000.
* No SP.
Student loan payments recovering CP
Reimbursed unless benefitted for 10 years
if not, actually improved income
Premarital child support
considered a creditor relationship. Support obligations are presumably paid by separate property, but can be paid by community property with a right of reimbursement if there were available separate property funds. Wife may seek reimbursement on behalf of the community if she can show that Husband used community property funds to pay his child support obligation when there were separate property funds available to do so.
Non-spousal beneficiary
Premium payments from community property funds on a term life
insurance policy with a non-spousal beneficiary are considered a gift to that third-party.
Divestiture Statute
When a former spouse is named as beneficial designee, that former spouse loses their right to the proceeds upon dissolution. But there is an exception if there is clear and convincing evidence that the transferor intended to preserve the non-probate transfer to the former spouse.
Void/Voidable Marriage
A void marriage is one that:
1) fails to meet statutory formalities,
2) is bigamous or polygamous, or
3) is incestuous.
A voidable marriage is one that:
1) one party wasn’t capable of consenting to,
2) is bigamous,
3) one party was of unsound mind,
4) was forced, or
5) one party was impotent
