BAR ESSAYS

Question 1

Classification

Answer 1

Property, including a business, acquired before marriage is separate property. However, property acquired during marriage is presumptively community property, even if title is taken in only one spouse’s name. The presumption can be overcome by clear and convincing evidence that the property originated as separate property. Documentary evidence is required; a spouse’s testimony is not sufficient.

Question 2

Separate Property

Answer 2

Property owned or claimed by a spouse before marriage or property acquired during marriage by gift, devise, or descent.

Question 3

There is a presumption that all property possessed by a spouse upon cessation of the marriage is…

Answer 3

community property. The presumption may be rebutted by clear and convincing evidence that the property originated as separate property. The evidence must be beyond the spouse’s testimony alone (i.e. there must be a paper trail when a spouse claims that assets were purchased with separate funds).

Question 4

Examples of Community Property

Answer 4

Earnings from employment during marriage; consideration for services performed (salary, bonuses, etc.);

Question 5

When one spouse gives a gift to the other spouse during the marriage, any income from the gift is presumed to be…

Answer 5

separate property

Question 6

Interest and dividends earned from separate property are…

Answer 6

community property.

Question 7

Inception of Title

Answer 7

The principal rule for characterizing an asset as separate or community property. The characterization is determined when the asset is acquired or when title first incepts. An enforceable right acquired prior to marriage, but exercised during marriage, relates back to its inception, and is separate property.

Question 8

The proper measurement of a reimbursement claim is…

Answer 8

the enhancement of the benefited estate. Generally, the enhancement in value is measured at the time of cessation of the marriage.

Question 9

An increase in the value of separate property is

Answer 9

separate property.

Question 10

Oil and gas interest classification

Answer 10

Payments for royalty or working interest are separate property if the underlying interest is separate property. Delay rentals are considered community property.

Question 11

Out of state property is treated as…

Answer 11

quasi community property if it would have been community property in Texas, had the spouses been in Texas at the time they acquired it.

Question 12

Assets acquired by debt incurred during the marriage are…

Answer 12

community assets. In addition, the community estate is obligated to pay the debt.

Question 13

Defined Benefits Plan

Answer 13

Document defines the benefits to be received upon retirement; community property is pro-rated by the amount of time of services while married, over the total time of services for the company.

Question 14

Defined Contribution Plan

Answer 14

Document defines contribution; use tracing to determine what amount of the increase is separate property and how much relates to dividends and interest, which is community property.

Question 15

If an increase in value in separate property is attributable to the uncompensated or undercompensated time, toil, talent, and effort of the spouse, the community estate may…

Answer 15

have a reimbursement claim.

Question 16

Compensation for personal injury is…

Answer 16

separate property.

Question 17

Damages for medical expenses and recovery for lost earning capacity is…

Answer 17

community property.

Question 18

Sole-management community property

Answer 18

Property a spouse would have owned had the spouse not been married.

Question 19

Joint Management community property

Answer 19

Sole-management community property that has been comingled with other property; requires both spouses to consent to the transfer or the transfer is void.

Question 20

When only one spouse incurs a debt, the contract creditor can reach that person’s:

Answer 20

sole-management community property, joint-management community property, and separate property. Creditor cannot reach the sole management of the other spouse. However, a tort judgment creditor can reach it all.

Question 21

Factors related to unequal division of community property

Answer 21

Earning capacity, business opportunities, education, good health, the impact of giving up a career for domestic purposes, and the size of the separate estate.

Question 22

Unreasonable gifts of community property during the marriage: Factors in determining whether a gift is reasonable.

Answer 22

(1) How much was given; (2) to whom it was given; and (3) and how much is left after the gift.

Question 23

When both separate and community funds are commingled in a bank account all of the funds are presumed to be…

Answer 23

community property. When a spouse is able to establish that separate funds were deposited into an account that also held community funds, there are several methods of tracing separate property in the commingled account to determine the allocation of the funds. Determining which method applies will depend on the specific circumstances. The methods are: the community-out-first rule, lowest intermediate balance, and identical sum inference.

Question 24

The community-out-first rule

Answer 24

in determining the allocation of a bank account between separate property and community property, there is a presumption that community funds are withdrawn first.

Question 25

Lowest Intermediate Balance

Answer 25

When the balance of a bank account with commingled funds drops below the amount of separate funds deposited into the account, the lowest balance of the bank account between the time that the separate property was deposited and the time of the divorce is deemed the separate property portion of the bank account.

Question 26

Identical Sum Inference

Answer 26

If a specific amount of separate funds is deposited into a joint account and an identical or very similar amount is withdrawn shortly after, there is an inference that the deposit was temporary and the withdrawn amount was from the separate property deposit. With proper documentation, the inference can overcome the community property presumption.

Question 27

Reimbursement

Answer 27

Reimbursement arises when the efforts or funds of one marital estate benefit another without receiving a benefit of equal value or when funds are used to reduce unsecured debt. (Ex. using community funds to pay a separate debt or separate funds used to enhance community property) Reimbursement is subject to equitable principles and is measured by the enhancement in value to the benefitted marital estate. The enhanced value is measured at the time the marriage ends.
Additionally, benefits for the use and enjoyment of property generally may be offset against a claim for reimbursement for expenditures to benefit a marital estate.

Question 28

The following expenditures do not qualify for reimbursement:

Answer 28

living expenses; payment of child support, maintenance, or alimony; student loan payments; financial contributions toward a professional degree.

Question 29

Division of Assets Upon Divorce

Answer 29

A court has no authority to divest a spouse of his separate property in a divorce proceeding. Generally, the community portion of the estate will be divided in a just and right manner. The factors a court will consider in determining a just and right division of property include: spouses’ capacities and abilities; relative business opportunities, financial condition, and obligations; education; relative physical conditions; size of separate estates; nature of the property; and length of the marriage. A court may also consider fault if the divorce is granted on fault grounds.

Question 30

The spouse seeking to set aside a premarital agreement must establish…

Answer 30

that she signed it involuntarily or that the agreement was unconscionable when made and (i) there was no fair disclosure of the other spouse’s property or financial obligations; (ii) the right to disclosure was not voluntarily and expressly waived in writing; and (iii) the spouse challenging the agreement had no adequate knowledge of the other spouse’s property or financial obligations. The burden of proof is on the spouse challenging the agreement. (Involuntary would be something like coercion or duress; just being old and the man’s refusal to marry the woman unless she signed is likely not enough to be “involuntary”).