Community Property 1-2

Question 1

What property is a spouse’s separate property?

Answer 1

• Property owned by either spouse before marriage
• Property acquired during the marriage by gift, will, or inheritance
• Property acquired during the marriage in exchange for separate
  property including by expenditure of separate funds (Note: This is
  the source rule and involves tracing property. )
• Rents, issues, and profits of SP acquired before or during marriage

Question 2

What is community property? and a couple common examples?

Answer 2

All property, other than SP, acquired by either spouse during
marriage is CP. The most common examples are:
* Salary or wages earned by either spouse
* Income from community assets

Question 3

What is the community property presumption?

Answer 3

: All assets acquired during the
marriage are presumptively CP. Absent a showing of the parties’
agreement or that title was taken in a form that overcomes the
community presumption, the burden of proof to show that a particular asset is SP is on the party so contending.

Question 4

How may the community property presumption be overcome?

Answer 4

a. Statutory facts (that is, the asset was acquired by gift, bequest,
devise, or descent; was the fruit of SP; or can be traced back to
an SP source)
b. Agreement between the parties that the property would not be
CP
c. Both spouses knowingly took title jointly in a form other than
CP (for example, property taken in joint tenancy along with a
collateral written agreement that the property was not CP)

Question 5

When does the community property presumption simply not apply?

Answer 5

when title is held by a person at death and the marriage during which that property was acquired was terminated more than four years earlier.

Question 6

When may CP be acquired?

Answer 6

during the existence of the marital
economic community

Question 7

When does the marital economic community begin and end?

Answer 7

at marriage; at death or on the date of separation

Question 8

How is the date of seperation show?

Answer 8

(1) intent not to resume the marital relation (by one party)
(2) and Conduct consistent with that intent (phys seperation suffices but is not required)

Question 9

Unless the spouses otherwise agree in writing or by oral stipulation in open court, each spouse is entitled to what division of CP?

Answer 9

1/2 interest in every community asset (in-kind division)

Question 10

When may a court make a non pro rate division?

Answer 10

when economic circumstances warrant (ex family home (especially if it would uproot the couple’s minor children), shares in a closely held corporation, or a pension (that is, awarding all of the pension to the earner and giving other assets to the spouse so they can go their separate ways)

Question 11

When will the court not split CP half and half due to state statutes?

Answer 11

(1) misappropriation (Each spouse has a fiduciary duty to the other spouse in the management and control of CP. If one spouse deliberately misappropriates the other spouse’s interest in CP or quasi-CP (either during
the marriage or when the divorce is pending), it may result in a court award or offset against the wrongdoer’s one-half share of the
remaining property)

(2) educational debts

(3) tort liability(A tort liability incurred by one spouse that is not based upon an activity for the benefit of the community is assigned, without offset, to the tortfeasor spouse.)

(4) personal injury award (A personal injury award is CP but on divorce is awarded to the injured
spouse unless interests of justice require otherwise)

(5) negative community - when community liabilities exceed community assets, the relative ability of spouses to pay the debt will be considered (protect dreditors)

Question 12

Time of valuation?

Answer 12

as close to the time of trial as practical unless circumstances warrant something different

Question 13

Requirement of disclosure

Answer 13

each party must disclose all assets and liabilities in which each party has an interest. This is a continuing duty requiring updates until a final judgment

Question 14

After a final divorce decree, what may be used to set aside the property distribution provisions?

Answer 14

Code of Civil procedure 473(b) - A court may relieve a party from a judgment taken against them through their mistake, inadvertence, surprise, or excusable neglect.
Generally, these motions should be brought within six months.

Extrinsic fraud, extrinsic mistake, or duress are grounds to relieve a party from a judgment even after the six-month period expires, but intrinsic fraud or mistake are not

Family code relief - Both varieties of fraud and mistake are sufficient to relieve a party from judgment under the Family Code

Question 15

Unauthorized inter vivos gifts of CP

Answer 15

One spouse may not make an inter vivos gift of CP without written
consent of the other spouse.

When the gifting spouse dies, the gift is treated as a valid testamentary transfer of the donor’s one-half interest in CP.

Question 16

Testamentary gifts of CP

Answer 16

A married person may transfer one-half of the CP and all of their SP
by will. The surviving spouse owns the other half of CP.

The surviving spouse is entitled to one-half of each item of CP.
Unless the surviving spouse consents, their CP claims are not satisfied by one-half the aggregate CP

Question 17

A community-funded life insurance policy - SP or CP?

Answer 17

CP. SO if a third party is a beneficiary, the deceased insured spouse has made a testamentary transfer to a third-party beneficiary (other than their spouse) of their one-half interest in CP insurance proceeds.

Question 18

What happens to CP and quasi CP in intestacy?

Answer 18

An intestate decedent’s one-half of CP (and quasi-CP) passes to the
surviving spouse.

Question 19

What happens to SP in intestacy?

Answer 19

An intestate decedent’s SP passes in whole or in part to the
surviving spouse according to three statutory formulas:

(1) if the decedent has no surviving issue, parent, sibling, nor the issue of a deceased sibling, then all of the decedent’s SP goes to the surviving spouse

(2) if the decedent leaves only one child or one issue of a deceased child, or has no children but leaves a parent (or parents), sibling, or a sibling’s child, then one-half of the decedent’s SP goes to the surviving spouse

(3) If the decedent leaves more than one living child, one living child and the issue of one or more deceased children, or the issue of two or more deceased children, then one-third of the decedent’s SP goes to the surviving spouse

Question 20

Purchases Made with Borrowed Funds

Answer 20

Credit acquired by one spouse during marriage is presumptively
community credit. But borrowed funds (and credit purchases) are
ultimately classified according to the primary intent of the lender.
To demonstrate that loan proceeds or credit purchases are SP, the
borrowing spouse must demonstrate that the lender primarily relied
on the borrower’s SP in granting the loan or extending the credit.

Question 21

What is the confidential relationship between spouses?

Answer 21

Each spouse must act in the highest good faith and fair dealing with
respect to the other spouse in the management and control of CP.
This is a fiduciary relationship subject to the same rights and duties as those of nonmarital business partners.

If one spouse gains an advantage from a transaction, a presumption
of undue influence arises, and that spouse has the burden of proof to
show they did not breach their fiduciary duty

Question 22

What are the standard is a managing spouse held to?

Answer 22

Deliberate dissipation or destruction of property is actionable.
Further, a grossly negligent and reckless investment of community
funds is a breach of a spouse’s fiduciary duty. Neither a business
partner nor spouse is held to the prudent investor standard

Question 23

What duties do a managing spouse owe to the other?

Answer 23

Duty to account - A spouse must provide any information concerning the CP that is reasonably necessary for the exercise of the spouse’s rights

Duty to secure consent - The managing spouse must secure the consent of, or consult with,
the nonmanaging spouse before:
* Making a gift of CP
* Conveying or encumbering community personal property used in the family home, including clothing
* Selling, leasing, or otherwise disposing of substantially all of the
personal property used in a CP business
* Conveying, encumbering, or leasing community real property

Question 24

What is the statute of limitations on actions against a managing spouse?

Answer 24

Generally, actions must be commenced within three years after
the date the nonmanager had actual knowledge of the relevant
act. However, an action may be brought at a spouse’s death or in
conjunction with divorce regardless of the three-year limitation

Question 25

Can parties opt out of CP or SP characterizations by agreement?

Answer 25

Yes.

Question 26

What is transmutation?

Answer 26

When the character of an asset is changed (from SP to CP, from CP to
SP, or from one spouse’s SP to the other spouse’s SP) by agreement
during the marriage (either by a gift or by a premarital agreement or by a transmutation during the marriage)

Question 27

Premarital agreements reqs

Answer 27

Stat of frauds - must be in writing and signed by both parties

Question 28

When may an oral premarital agreement be enforced?

Answer 28

(1) it has been fully executed (promisor has actually performed - but not marriage alone)

(2) Estoppel - The promisor is estopped to assert the Statute of Frauds (that is, the promisee has relied to their detriment on the oral premarital agreement)

Question 29

What may a premarital agreement NOT agree to limit

Answer 29

child support obligations

Question 30

What circumstances render premarital agreements unenforceable?

Answer 30

(1) not voluntary

(2) unconscionable

Question 31

How is voluntariness shown for premarital agreements?

Answer 31

(1) Was represented by counsel or waived that right in writing;
(2) Was given at least seven days to review and sign the agreement;
and
(3) If unrepresented by legal counsel, was fully informed in writing (in a language in which the party was proficient) of the terms and basic effect of the agreement. The party must also execute a document declaring they received this information.

Question 32

Unconscionable premarital agreement - spousal support

Answer 32

A provision in a premarital agreement regarding spousal
support is unenforceable on one of two grounds:

• The party challenging the agreement was not represented by
  independent legal counsel at the time it was signed OR
• The provision is unconscionable at time of enforcement (even if the party had independent legal counsel at the time of
  signing

Question 33

Unconscionable premarital agreement - other agreements

Answer 33

An agreement about matters other than spousal support is
unenforceable if it was unconscionable when made and:

• A full and fair disclosure of other party’s property or financial
  obligations was not made;
• The right to a disclosure was not waived in writing; and
• The party challenging did not have adequate knowledge of
  the other party’s property or financial circumstances.

*By statute, unconscionability is a matter of law to be decided by
the court, not a question for the jury

Question 34

When is a waiver of death rights enforceable?

Answer 34

if it satisfies either the family code or the probate code requirements

Question 35

Marital agreements (transmutations) What is required?

Answer 35

*Be made in writing
* Expressly declare that a change in the ownership of property is
being made
* Have the consent of the spouse whose interest is adversely
affected

EE not allowed to interpret the meaning

BUT there is an exception for personal gifts of relatively insubstantial value

Question 36

What are the two ways that CA courts split into CP and SP a business owned before marriage greatly increases in value during marriage?

Answer 36

Pereira Accounting and Van Camp Accounting

Question 37

What is Pereira Accounting?

Answer 37

The SP component consists of the separate capital plus a fair rate of
return thereon (for example, 10% interest on principal × 10 years). The
remainder is CP

Question 38

What is Van Camp Accounting?

Answer 38

The services of the spouse who is working for the business are
valued using the going market salary for that position
Family expenses that were paid from business earnings are then subtracted from that amount.
The remainder, if any, represents the CP component of the business.
The rest of the business is SP

Question 39

How do courts decide whether to use Pereira or Van Camp Accounting?

Answer 39

They may select whichever formula will achieve substantial justice between the parties.

Generally, however, Pereira should be used when the spouse’s
management was the primary cause of the growth or productivity of
the separate business. Look for instances in which a spouse contributed creative ideas, developed new techniques, or worked long hours while drawing only a modest salary.

Van Camp should generally be used when the character of the
separate business is largely responsible for its growth or productivity.

Question 40

Stock Options as Award for Past Service

Answer 40

Marriage of hug - For this formula, the starting point for both the numerator and denominator of the fraction is the date of employment.

The numerator is the
years from the date of employment to the date economic community
ends, and the denominator is years from the date of employment until
the date the options become exercisable.

The fraction is then multiplied by the number of shares of stock that
can be purchased under the options to obtain the CP interest, which
is subject to equal division on divorce

Question 41

Stock Options to Encourage Continued
Employment:

Answer 41

Marriage of Nelson - For this formula, the starting point for both the numerator and denominator of the fraction is the date the options are granted.

The numerator is the years from the date the options are granted until the economic community ends, and the denominator is the years from
the date the options are granted until they become exercisable

Again, the fraction is multiplied by the number of shares of stock that
can be purchased under the option to obtain the CP interest, which is
subject to equal division on divorce.

Question 42

What is the SP presumption?

Answer 42

all property acquired before marriage or after separation is SP

Question 43

Transmutation

Answer 43

(1) during marriage, spouses may change the status of their property
(2) to be valid, the transmutation must be in writing and expressly declare that a change in ownership of property is being made; and
(3) it must be consented to or accepted by the spouse whose interest is adversely affected.

Question 44

CP used to improve SP (with a loan)

Answer 44

(1) the personal credit of each spouse is presumptively CP
(2) to overcome this presumption, it must be show that the lender primarily relied on a spouse’s SP in granting the loan.

Question 45

Liability of CP and SP to satisfy torts

Answer 45

(1) a spouse is not liable for their spouse’s torts except in cases where they would be liable if the marriage did not exist
(2) if liability is based on an act or omission that occurred while the married person was performing an activity for the benefit of the community, the liability will be satisfied form CP first, then from the tortious spouse’s SP

Question 46

Tracing

Answer 46

(1) when SP finds are commingled with community funds, the owner of the separate funds may trace the SP funds through either the exhaustion method or through direct tracing
(2) any available community funds are presumed to have been used first to pay for family expenses

Question 47

What is the exhaustion method of tracing?

Answer 47

SP proponent shows that at the time they purchased the asset whose character is contested. the community funds in the account had already been exhausted by payment for family expenses

Question 48

What is the direct method of tracing?

Answer 48

SP proponent may show that at the time the asset was purchased where were sufficient separate funds available, and they intended to use those funds to purchase an SP asset

Question 49

does titling something in only one spouse’s name have any bearing on its characterization?

Answer 49

no, idiot

Question 50

CP pressumption

Answer 50

All property acquired during marriage is presumed to be CP

*Except property
(1) received by gift, bequest, devise, descent;
(2) the rents, issues, and profits of SP
(3) and property acquired in exchange for SP
ALSO
*increases to SP are generally SP and increases to CP are generally CP

Question 51

Wage replacements (like disability)

Answer 51

(1) to the extent that disability pay is intended to replace marital earnings, the pay is CP.
(2) to the extent that disability pay is intended to replace separate post-divorce earnings, it is SP.
(3) it is immaterial that the right to receive the wage replacement may have been earned during the marriage or purchased with community funds.

Question 52

Debt incurred after end of the community

Answer 52

(1) when a spouse incurs a debt during a marriage, all CP and the debtors SP are liable for the debt
(2) the SP of the other spouse typically is not liable
(3) during marriage does not include the time in which the parties are living separate and apart before a judgement of dissolution or legal separation