COMMUNITY PROPERTY Flashcards
Separate Property is: (statutory definition)
- Property owned by either spouse before marriage; or
- Property acquired during marriage, by gift, will, or inheritance; or
- Property acquired during marriage with the expenditure of separate funds.
- The rents, issue, and profits derived from SP.
Wi inherits $10,000 from mother’s estate, which she uses to buy IBM Stock. Is the IBM stock SP or CP?
SP because of the tracing or source rule. Because she used the inheritance which was SP to purchase the IBM stock it is SP.
What is the statutory definition of community property?
Property, other than SP, acquired by either spouse during marriage.
Most common examples=
• salary or wages earned by either spouse
• income from community assets
Prize money won by W on quiz show is ____. Bonus paid by H’s employer which was wrapped in gift box is _________.
Both = CP
- prize money was acquired from wife’s labor
- bonus= compensation, not a gift.
What is the community presumption?
All assets acquired during 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 that a particular asset is separate property is on the party so contending.
As of 2004, the community property
system applies to registered domestic partners upon filing a Declaration of Domestic
Partnership with the Secretary of State, retroactive to January 1, 2000. It is available only to (i)
____________, and (ii) __________________.
same-sex parties; elderly opposite-sex couples receiving social security benefits.
Because the In re Marriage cases of 2008 deemed that banning same-sex marriage was unconstitutional and came before Prop 8, ____.
Same-sex couples married after the In re Marriage cases in 2008 and before Prop. 8, may claim community property rights as spouses, not domestic partners.
Every community property answer should start with:
- CA is a commnity property state.
- There is a community presumption where all assets acquired during the marriage are CP,
- There are areas of SP like:
• Property owned by either spouse before marriage; or
• Property acquired during marriage, by gift, will, or inheritance; or
ª Property acquired during marriage with the expenditure of separate funds.
• The rents, issue, and profits derived from SP.
When does the economic community end?
- Permanent physical separation
2. Intent not to resume the marital relationship (only need one party).
Hal and Wynn, having difficulties in their marriage, agree to a trial separation for six
months. Hal moves into his own apartment on May 10, 2005. When the trial period ends
November 10, 2005, Hal and Wynn discuss their future. Hal, who still is in love with Wynn, begs
her to “give me another chance,” but Wynn tells him that “the situation is hopeless.” Wynn
files for divorce in March 2006. Between May 10 and Nov. 10, 2005, Wynn invests $15,000 of
her earnings to buy 300 shares of Able stock. Between November 10 and the time of filing for
divorce, Hal invests $10,000 of his earnings to buy Baker stock.
When did the economic community end?
Characterize the stock:
Economic community ended Nov. 10.
Able stock (acquired between May 10 and Nov. 10) is CP
Baker stock (acquired after Nov. 10 and before divorce filing) = SP
Doctor Harry leaves Wanda and moves in with his nurse. Harry and the nurse set up
housekeeping on a houseboat in Marina Del Rey. Thereafter, Harry never had sex with Wanda.
But Harry occasionally went home to eat with Wanda and the kids, took Wanda to dinner on
several occasions, took Wanda along to medical association meetings, and (classy guy) regularly
took his laundry home.
o Does this show the intent of either party not to resume marital relation?
No, court held that they had upheld the facade of marriag.e Until they filed for divorce, CP.
During marriage to Hal, Wendy (a law professor) wrote a casebook published by West
Publishing Co. The book was not mentioned in the divorce proceeding. Six months after the
divorce Wendy receives an $8,000 royalty payment from West. Wendy contends that the
$8,000 is her SP because she owned the copyright and she now owns the book. Is she correct?
No. The copyright and all royalty payments were CP because she wrote the book during the marriage.
** But if Wendy wrote the book before marriage, royalty payments would be SP,
even if received during the marriage.
For community property not divided on divorce, the court retains ___________
to award CP that was not previously adjudicated, and on motion the omitted or
unadjudicated CP will be divided 50-‐50 unless the court finds that the interests of justice require an unequal division.
continuing jurisdiction
At the time of their divorce, H & W own the following assets as community property:
• a house ($300,000);
• furnishings, cars, and other tangible personal property ($20,000);
• and stocks and bonds ($500,000),
for a total of $820,000. H is an engineer; W (who has only a high school education) has not worked since their first child was born.
Citing the disparities in earning power and career potential of the parties, and the fact that W was awarded custody of the couple’s minor children, in making a division of CP the trial court (a) divides the tangible personal property equally; (b) awards the house to W; and (c) awards $200,000 of the securities to W and $300,000 to H. As a result, W takes property worth $510,000 and H takes property worth $310,000. Proper?
No. Absent a property settlement agreement, all community property must be divided equally. 50/50
Disparity in earning power can be considered only as to spousal support (alimony) & child support.
Disparity in earning power cannot be considered for ____________ and can only be considered as to ___________ and __________.
division of community property; alimony (spousal support); child support
Suppose that the court divided the tangible property upon divorce equally ($10,000 each),
awarded the house ($300,000) to W, and awarded securities worth $100,000 to W and
$400,000 to H, with the result being that each ends up with assets worth $410,000.
Was this non-‐pro rata division proper?
General rule = no. Each an devery community asset (and liability) must be divided 50/50.
Exceptions:
• Economic circumstances exception
• famly residence
• closely held coporation
• pension
• Statutory exceptions
• one spouse misappropriates CP
• educational debts of one spouse
• tort liabilit not based on activity for the
benefit of the community
• Personal Injury award given to injured
spouse
• Negative community: community
liabilities exceed assets; relative ability
of spouses to pay debt is considered
(concern is to protect creditors)
What are the exceptions to the general rule that all communitiy property must be divided 50/50 meaning each piece of property must be divided 50/50?
- Economic circumstances: can give particular asset wholly to one spouse and cash out other spouse with other assets (each spouse gets 50% of total value). E.g.:
• Family residence (very common) (children)
• Closely held corp.
• Pension: allows them to go separate ways - Statutory: Where one spouse ends up with more than 50%:
• 1 spouse misappropriates CP, whether
before or during pendency of divorce
• 1 spouse has incurred educational debts
• 1 spouse has incurred tort liability not
based on activity for benefit of the \
community
• personal injury award on divorce is
awarded to injured spouse (unless
interests of justice require otherwise).
• negative community: community liabilities
exceed assets; relative ability of spouses
to pay debt is considered (to protect
creditors)
Unbeknownst to Winkie, Hobie gives Apple stock (CP) worth $40,000 to his deadbeat
brother Buddy. When Winkie finds out about the gift (the stock is then worth $100,000), what
are her options?
- Winkie can set the gift aside in its entirety because neither spouse can make a gift of CP without the other spouse’s written consent.
- Alternatively, on divorce, W can take equal offsetting CP assets to recover her 1/2 CP.
3.
Unbeknownst to Winkie, Hobie gives Apple stock (CP) worth $40,000 to his deadbeat
brother Buddy. When Winkie finds out about the gift (the stock is then worth $100,000), what
are her options if she only learns about the gift after H’s death?
- W can set the gift aside as to her 1/2 community property.
- W’s recovery will be either from the donee or H’s estate; whichever is easitest.
The same result would apply if Hobie, the insured under a $100,000 CP life insurance
policy, names a third party as a beneficiary (e.g., girlfriend). Winkie can recover her
½ CP, from either the beneficiary OR Hobie’s estate.
Generally, the power to manage CP is not equal to the power to give it away. What is the exception?
When US gov’t savings bonds are involved.
Here, there is federal preemption.
So even if Hobie uses $20,000 CP to buy United States Series EE Savings Bonds in the name of “Hobie, payable on death to Buddy,” Winkie cannot recover her ½ community interest in bonds.
Harry buys Blackacre with community funds. Not being totally familiar with
California’s community property system, and because the deed conveying Blackacre names
Harry as grantee, Harry thinks Blackacre is his SP. He dies leaving a will that says:
- I, Harry, own Blackacre as my separate property. I devise fee simple title therein to
my sister Sally. - I give and bequeath all the rest, residue, and remainder of my property to my wife
Wanda if she survives me, otherwise to my brother Bob.
At the time of H’s death, Blackacre is workth $100,000. H & W owne other community property worth $400,000.
No. Each spouse has the power of testamentary disposition over all of his SP, but only over 1/2 of the CP.
No. Widow’s Election Will.
Harry’s will purports to bequeath the entire interest in a community asset. Wanda has therefore been put to a choice (an election) she cannot read the will selectively ( I’ll take the residuary estate under ¶ 2, but protest the gift of ¶ 1). Rather, she has to read all of the
will. If Wanda elects to take under the will and receive her residuary estate, she will take 1//2 of Harry’s CP ($200,000), but she has to allow
the will to operate to devise Blackacre to Sally.
Alternatively, Wanda can elect to take against the will, by claiming
her ½ CP in Blackacre. But she then must relinquish all testamentary
gifts in her favor. In this case, Harry’s will is read as though Wanda died before him, meaning that Wanda does not take Harry’s 1/2 CP in residuary estate under ¶ 2 of the will.
Wanda should take under the will. If she takes under the will, she will wind up with $400,000 (her
1/2 CP ($200,000) + Harry’s 1/2 CP ($200,000). If she elects against the will, she will wind up with $250,000 (her ½ CP ($200,000) + ½ Blackacre ($50,000).
Hal buys a lot near Big Bear Lake for $50,000, paying $10,000 in community funds and
$40,000 with a loan from Bank. At the Bank’s insistence, Willow signs the note for the loan along with Hal. The deed to the lot names Hal as the grantee.
At the time of purchase, the lot is at least _______ CP.
20% becuase of the $10,000 down payment from community funds.
Funds borrowed during marriage and goods purchased during marriage are _________________. This is the _____________. However, borrowed funds (and credit purchases) are classified according to the ________________. We look at where the lender is looking for satisfaction of the debt.
presumptively community credit; community credit presumption
primary intent of the lender
Hal buys a lot near Big Bear Lake for $50,000, paying $10,000 in community funds and
$40,000 with a loan from Bank. At the Bank’s insistence, Willow signs the note for the loan along with Hal. The deed to the lot names Hal as the grantee.
What would be the result if the lender was primarily relying on Hal or Willow’s general standing in the community, or was relying primarily on Hal’s personal creditworthiness or reputation?
The note would be a CP obligation, and the lot would be CP.
Hal buys a lot near Big Bear Lake for $50,000, paying $10,000 in community funds and
$40,000 with a loan from Bank. At the Bank’s insistence, Willow signs the note for the loan along with Hal. The deed to the lot names Hal as the grantee.
What would be the result if the loan was secured by a mortgage on land in Los Angeles
worth $50,000 which Hal owns as his SP?
The note would likely be a SP obligation; the lot would be 20% CP and 80% SP.
But remember, the controlling test is the primary intent of the lender. Thus it still coudl be shown that (e.g.) the Bank was primarily looking to Hal’s credit standing, in which case the note and lot would be CP.
Spouses are subject to __________ that arise from their confidential relationship, imposing
a duty of the highest good faith and fair dealing with each other. If one spouse gains an
advantage from a transaction, a ___________________. That spouse has the
_______________to show she did not breach her fiduciary duty.
fiduciary duties; presumption of undue influence arises; burden of proof.
• Under a 2002 statute, a grossly negligent and reckless investment of community funds is
a breach of a spouse’s fiduciary duty.
•Example: if H invests community funds in Alchemy, Inc., a start-‐up company with a
“sure-fire formula to turn lead into gold,” it would be a presumptive breach of the H’s fiduciary duty.
*This can’t just be something stupid–it’s gotta be fucking absurd.
Under a 2002 statute, a __________________ is
a breach of a spouse’s fiduciary duty.
a grossly negligent and reckless investment of community funds
Absent any contrary agreement, the statutory definitions of SP and CP control. But California
has always allowed the parties to opt out of the CP and SP characterizations by agreement,
either as to _____________ or as to ______________.
particular assets; all acquisitions
Agreements can be made before marriage, and thus governed by the _________; or be made during the marriage.
When, by agreement during the marriage the
character of an asset is changed (from SP to CP, from CP to SP, or from one spouse’s SP to the
other spouses SP), this results in a __________. Transmutation can be by _______ (e.g., H gives
jewelry inheriited from his mother to W on her birthday, jewelry is W’s SP), or by ___________.
Uniform Premarital Agreement Act
transmutation
gift
agreement
What is a transmutation? In what 2 ways can one occur?
Transmutation is when during the marriage 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).
Can occur by gift or agreement.
What is the general rule for premarital agreements?
Premarital agreements must be in writing, signed by both parties. Oral agreements are invalid.
Exceptions:
1. Where oral agreement is executed (fully performed)
- Estoppel based on detrimental reliance.
What are the 2 exceptions to the general rule that premarital agreements must be in writing and signed by both parties?
- Where oral agreement is executed (fully performed)
- Estoppel baed on detrimental reliance.
E.g. of #1:
To induce Winkie to marry him, Hobie orally agrees to name her as beneficiary of his
$100,000 life insurance policy. The parties marry, and Hobie changes the beneficiary
designation to make Winkie the beneficiary. Later, after a heated argument, Hobie changes his
policy to make his sister Sue the beneficiary. Hobie dies shortly thereafter. Winkie now sues
Sue, offering proof of the oral agreement; Sue contends that evidence of the agreement is
barred by the writing requirement for premarital agreements.
Winkie argues that her marrying Hobie in reliance on the agreement is sufficient
performance of the oral contract to make it an exception to the writing
requirement. Is she correct?
• No. Marriage alone is not sufficient performance to make it an exception to the writing requirement because that would eliminate the writing requirement in every case.
E.g of #2
Wanda (who is single) executes a will leaving all of her property to her nephew
Norman. Wanda later meets Howie. Howie agrees that if Wanda marries him, he will make no
claim against W’s estate at the time of W’s death. They marry. Wanda dies, and
Howie brings a claim for his share of the of the will against W’s estate (which he would otherwise get under CA’s omitted spouse statute)
• In probate court, evidence of Howie's oral promise is offered by independent witnesses. Howie argues that the evidence is inadmissible because of the premarital agreement writing requirement. Is the evidence admissible?
Yes. Wanda relied on Howie’s promise, and he is now estopped from asserting the writing requirement.
To induce Winkie to marry him, Hobie orally agrees to name her as beneficiary of his
$100,000 life insurance policy. The parties marry, and Hobie changes the beneficiary
designation to make Winkie the beneficiary. Later, after a heated argument, Hobie changes his
policy to make his sister Sue the beneficiary. Hobie dies shortly thereafter. Winkie now sues
Sue, offering proof of the oral agreement; Sue contends that evidence of the agreement is
barred by the writing requirement for premarital agreements.
Winkie argues that her marrying Hobie in reliance on the agreement is sufficient
performance of the oral contract to make it an exception to the writing
requirement. Is she correct?
Winkie argues that evidence of Hobie’s actions is still admissible to prove the
existence of a premarital agreement as to the insurance. Is she correct?
- No. Marriage alone is not sufficient performance to make it an exception to the writing requirement because that would eliminate the writing requirement in every case.
- Yes. By naming her as beneficiary, Hobie did what he promised and acted consistently with the existence of a contract. This conduct substitutes for requirement of writing.
In a premarital agreement, what can parties agree to? What is the exception?
Just about anything.
Exception: parties cannot agree to limit either party’s contribution to furnish child support. Prohibited by statute.
In a premarital agreement, what can parties not agree to?
to limit either party’s contribution to furnish child support. It is prohibited by statute.
What are the 2 defenses to enforcement of a premarital agreement?
- Not signed voluntarily
2. Unconscionability
What is the background to the “not signed voluntarily” exception to the enforcement of premarital agreements?
Marriage of Bonds (Cal. S. Ct. 2000): in 1987, on trip to Montreal, BB meets Swedish masseuse. Whirlwind courtship; BB’s lawyer drafts premarital agreement saying each keep earnings as SP. She was told she should get an attorny; declines, saying “that is the way we do it in Sweden.” Flew to Vegas and married next day. Marriage doesn’t last, she tries to render agreement unenforceable, saying not signed voluntarily. Court held agreement enforceable, reasoning it was an informal wedding and she could have postponed it if she wanted attorney to review the agreement. Court suggested that it would have been different if she was presented with take-‐it-‐or-‐leave it agreement 30
minutes before formal wedding. California legislature not happy.
2001 statute (response to Bonds) -‐ A premarital agreement shall be deemed not
voluntary (and thus unenforceable) unless court finds that party challenging
agreement:
i. Was represented by independent legal counsel at time agreement signed (or waived in separate writing); AND
ii. Was given at least 7 days to sign; AND
iii. If not represented by independent counsel, was fully informed in writing (in language in which party proficient) of terms and basic effect of agreement. Party must execute document declaring that they got information and identifying who provided it.
A premarital agreement shall be deemed not voluntary (unenforceable) unless court finds that party challenging the agreement:
- Was represented by independent legal counsel at the time agreement was signed (or waived in a separate writing); AND
- Was given at least 7 days to sign; AND
- If not represented by independent counsel, was fully informed in writing (in language in which party proficient) of terms and basic effect of agreement. Party must execute document declaring that they got information and identifying who provided it.
What are the 2 tests for unconscionability?
- For spousal support: While generally, spousal support can be waived or modified in premarital agreements, it will be unenforceable if:
a) party challenging was not represented by
independent legal counsel; OR
b) provision is unconscionable at the time of
enforcement (even if party represented by
independent legal counsel). - For anything else:
Agreement is unconscionable if it was unconscionable when made AND
(i) no full and fair disclosure of the other party’s
property or finanaical obligations;
(ii) right to disclosure not yet waived in writing;
and
(iii) party challengin had no adequate knowledge
of other party’s property or financial
circumstances.
By statute, unconscionability is a __________ to be decided by the ______, not a question for the ________.
matter of law; the courrt; jury
After 1985, what are the requirements for transmutations?
Must be
- in writing
- signed by spouse whose interest is adversely affected; and
- must explicitly state that a change in ownership is being made
T/F? Usual exceptions to the writing requirement (e.g. estoppel, partial performance, etc) do apply to the writing requirement for transmutations.
False. They do not apply!
What is the only exception to the transmutation requirements?
Gifts of tangible property of personal nature (e.g. inherited jewelry) which “are not substantial in value taking into account the circumstances of the marriage.”
*A $15,000 painting didnt count here.
Hal owns AT&T stock worth $80,000; Wendy owns Exxon stock worth $20,000. Over
breakfast one day in late 1984 or early 1985, Hal says, “I think it would be a good idea for all of our stock to be owned as CP.” Wendy says, “Great!”
If 1984, what result?
If 1985, what result?
1984: This is a valid oral transmutation agreement and all stock is now CP.
1985: Oral agreement is not valid, each retain their stock as SP.
H executes a will that says, “I own no SP. All of my property, real and personal, is CP or my wife and me.” H&W get divorced. In proceedings, H claims that some of his assets are SP.
W rpocures Xerox copy of H’s will, saying it shows a transmutation. Is H’s will admissible in
divorce proceeding as evidence of a written transmutation agreement?
Nope. By statute, in any proceeding commenced before the death of the person who made the will or created a revocable trust, a statement in a will or revocable trust as to the character of the property is not admissible as evidence of transmutation.
