CALIFORNIA COMMUNITY PROPERTY Flashcards
Basic Community Property Presumption
“All property acquired during marriage is presumed to be community property, unless acquired by gift or inheritance, in which case it is presumptively separate property”
Characterization of Assets
The source presumption of an asset depends upon:
- who acquired the asset;
- how was the asset acquired; and
- when was the asset acquired
Quasi-Community Property
Property acquired by one of the spouses while domiciled in a non-community property state that would have been community property had the spouse been domiciled in California or any other community property state at the time of the acquisition is Quasi-Community Property
Until divorce or death, the quasi-community property remains the separate property of the acquiring spouse.
BUT, property acquired in a non-CP state by spouses while domiciled in a CP state is CP, NOT QCP
At divorce, or on the death of the acquiring spouse, as well as for the purposes of creditors’ rights, quasi-community property is treated the same as CP
If the non-acquiring spouse dies first, the quasi-cp remains the separate property of the acquiring spouse.
if the property is acquired by both spouses in joint title in a non-cp state, follow the joint title rules
Quasi-Marital Property
Putative spouse: one that has a good faith belief that he or she is lawfully married, even though they are not.
First set out rules regarding putative marriage and quasi marital property
handle the rest of the questions as if it were a regular CP question BUT always refer to Quasi Marital Property (QMP) rather than community or quasi-community property; SP remains discussed as SP
Quasi-Marital Property
If you have a putative spouse fact pattern, lay out and discuss Quasi Marital Property:
“All property acquired during the putative marriage is labeled as Quasi Marital Property (QMP) whether it otherwise would have been CP or QCP.
Unmarried Cohabitants
Do NOT apply CP principles.
Apply Contract principles (express or implied contract) and if applicable, restitutionary remedies (unjust enrichment, constructive or resulting trust)
Consideration MAY NOT include sexual services
Pensions, Stock Bonuses, and Options
Bonuses and pensions are treated as wages.
Bonuses, pensions and stock options acquired in part during marriage and in part outside of the marriage, use the pension time rule
Pensions, etc. - Application of Rule
For bonuses, pensions, stock bonuses:
CP Interest = (total shares of stock/bonus/pension earned) x (years of marriage in which asset is earned/total number of years in which asset is earned until payable)
For stock options:
CP interest = ((total options) x (years from grant of options during marriage until dissolution)) / (years from grant of options until exercise)
Personal Injury Damages
Characterized based on when they occurred:
- Community Property if the personal injury cause of action arises during marriage
- SP if injury arises before marriage or post-separation
- SP if injury is due to tort of other spouse
For divorce purposes, community estate personal injury damages are assigned entirely to the injured spouse unless the interests of justice require otherwise
Life Insurance
Proceeds are largely CP.
if deceased spouse names a beneficiary other than spouse, determine character.
Term life: character of proceeds is character of last premium paid
Whole life: cash value is allocated based on proportion of premiums paid by SP and proportion paid by CP; term amount (death benefit) based on character of last premium paid
Disability Pay
Disability pay (including workers’ comp) is characterized by what it is intended to replace.
earnings during marriage (CP)
earnings before or after marriage (SP)
Business Valuation
When a business is developed entirely during a marriage, it is entirely community property. the Van Camp and Pereira rules do not apply
Pereira/Van Camp Apply if:
Spouse brings SP business into marriage; OR spouse inherits SP business
AND
EITHER spouse works in the business AND
Business value increases at least in part due to efforts of either spouse
Two theories for Community Increase
If you have a separate property business worked on by either spouse, and need to calculate the portion of value belonging to the community:
Pereira - increase in value due to management efforts
Van Camp - increase in value due to character of business
Pereira
Management efforts of the spouse are the primary cause of the growth of the value of the business
SP portion = (Value of managing spouse’s SP business at time of marriage + [fair rate of return (10% per annum) value length of marriage])
CP = value at dissolution - SP portion
Pereira applied:
Value of business on date of marriage = $100K
Length of marriage = 20 years
Calculate CP and SP portion
SP = $100K + [($1ooK) x (10%) x 20)] = $300K
CP = $500K - $300K = $200K
Van Camp
When the character of the business, or external circumstances, are primarily responsible for business growth in value, apply the Van Camp rules
(Market salary - family expenses paid from salary) * years of marriage = CP
SP = FMV of business at dissolution - CP portion
Van Camp applied:
W’s services worth $40K per year, but she takes only $25K per year in salary
W pays $5K per year in household expenses
Business operates 6 years during marriage at time of dissolution
Value at dissolution = $100K
Calculate CP and SP portions: ($40K - $5K - $25K) x 6 = $60K so that is CP, and $40K is SP
Business Value
Courts use two business valuation methods
- market sales valuation (expert opinion) and;
- Capitalization (past excess earnings attributable to goodwill)
Court not bound by private valuation agreements
Goodwill
Goodwill is the difference between total value and value of assembled physical assets
Represents those qualities that generate income beyond that derived from the labor of a spouse and the reasonable return on capital and physical assets
Goodwill is treated like CP if created during marriage (the difference between a business’ total value and the value of its assembled physical assets)
Education and Training
Education and training acquired during marriage are NOT community property
Community has an equitable right of reimbursement, with interest, when community funds are:
- used either to pay for education or training or used to repay a loan used for education or training; and
- the education or training substantially enhances the earning capacity of the educated party
exceptions: reimbursement reduced or eliminated if EITHER:
1. already substantially benefited from the education and training (10 year presumption), or
2. if the education reduces the educated spouse’s need for spousal support
Prenuptial Agreements
Agreements made before marriage (prenuptial agreements) do not require consideration, but they must be in writing signed by both parties to satisfy the SoF
Premarital agreements will not be enforced if they “promote divorce”
Premarital agreements will not be enforced if they are not “voluntary”
Was Prenuptial Agreement voluntary?
The party against whom enforcement is sought:
- represented by independent counsel, or expressly waived representation;
- had 7 days to review before execution and advised to seek independent counsel; and
- if unrepresented, the party is
- fully informed in writing of the terms and rights she would be giving up, and
- proficient in the language of the agreement and the explanation, and
- no duress, fraud, or undue influence
Prenuptial Agreement - Unconscionability Test
Alternatively, a party could set aside a prenuptial agreement that is unconscionable when executed and the party did not and could not have had adequate knowledge of the wealth of the other party, and didn’t waive her right to disclosure of such wealth
Agreements during Marriage: Transmutation
Agreements made during marriage to alter the character of property - transmutation
Pre-1985 Agreements: oral transmutation agreements OK
Post-January 1, 1985 Agreements: express declaration in writing
If property is acquired in joint tenancy before January 1, 1985 (or in tenancy in common BEFORE January 1, 1988), the property retains its joint character, and is treated as separate property
Joint Title Rules
Under the anti-Lucas legislation all jointly held property acquired during marriage is presumed CP at divorce and legal separation. This applies to joint tenancy from and after 1/1/85; and to tenancy in common from and after 1/1/88.
- but at death:
- if joint tenancy = all to survivor
- if TIC, to whomever inherits
SP contributions to the acquisition of the property are reimbursed to the SP contributor without interest or appreciation
