Classification of Assets as Separate or Community Property

Question 1

*Inception of title rule

Answer 1

The character of an assets as separate or community property is determined at the time the asset is acquired and no subsequent actions will alter its character

Question 2

*Community property presumption

Answer 2

If property is acquired during marriage it is assumed to be community property unless it is affirmatively shown 1) that the asset was acquired by gift, devise, or descent or 2) that is was acquired with the separate property of one of the spouses

Question 3

Installment Purchases begun before marriage

Answer 3

Separate property

Where installment payments on a purchase are begun before marriage and completed after marriage, the purchase is separate property

Question 4

*Assets Purchased During Marriage

Answer 4

Presumptively Community Property

The presumption is overcome only by clear and convincing evidence of the asset’s separate character

Question 5

Assets Acquired on Credit During Marriage

Answer 5

Presumptively on Community credit

The source of funds later used to pay off the credit obligation is irrelevant

Ownership is determined at the time the asset is purchased on credit

How to rebut the presumption:

1) the lender agree to look solely to separate estate of the borrowing spouse
2) a spouse purchases the asset using borrowed funds with the intention of immediately paying the debt with proceeds from the sale of separate property

Question 6

*Claims for reimbursement

Answer 6

provides a spouse a remedy if:

• a spouse’s separate property assets were used to contribute to or improve the other spouse’s property—whether it be community property, or separate property; or
• a party uses community property to benefit their separate property estate
• if SP used to improve property, then can only reimburse the amount improved (not the amount contributed)
• GIFTS reimbursable

Claim matures on termination of marriage

Claims can be offset by use and enjoyment

Claims can be waived through a prematerial or marital property agreement

Question 7

Claims for reimbursement that are recognized

Answer 7

1. payment by one marital estate of the unsecured liabilities of another marital estate
2. inadequate compensation for the time, toil, talent, and effort of a spouse by a business entity under the control and direction of the spouse (value of time, toil, and effort - actual remuneration received= amount of reimbursement claim)
3. the reduction of the principal amount of a debt secured by a lien on property
4. capital improvements to property (measured by enhanced value to the benefited marital estate
5. the reduction by the community property estate of an unsecured debt incurred by the separate estate of one of the spouses

Question 8

*Non-reimbursable claims

Answer 8

1. the payment of child support or spousal maintenance
2. the living expenses of a spouse or child of a spouse
3. contributions of property of a nominal value
4. the payment of a liability of a nominal amount
5. a student loan owed by a spouse

Question 9

Adverse Possession Before marriage

Answer 9

if claimant entered rightful claim before marriage, the land is separate property.

If claimant was naked trespasser before marriage, land is community proper.

Question 10

*Effect of how title is taken: Title in One Spouse’s Name Without Recital of Separate or Community Ownership

Answer 10

Presumption that title to an asset obtained during marriage presumptively belongs to the CP, regardless of whose name is on title.

unless agreement states otherwise

Question 11

*Effect of how title is taken: Separate funds of one spouse used and title in Both Spouses names

Answer 11

If one spouse uses separate funds to buy an asset and causes title to be taken in both spouses’ names, it is presumed that a gift to the other spouse was intended

Can be rebutted though extrinsic evidence that no gift was intended, and the asset is then considered the separate property of the spouse whose funds were used.

Question 12

*Commingling of separate and community property

Answer 12

the community presumption can be overcome by TRACING

The burden of proof is on the party seeking to establish the asset as separate property

Question 13

*Commingled Bank Accounts

Answer 13

Presumption that community property funds were withdrawn first, before separate funds were withdrawn

“community out first” principal

Question 14

Community Property Survivorship Agreement

Answer 14

spouses may agree in writing that all or part of their community property becomes the property of the surviving spouse on the death of a spouse

Must be in writing and signed by both spouses

Either spouse may revoke by written notice to the other spouse

Survivorship language must be clear

Right will pass as a non-probate transfer

Question 15

Sales and Distributions by personal representative of deceased spouse

Answer 15

A personal representative or the deceased spouse’s estate who has no actual knowledge of the existence of a survivorship agreement is not liable for selling, distributing, or otherwise deposing of the property subject to the agreement

A person who purchases property from the personal representative without notice of the survivorship agreement takes good title as against the surviving spouse

Question 16

*Premarital agreements

Answer 16

Must be in writing, signed by both spouses

Can be revoked or amended only by writing signed by both parties

Question 17

Premarital agreements Permissible Terms

Answer 17

1. anything regarding property rights (right to sell, lease, encumber, etc. )
2. can govern disposition of property on divorce or death
3. choice of law provisions
4. can eliminate spousal support
5. can re-characterize income

Question 18

*Premarital agreements - Impermissible Terms

Answer 18

1. cannot provide that after marriage, the spouse’s separate property will be community property (this can only be done during marriage by a conversion agreement, not before)
2. cannot agree to adversely affect child support
3. cannot be against public policy or criminal statute

Question 19

*Marital Agreements - Generally

Answer 19

Must be in writing and signed by both spouses

Terminates upon divorce and is not revived if the parties remarry

Question 20

*Marital Agreements - Conversion Agreements

Answer 20

Convert SP into CP

• Must be made during marriage with respect to existing property
• Must be in writing, signed by bot spouses, and specify the property to be converted
• Will not have an affect on the rights of preexisting creditors

Question 21

*Marital Agreements - Partition/Exchange Agreements

Answer 21

Purpose: convert CP into SP for each spouse

• must be voluntary by both spouses
• may not affect the rights of creditors
• Must be written and signed by both spouses (Oral agreement not valid); no consideration needed
• Spouse can make a gift of his interest in the CP to the other spouse, making the property SP to the other spouse

Question 22

*Income from SP

Answer 22

is CP

Question 23

*Statutory Defenses to all Premarital and Marital (including partition/exchange) Agreements

Answer 23

not enforceable if:

(i) it was not executed voluntarily by both parties; or
(ii) it was unconscionable when made and (i) no fair disclosure was given of the property or obligations, (ii) the right to disclosure was not waived in writing, and (iii) the party had no adequate knowledge of the property or financial obligations of the other party.

e.g. unconscionable or involuntary

decided by court, not jury

“unfairness” short of unconscionability does not qualify

Question 24

• Partition vs Exchange Agreement

Answer 24

Partition: splits individual assets by some percentage

Exchange agreement: if it trades certain assets for others

Question 25

*Effect of how title is taken: Title in Spouse’s Name as “Sole and Separate Property” (or similar)

Answer 25

The “Significant Recital”

If other spouse participates in transaction, it is conclusively separate property of the person with title (absent fraud or mistake) and no extrinsic evidence allowed

if other spouse does not participate in the transaction, it is presumably community property in the absence of showing that the property was acquired with separate funds of the person whose name is on title.

Question 26

*Can a married couple partition or exchange their community property, and if so, is it lawful for such partition to include partition of future income, increases, and after-acquired property

Answer 26

Yes, married couple can partition and exchange their community property and it is proper that such agreement include partition of future earnings, increases in their respective separate estates, and after-acquired property in their name.

Question 27

*Common Law Defenses to all Premarital and Marital (including partition/exchange) Agreements

Answer 27

No common law defenses exist. The only allowable defenses are the statutory defenses (unconscionable and involuntary)