Community Property

Question 1

Permanent Separation?

Answer 1

1. Intent to end marriage communicated; and
2. Conduct consistent with that intent

Question 2

Putative Spouse Treated as Married?

Answer 2

1. Good faith belief; and
2. Void/voidable marriage

Estoppel may apply against party who knew or once discovered.

Property is classified as Quasi-Marital Property (QMP)

Question 3

Premarital Agreements Valid If:

Answer 3

1. Does not promote divorce;
2. In writing and signed by both;
3. Voluntary (deemed involuntary unless independent counsel or waived in writing, seven days to review, terms/rights in writing, no duress, fraud, undue influence);
4. Not unconscionable at execution;
5. Disclosure of other party’s wealth (or written waiver);
6. Cannot waive child support or spousal support (unless with indpendent counsel).

Question 4

California Marriage Presumptions?

Answer 4

1. Community Property = property acquired during marriage by a spouse’s labor
2. Separate Property = property aquired before marriage, after permanent separation/divorce, or by devise, inheritance, or gift
3. Quasi-Community Property = property acquired elsewhere but would be CP if acquired in California
4. Quasi-Marital Property = property acquired by putative spouses

Question 5

Community Property - Presumptions Inferred by Title?

Answer 5

1. Source of funds SP but title is CP = presumed gift to community.
2. Source of funds CP but title is SP = remains CP unless written transumation

Question 6

Community Property - Jointly Titled Property - Lucas

Answer 6

At death, all jointly titled property is presumed CP. No right to reimbursement for SP contributions.

Question 7

Jointly Titled Property - Anti-Lucas

Answer 7

At permanent separation/divorce, all jointly titled property presumed CP unless agreement otherwise. Right to SP reimbursement for: (1) down payments; (2) improvements; and/or (3) principal.

Question 8

Married Woman’s Special Presumption (MWSP)?

Answer 8

Woman’s name alone prior to 1975 is her SP.

Question 9

Initial Characterization of Property?

Answer 9

1. If CP funds used during marriage = CP
2. If acquired before or after marriage or SP funds used during marriage = SP

Question 10

Two Methods for Tracing Commingled Funds?

Answer 10

1. Exhaustion Method: All CP funds exhausted by community expenses when purchased.
2. Direct Tracing: Sufficient SP funds at time of purchase and intent to use SP.

Cannot overcome joint title presumption except for joint bank accounts. Burden on proponent of SP.

Question 11

Three Transmutation Requirements?

Answer 11

1. In writing;
2. Describe change in ownership; and
3. Consent of adversely affected spouse.

Exception for gifts of insubstantial nature. Pre-1985, oral and inferred conduct sufficient.

Question 12

Spouse’s Two Fiduciary Duties?

Answer 12

1. Full disclosure of material facts regarding community assets/debts
2. Good faith and fair dealing (cannot take advantage of each other)

Question 13

Management/Control of Community Personal Property?

Answer 13

• Equal power
• One cannot gift or dispose for less than fair market value
• One cannot sell or convey family furnishings without written consent

Question 14

Management/Control of Community Business?

Answer 14

Managing spouse can make all decisions but must give written notice to sell.

Question 15

Management/Control of Community Real Property?

Answer 15

• Both need to sign to sell or lease for more than one year.
• Cannot convey to third party without other’s consent.

Presumed Bona Fide Purchaser in case of conveyance and other spouse may void up to one year. If not BFP, voidable at any time.

Question 16

Two Approaches to CP Contributions to SP Business?

Answer 16

1. Pereira: Use if spouse’s skill is reason for growth.
   SP = Initial SP + RRR (10% of SP per year of marriage)
   CP = Value of Business - SP
2. Van Camp: Use if character of business reason for growth.
   CP = FMV Salary - family expenses - salary taken
   SP = Value of Business - CP

Question 17

CP Contribution to Other Spouse’s SP?

Answer 17

Presumed gift in some jurisdictions.

Question 18

CP Contribution to Spouse’s Own SP?

Answer 18

CP reimbursed greater of (1) amount spent on improvement or (2) increase in value.

Question 19

CP Contribution to SP Real Property?

Answer 19

• CP % = amount CP contributed to principal/total loan amount
• Then, multiple CP % by appreciation = CP
• Payments for interest, tax, and insurance excluded.

Question 20

SP Contributions to Other Spouse’s SP?

Answer 20

Reimbursement without interest for down payments, improvements, and/or loan principle.

Question 21

SP Contributions to CP Property or Business?

Answer 21

Reimbursement without interest for down payments, improvements, and/or loan principle. For business, review Pereiran and Van Camp.

Question 22

Characterization of Personal Injury Award?

Answer 22

During Marriage: CP, including at death, but if divorce, SP to injured spouse.
After Permanent Separation: SP

Can get reimbursement for CP or SP funds used on behalf of injured spouse from SP injury funds.

Question 23

Characterization of Pensions?

Answer 23

Earned during marriage = CP, regardless of when fully vests.
CP = (Total Pension x Years Married) / Total Years Pension Earned

Court may “reserve jurisdiction” until spouse retires or use “cash out” method. Cash out gives pension to employed spouse and gives other CP of equal value to non-employed.

Question 24

Characterization of Stock Options?

Answer 24

• Vests during marriage = CP
• If for past services, use Time Rule. CP = (Total Stock x Years Married) / Total Years Stock Earned
• If for future services = SP

Question 25

Characterization of Disabiltity/Worker's Comp?

Answer 25

SP or CP depending on what earnings it is replacing.

Question 26

Characterization of Severance Pay?

Answer 26

CP = Replaces retirement benefits earned while married. SP = Replaces future post-divorce earnings.

Question 27

Characterization of Bonus?

Answer 27

CP = Earned during marriage. SP = Earned after marriage. Does not matter when paid.

Question 28

Characterization of Education/Training?

Answer 28

Not CP but CP reimbursement if: (1) CP paid for education and (2) earning capacity substantially enhanced. Defenses to Reimbursement: * Community substantially benefited (presumed if more than ten years) * Other spouse received education * Reduced need for spousal support in educated spouse

Question 29

Characterization of Life Insurance?

Answer 29

* Whole Life: each estate (SP and CP) gets % cash value = % premiums paid (% = amount paid / total amount) * Term: SP or CP based on last payment of premiums. * Remember, if CP, then can only devise 1/2 to non-spouse beneficiary

Question 30

Characterization of Business Goodwill?

Answer 30

To the extent goodwill is earned during marriage, that is CP. Hard to account for. Excess Earnings Method = professional's annual net (deduct fair return) earnings - similar professional earnings. Capitalize excess earnings over marriage.

Question 31

Federal Preemption of CP and SP?

Answer 31

Remeber federal law may preempt state law if asset is federal asset, i.e., military pension.

Question 32

Community Property - Characterization of Debts/Liabilities?

Answer 32

* During Marriage = CP debt * Intent of Lender may rebut by showing lender relied on SP * Determined at time of contract, tort, etc.

Question 33

Creditor's Rights to CP and SP?

Answer 33

Creditor has same management/control rights as indebted spouse; full access to CP for all debts before and during. Exception for earnings during marriage of non-debtor placed in separate account.

Question 34

Community Property - Order of Debt Satisfaction?

Answer 34

1. Community Interest: CP first, then SP. 2. Separate Interest: SP of debtor, then CP. 3. SP Debt before Marriage: All CP and debtor's SP; exception for non-debtor earnings in separate account. 4. SP Debt during Marriage: All CP and debtor's SP (no access to non-debtor SP except for necessities of life debts) 5. Injury caused by Spouse: SP unless conduct for benefit of community, then CP.

Question 35

Division of Property at Divorce?

Answer 35

* CP and QCP split equally * Each keeps SP * CA court can divide out-of-state real property but be aware of jurisdictional issues in execution

Question 36

Division of Property at Death?

Answer 36

* Half of CP/QCP to surviving spouse and half to estate. * Will: Can devise all of SP and only half of CP/QCP; no interest in QCP titled in survivor's name. * No Will: All CP to surviving spouse; SP will be divided either all to spouse, 1/2 to spouse, or 1/3 to spouse depedning on # of living children. * Out-of-state real property will probate in jurisdiction.