Characterization of Property

Question 1

Onerous Title

Answer 1

Property acquired by H and W during marriage thru labor, industry, or other valuable consideration –> CP

Question 2

Lucrative Title

Answer 2

Property acquired through gift, succession, inheritance, etc. –> SP

Question 3

Personal Injury Awards

Answer 3

Character hinges on when the tort cause of action arose= when the injury occurred.

Question 4

Personal Injury Awards- Before Marriage or After Permanent Separation

Answer 4

Recovery is SP of injured spouse; if CP or spouse’s SP was used to pay expenses related to injury –> reimbursement right.

Question 5

Personal Injury Awards- Arises During Marriage

Answer 5

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).

Question 6

Whole Life Insurance Proceeds

Answer 6

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

Question 7

Term Life Insurance Proceeds

Answer 7

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

Question 8

Unvested Pensions

Answer 8

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

Question 9

Unvested Pensions (Pre-1976)

Answer 9

Mere expectancy–> CP had no interest in a non-vested pension.

Question 10

Unvested Pensions (Post-1976)

Answer 10

Treated as CP if right to receive benefits under the pension plan was earned during marriage

Question 11

Disability Benefits

Answer 11

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

Question 12

Severance Pay

Answer 12

If resembles a retirement pension: CP. If replacing wages for short time: treated like regular wages (SP after marriage OR CP during marriage)

Question 13

Bonuses

Answer 13

Work during marriage: CP. Work after separation: SP

Question 14

Employee Stock Options

Answer 14

Divided by total years option accruing: portion that is CP; rest is SP

Question 15

Professional Degrees & Licenses

Answer 15

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.

Question 16

Professional Degrees & Licenses Reimbursement

Answer 16

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

Question 17

Business Goodwill

Answer 17

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

Question 18

Professional Goodwill

Answer 18

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

Question 19

Valuation of Goodwill- Fair Market Value

Answer 19

What the goodwill would command on the open market

Question 20

Valuation of Goodwill- Capitalization of Past Excess Earnings

Answer 20

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

Question 21

Valuation of Goodwill- Buy-Out Agreements

Answer 21

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

Question 22

Valuation of Goodwill- Jury Question

Answer 22

Some CTs allow jurors to decide which method to utilize

Question 23

Premarital Agreements

Answer 23

(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

Question 24

Transmutation (Pre-1985)

Answer 24

Oral agreement or inferred by the parties behavior

Question 25

Transmutation (Post-1985)

Answer 25

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

Question 26

Married Women’s Special Presumption

Answer 26

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)

Question 27

Jointly Titled Assets- Death or Creditor Rights

Answer 27

Lucas applies–> any SP used to acquire asset presumed a gift unless contrary oral or written K

Question 28

Jointly Titled Assets- Divorce (1980- Lucas)

Answer 28

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

Question 29

Jointly Titled Assets- Divorce (1984- Anti-Lucas)

Answer 29

JT presumed CP only rebutted by writing; automatic reimbursement without interest unless waived in writing for SP down payment, improvements, or principal payments

Question 30

Jointly Titled Assets- Divorce (1987)

Answer 30

CP presumption applicable to all jointly held property (JT, TIC, CP)

Question 31

Tracing

Answer 31

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

Question 32

Family Expense Presumption- Tracing Funds in Commingled Account

Answer 32

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

Question 33

Tracing Property Purchased from Commingled Funds

Answer 33

BOP on SP proponent to trace; otherwise presumed CP

Question 34

Tracing Property Purchased from Commingled Funds- Exhaustion Method

Answer 34

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

Question 35

Tracing Property Purchased from Commingled Funds- Direct Tracing

Answer 35

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)

Question 36

Tracing Property Purchased from Commingled Funds- Recapitulative Accounting

Answer 36

SP proponent can’t simply show total expenses exceeded income and therefore SP must have been used to purchase

Question 37

Community Funds or Labor Used to Enhance Value of SP- CP Proponent: Periera

Answer 37

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

Question 38

Community Funds or Labor Used to Enhance Value of SP- SP Proponent: Van Camp

Answer 38

Gives CP a fair salary minus any salary already received; remainder belongs to SP. Used when character of the business is responsible for growth

Question 39

CP Business & Post-Separation Labor Increases Value of CP Asset

Answer 39

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

Question 40

Moore/Marsden Proportional Interest: CP payments that pay off purchase price of SP

Answer 40

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

Question 41

Improvements- CP Funds used to improve own SP

Answer 41

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

Question 42

Improvements- CP Funds used to improve other spouse’s SP

Answer 42

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

Question 43

Improvements- SP used to acquire or improve other spouse’s SP

Answer 43

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

Question 44

Credit Acquisitions

Answer 44

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.