Characterization of Property Flashcards
Onerous Title
Property acquired by H and W during marriage thru labor, industry, or other valuable consideration –> CP
Lucrative Title
Property acquired through gift, succession, inheritance, etc. –> SP
Personal Injury Awards
Character hinges on when the tort cause of action arose= when the injury occurred.
Personal Injury Awards- Before Marriage or After Permanent Separation
Recovery is SP of injured spouse; if CP or spouse’s SP was used to pay expenses related to injury –> reimbursement right.
Personal Injury Awards- Arises During Marriage
Recovery is CP and upon divorce assigned entirely to injured spouse so long as no commingling with CP unless CT determines interests of justice req. otherwise (injured spouse must receive at least 1/2).
Whole Life Insurance Proceeds
An insurance plan and investment tool. CP & SP share in the value of the policy in proportion to contributions to premiums paid to the policy. CP is also entitled to a percentage of the policy regardless of who the spouse designates as the beneficiary
Term Life Insurance Proceeds
Insures person against death for a fixed period; if time period over, policy lapses until renew. Characterize as CP or SP based on which estate paid the premium for the current period/term
Unvested Pensions
When the EE has not yet completed the minimum term of service. If the EE leaves for any reason, the EE does not have any right to benefits upon retirement
Unvested Pensions (Pre-1976)
Mere expectancy–> CP had no interest in a non-vested pension.
Unvested Pensions (Post-1976)
Treated as CP if right to receive benefits under the pension plan was earned during marriage
Disability Benefits
Worker’s comp; disability pension. Depends on what wages were designed to replace: If replacing marital earnings: payments are CP; If replacing post-marital earnings: payments are SP
Severance Pay
If resembles a retirement pension: CP. If replacing wages for short time: treated like regular wages (SP after marriage OR CP during marriage)
Bonuses
Work during marriage: CP. Work after separation: SP
Employee Stock Options
Divided by total years option accruing: portion that is CP; rest is SP
Professional Degrees & Licenses
Community can be reimbursed for community contributions to education or training that enhances earning capacity (direct education costs such as tuition, books, and payments on student loans); loan assigned to student.
Professional Degrees & Licenses Reimbursement
Reimbursement will not be made or will be reduced if: after 10 years rebuttable presumption that community has substantially benefited: no reimbursement; under 10 years rebuttable presumption that community has not substantially benefited: reimbursement; other party’s education was paid by CP
Business Goodwill
Difference between the value of the business and the value of the tangible assets. Goodwill is generally an intangible derived from the expectation that customers will continue to return
Professional Goodwill
Similar to business goodwill, but here in the context of the professional such as a doctor or attorney; the goodwill is more closely attributable to the professional himself
Valuation of Goodwill- Fair Market Value
What the goodwill would command on the open market
Valuation of Goodwill- Capitalization of Past Excess Earnings
Determine the difference between the current earnings of the business and the earnings that would ordinarily be produced by the assets of the business; then figure out what amount would be necessary to continue such a stream of income into the future
Valuation of Goodwill- Buy-Out Agreements
Typically contained in partnership agreements- spell out the amount to be paid to a partner or a business owner in the event of sale. The agreement may specify an amount for goodwill, which could be used as evidence, but CT not bound by it
Valuation of Goodwill- Jury Question
Some CTs allow jurors to decide which method to utilize
Premarital Agreements
(1) No consideration required (2) Must be in writing, signed by both parties (SoF) (3) Terms cannot promote divorce (4) Must not be unconscionable at the time of enforcement (5) Must be signed voluntarily (6) Cannot agree to limit contribution to furnish child support
Transmutation (Pre-1985)
Oral agreement or inferred by the parties behavior
Transmutation (Post-1985)
Must be in writing and signed or accepted by the spouse whose interest is adversely affected. The writing must be an express declaration of change in ownership. Exceptions: no writing required for personal gifts between spouses of an insubstantial value; a will cannot be used as a writing to prove a transmutation unless the testator has already died
Married Women’s Special Presumption
If married woman acquired property by a written instrument before 1975: W alone–> property presumed W’s SP; W & another–> W presumed to take as tenant in common unless instrument expresses different intention; H & W described as “Husband & Wife”–> presumed CP unless instrument expresses different intention; it is not absolute, does not apply if the married woman controlled how title was taken or if there was some reason other than husband making a gift (to avoid creditors, avoid detection, etc)
Jointly Titled Assets- Death or Creditor Rights
Lucas applies–> any SP used to acquire asset presumed a gift unless contrary oral or written K
Jointly Titled Assets- Divorce (1980- Lucas)
Joint tenancy presumed CP and any SP contribution presumed a gift unless contrary oral or written K. Can rebut presumption by a clear statement in the title that each spouse owns a one half interest in the property
Jointly Titled Assets- Divorce (1984- Anti-Lucas)
JT presumed CP only rebutted by writing; automatic reimbursement without interest unless waived in writing for SP down payment, improvements, or principal payments
Jointly Titled Assets- Divorce (1987)
CP presumption applicable to all jointly held property (JT, TIC, CP)
Tracing
A process that is used to get back to the original source of funds used to acquire an asset. The character of any asset will be determined by the source of funds used to acquire the asset
Family Expense Presumption- Tracing Funds in Commingled Account
Family expenses paid by CP funds: available CP funds are presumed to have been used to pay family expenses; SP funds deemed to have been used to meet family expenses only when community funds exhausted. Gift presumed when SP funds used to pay family expenses: no right of reimbursement unless the parties have agreed otherwise
Tracing Property Purchased from Commingled Funds
BOP on SP proponent to trace; otherwise presumed CP
Tracing Property Purchased from Commingled Funds- Exhaustion Method
SP proponent may show that at time asset purchased, community funds in commingled account were exhausted by payment of family expenses, therefore asset purchased with SP
Tracing Property Purchased from Commingled Funds- Direct Tracing
SP funds were available at time of purchase in a commingled account that would cover the expense and proponent intended to use those funds to purchase asset (need documentary evidence, i.e., adequate records to establish intent)
Tracing Property Purchased from Commingled Funds- Recapitulative Accounting
SP proponent can’t simply show total expenses exceeded income and therefore SP must have been used to purchase
Community Funds or Labor Used to Enhance Value of SP- CP Proponent: Periera
Gives SP a reasonable return based typically on the legal interest rate; rest belongs to CP. Used when management of spouse (personal skills/efforts) was primary cause of growth or productivity
Community Funds or Labor Used to Enhance Value of SP- SP Proponent: Van Camp
Gives CP a fair salary minus any salary already received; remainder belongs to SP. Used when character of the business is responsible for growth
CP Business & Post-Separation Labor Increases Value of CP Asset
Reverse Periera: CP gets a reasonable rate of return, remainder goes to SP. Reverse Van Camp: Determine a fair salary for SP labor, deduct any SP salary already taken and any SP expenses paid out of the business, remainder goes to CP
Moore/Marsden Proportional Interest: CP payments that pay off purchase price of SP
When CP funds are used to make principal payments (not interest, taxes, or insurance) to acquire SP, community receives a proportionate interest in the property in the ratio that payments on the purchase price with community funds bear to the payments made with SP funds
Improvements- CP Funds used to improve own SP
CP entitled to reimbursement for the cost of the improvements OR the amount by which the improvement increases the value of the realty, whichever is greater
Improvements- CP Funds used to improve other spouse’s SP
JDX split. No reimbursement: Gift presumed when a spouses uses CP funds to improve the other spouse’s SP. Presumption may be overcome only by evidence of an agreement to reimburse. Reimbursement: Absent any non-reimbursement agreement, must reimburse the community for its contribution to the improvement of one spouse’s SP
Improvements- SP used to acquire or improve other spouse’s SP
A spouse who makes a SP contribution to the acquisition or improvement of the other spouse’s SP is entitled to reimbursement, without interest or appreciation, of his SP contribution
Credit Acquisitions
Property acquired on credit during marriage is presumed to be CP. To overcome the presumption, SP proponent must demonstrate lender primarily relied on SP proponent’s SP in granting the loan or extending the credit. No apportion of the loan itself; rather apportionment may be made of the asset.
