Basic Principles

Question 1

community property on the bar

Answer 1

1. often tested on bar
2. bar: story starts with H & W married and domiciled in CA unless otherwise noted
3. bar: question will involve characterizing assets in the context of divorce or separation, death, or creditor’s claim

Question 2

How to start all CP essays

Answer 2

1. California is a community property state
2. there is a community presumption where all assets acquired during marriage are presumptively community property
3. there are areas of separate property which include…. (list the 4 areas)

i. property owned by either spouse before marriage
ii. property acquired during marriage by gift, will, or inheritance
iii. property acquired during marriage with the expenditure of separate funds
iv. rents, issue, and profits derived from separate property

Question 3

Default Statutory Definitions of assets

Answer 3

1. default statutory definitions that apply unless the character of an asset has been altered by
   i. parties’ agreement (premarital or during marriage)
   ii. parties’ conduct, or
   iii. how title was taken

Question 4

When do you have tracing of separate property

Answer 4

tracing if any of:

i. property owned by either spouse before marriage
ii. property acquired during marriage by gift, will, or inheritance
iii. property acquired during marriage with the expenditure of separate funds
iv. rents, issue, and profits derived from separate property

Question 5

What is community property

Answer 5

i. all property other than separate property acquired by either spouse during the marriage
ii. includes labor of one spouse during the marriage (ex. wages, bonuses, etc.)
iii. includes income from community assets

Question 6

Community Presumption

Answer 6

i. presumption that assets acquired during marriage are community property
ii. burden of proof the asset is separate property rests on contending party
5. source rule aka. tracing

Question 7

Economic Community

Answer 7

1. “marriage” refers to the economic community
2. the economic community ends if there is: (permanent separation + intent)
   i. permanent physical separation, and
   ii. intent not to resume the marital relation by either party
   a. only need intent of one party
   b. there is intent to resume if maintaining the facade of marriage (ex. eating together, going out together, doing laundry at home)
   c. divorce is substantial evidence of intent not to resume the relation
   d. conduct must be consistent with this intent!
   i) Permanent physical separation works, but do not have to go that far.
3. Unless court finds that interests of justice require otherwise.
4. ex. physical separation and later one party saying they want to stay separated, economic community ends at the point of the later agreement
   i. i.e. when the trial separation period ends and they decide to proceed with a divorce.
5. Occasionally going to have dinner with each other, going out in public, getting laundry don
   i. Not sufficient to show intent of end of marriage.
   ii. Maintaining façade of marriage = community party
6. Copyright and future book royalties = community property. As long as book was written during marriage.
   i. But if it was written before then profits are separate property.

Question 8

CA Extension of the Economic Community

Answer 8

1. community property system also applies to registered domestic partners upon filing a Declaration of Domestic Partnership with the Secretary of State
2. retroactive to January 1, 2000
3. domestic partners include same sex couples, and elderly opposite-sex couples receiving Social Security benefits
4. Same sex marriage is legal in CA

Question 9

Equal Division at Divorce

Answer 9

1. earning power disparity is irrelevant, except for spousal support (alimony) and child support
2. must divide community property equally, unless property settlement agreement otherwise
3. each individual asset and liability and the total must be divided equally (pro-rata division) UNLESS below exceptions.

Question 10

Economic Circumstances Exception to equal division at divorce

Answer 10

4. economic circumstances exception: non-equal division if economic circumstances warrant
   i. give asset entirely to one spouse and cash out other assets
   ii. where division would diminish value of assets, uproot children, asset is intimately related to one spouse, or the asset is a risky investment one spouse is better able to bear
   iii. ex. family residence, closely held corporations, pensions

Question 11

Statutory Exceptions to equal division at divorce

Answer 11

5. statutory exceptions: one spouse can end up with more than their equal share if:

i. personal injury (tort judgments)
a. a personal injury award is community property, but on divorce is awarded to injured spouse (unless interests of justice require otherwise)

ii. tort liability
a. spouse is not liable for the torts of other spouse if not based on activity for the benefit of the community

iii. educational debt
a. educational debt is treated as separately incurred debt (take own law school loans)

iv. negative community
a. where community liabilities exceed assets
b. relative ability of spouses to pay debt is considered (concern is to protect creditors)

v. deliberate misappropriation
a. court may offset the award against a spouses that misappropriates CP before or during pendency of divorce
b. ex. substantial community property assets disappear during separation

Question 12

Community Property Not Divided on Divorce

Answer 12

1. court retains jurisdiction to divide community property not divided on divorce
2. motion must be made
3. unadjudicated community property is divided 50/50 unless justice require unequal division

Question 13

Lifetime Gifts of Community Property

Answer 13

1. gifts of community can only be made with written consent
2. for gifts of CP given without written consent, the aggrieved spouse can:
   i. at divorce:
   a. set the gift aside in its entirety, or
   b. recover their half of the community property by taking offsetting community assets
3. if spouse only learns about the prohibited gift after the given spouse’s death:
   i. the surviving spouse can:
   a. set the gift aside as to their half of the community property, or
   b. recover from the donee or donor’s estate
   ii. same result if deceased spouse names a 3P as their life insurance beneficiary. Can recover half.
4. federal savings bonds exception:
   i. federal pre-emption when US savings bonds are involved
   ii. ex. H buys federal savings bonds with CP, payable on death to 3P.
   iii. cannot recover.

Question 14

Testamentary Gifts of Commuity Property

Answer 14

1. each spouse only has testamentary power over of half of their community property
2. widow’s election will: it applies if a will tries to leave the entire community asset to a 3P; the spouse must either:
   i. take under the will and allow it to devise the entire community property away
   ii. take against the will and take only half of the community property

Question 15

example of Testamentary Gifts of Commuity Property

Answer 15

3. Ex: H thinks blackacre is separate property. His will says “I own blackacre as separate property.Fee simple to sister. Give the remainder to W, otherwise my brother.” Blackacre worth 100k, other community property is 400k.
   i. H did not have power to devise entire interest in blackacre to Sister.
   ii. Does W get to keep half interest AND take half of the community property under paragraph two.
   a. No.
   b. Widow’s election will means that
   i) H will tries to give the entire interest in a community asset.
   ii) W has choice:
   a) Canot read will selectively and take residual but protest gift. Must read of All of will.
   b) Can take under will, get ½ of CP worth 200k, and allow devising blackacre to Sister.
   c) Can take against will and claim ½ of blackacre, and must relinquish testamentary gifts.
   iii) She will take under the will. She gets 400k: ½ of CP and ½ of H property: 400k
   iv) If she takes against the will, she gets 200k. ½ of her property 200k + ½ of blackacre of 50k.

Question 16

ACQUISITIONS ON CREDIT DURING MARRIAGE

Answer 16

1. percent of purchase funded by community funds (ex. downpayment) is community property
2. the part of property purchased on credit is classified based on lender’s primary intent
   i. presumptively community credit
   ii. BUT lender’s intent controls
   iii. likely community property if lender would look to both spouses for satisfaction
   iv. indications of lender’s intent:
   a. if a note is a community obligation, the property is community property
   b. if a note is secured by separate property, the property is likely separate property
   v. controlling test, controls over the community credit presumption (that funds borrowed during marriage, and goods purchased during marriage are community property)

Question 17

Fiduciary Duty and Undue Influence

Answer 17

1. confidential relationship exists between spouses, giving rise to fiduciary duties
2. duty of good faith and fair dealing between spouses exists
3. common law presumption:
   i. presumption of undue influence if a spouse that gains an advantage from a transaction (that the other spouse does not gain)
   ii. advantaged spouse bears the burden of showing she did not breach fiduciary duty
4. statutory presumption:
   i. a grossly negligent and reckless investment of community funds breaches a spouse’s fiduciary duty
   ii. has to be more than just stupid (no presumptive breach if just a dumb purchase)
   iii. has to be something nobody would buy (ex. investing in alchemy on turning lead into gold)