Community Property Flashcards
General Presumption
California is a community property state. Any property acquired during the marriage is presumed to be community property, including wages, earnings, and salary. Any property acquired before the marriage, after divorce or permanent separation, or by gift or inheritance, is presumed to be separate property. Upon divorce, the CP is split equally in kind unless an agreement states otherwise.
Quasi-Community Property
QCP is property acquired by a couple while living in a non-CP state, but that would be considered CP had the couple acquired the property while living in CA. During the marriage QCP is treated as SP, but upon death or divorce QCP is treated as CP.
Marital Economic Community
The marital economic community lasts from the start of marriage until death, divorce, or permanent physical separation, in which the couple must be separated and have no intent to return to the marriage.
Source Rule
The characterization of an asset as CP or SP depends on 1) source, 2) actions taken to alter character of the item, and 3)statutory presumptions affecting the item.
CP Gifts to 3rd Parties (Management and Control of CP)
CA prohibits gifts of CP for less than fair and reasonable value unless the other spouse gives written consent.
Prenuptial Agreement
A prenuptial agreement (prenup) alters the character of property prior to marriage. A couple may enter a valid prenup if it is in writing, signed by both couples, and was not subject to involuntariness or unconscionability.
To prove the agreement was voluntary, the proponent must prove 1) the other spouse was independently represented or waived her rights, 2) fully understood the rights she was giving up, 3) the agreement was not obtained by fraud, duress, or undue influence, and 4) other factors the court deems relevant.
To prove the agreement was not unconscionable at the time it was formed, the proponent must prove that the other spouse was fully informed of the assets and liabilities of the proponent party or that the other party had waived such a right to full disclosure of the assets and liabilities of the proponent party.
Transmutation
An agreement between the couple that changes the status of ownership of the property. It must expressly declare the intent of the parties, especially the adversely affected spouse, to change the property ownership.
Just saying “X is B’s property” and “Y is A’s property” is insufficient to make property SP because it does not use the word “separate”
Special Presumption (of title) or (Special community property presumption)
At death = property’s title and the manner it was held is presumed to reflect the status of the property
At divorce = any property jointly held by spouses is presumed to be CP at divorce
Presumption can be defeated w/clear & convincing evidence (explicit agreement after 1984)
Fiduciary Duties
Generally, either spouse can control and manage CP without the consent of the other. However, exceptions apply for major conveyances and transactions that may impact the disposition of CP, such as real estate. In that situation both spouses must give their informed written consent. Otherwise, it is a breach of the spouse’s fiduciary duty and other spouse may have his/her name added to title of the property as a remedy
Debts after separation/divorce
Generally the liabilities of the debit spouse. However, after separation, both the debtor and non-debtor spouse may be personally liable for payments for the necessities of life of either spouse.
Court will divide liability depending on each spouse’s ability to pay
SP Business w/CP Contribution
A spouse’s effort, skill and industry during marriage is a CP asset. When CP is used to enhance a SP business, the spouse may be entitled to compensation for her efforts. To calculate the share of reimbursement, courts will use two different formulas: Van Camp and Pereira.
Van Camp Formula
Formula favors SP. The Van Camp formula is used when the growth in the business is primarily due to the unique nature of the business and not necessarily to the spouse’s skill or time invested.
Determine fair salary for the community labor times the years married and subtract any profits received and amounts paid for community expenses.
CP = reasonable value of services - salary already paid
SP = FMV Of SP business at divorce - CP
Pereira Formula
This formula favors the community. Courts will use this family when growth of the business is primarily due to the spouse’s time, effort, labor, and skill.
Determine the value of the SP at the beginning of the business times the 10% reasonable return rate. The remainder is CP (the FMV of the business at time of divorce
