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Community Property Flashcards

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1
Q

What is the basic idea of community property?

A

the acquisition of property by either spouse during marriage through the time, energy, and skill of one or both spouses is treated as a contribution to the marital community

contributions can be pecuniary or nonpecuniary

contributions are presumed equal

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2
Q

When does the marital community end?

A

the marital community ends with permanent separation, divorce, or death, whichever comes first

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3
Q

When does permanent separation occur?

A

1) one spouse expressly informs the other spouse that they intend to end the marriage AND
2) the spouse’s conduct is consistent with that intent

+It is ok to be permanently separated, but living together still. But there likely needs to be further conduct to show separation
+On the essay, argue both ways that the community ended or did not end.

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4
Q

How is SP acquired?

A
  • before marriage
  • after divorce/permanent separation
  • by gift or inheritance, even during marriage
  • rent, income, or profit from a SP asset remains SP

+earnings are assumed SP when a married couple is living apart

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5
Q

What is quasi-community property?

A

QCP is property acquired by a married couple while living in another state that would have been classified as CP if the parties were married and domiciled in CA at the time the property was acquired

During marriage, the property is governed by the laws of the other state

[C as in Community matters and determines type of property]

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6
Q

When is the QCP rule triggered?

A

This rule is only triggered upon divorce or upon the death of the spouse holding title to the property

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7
Q

What is the equal division rule?

A

upon divorce, 1/2 of the community property estate will be split

*This can change according to the spousal agreement or exceptions

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8
Q

How does a party rebut a CP or SP presumption of an asset?

A

Willa purchased a painting during marriage with dividends from her stock index fund. Willa
invested in the stock index fund using money she inherited from her
grandmother. Presumptively it is CP, but it is actually SP

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9
Q

What are the elements of a valid marriage?

A

[CALS think of a wedding at berkeley]

  • consent (if younger than 18, there must be a court order and parental consent)
  • authentication
  • license
  • solemnization
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10
Q

What are the elements of a domestic partnership?

A
  • intimate and committed relationship of mutual caring adults
  • capacity to marry
  • registration under the CA Domestic Partner Rights and Responsibilities Act

+cohabitation is NOT required

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11
Q

CA has abolished common law marriage

A

But under the Full Faith and Credit Clause, CA will recognize a valid common-law marriage created in another state

CP principles will apply to these marriages

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12
Q

When is a marriage void (invalid from its inception)?

A

On the grounds of

  • bigamy
  • incest
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13
Q

When is a marriage voidable (legal until declared void by the court)?

A
  • underage
  • unsound mind
  • fraud sufficient to vitiate consent
  • force or duress
  • incurable physical incapacity
  • person remarries after presumed death of prior spouse
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14
Q

What is the putative spouse doctrine?

A

it protects an innocent spouse in a void or voidable marriage from losing CP benefits IF the spouse believed in good faith that the marriage was valid

Good faith is determined by a totality of the circumstances

+The moment that the putative spouse finds out that they are not married, the doctrine no longer applies

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15
Q

What is the property acquired by a putative spouse during a void or voidable marriage called?

A

quasi-marital property (QMP)

[remember M as in make believe]

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16
Q

What protections do unmarried cohabitants get?

A

contract principles apply.

An express agreement between unmarried cohabitants (i.e., cohabitation contract) is
enforceable unless the underlying consideration for the contract is sexual services.

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17
Q

What is prohibited in a spousal agreement?

A

an agreement that:

  • impacts child support
  • promotes divorce
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18
Q

What are requirements for a valid prenuptial agreement?

A

SUV W

  • signed by both parties
  • not unconscionable
  • voluntary
  • in writing

+does not need consideration

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19
Q

What must the spouse seeking to enforce the prenuptial agreement show?

A

the agreement was neither involuntary nor unconscionable at the time of its execution

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20
Q

What must be shown by the proponent spouse to demonstrate that the prenuptial agreement was voluntary?

A
  • the spouse against whom enforcement is being sought was represented by independent legal counsel or waived their right to independent counsel in a separate writing (but still understood the material terms)
  • 7 days passed between receipt of the agreement and having to sign it
  • the agreement is not a product of duress, fraud, undue influence, or incapacity
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21
Q

What must be shown to demonstrate that the prenuptial agreement was unconscionable?

A

all of the following:

  • spouse lacked a full, fair, and reasonable disclosure of the property and obligations of the other spouse
  • spouse did not waive the disclosure in writing
  • spouse did not have, nor reasonably could have had, adequate knowledge of the other spouse’s property or obligations
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22
Q

What is the key difference between prenups and spousal support provisions?

A

prenups: unconscionability is analyzed at the time of execution

spousal support provision: unconscionability is analyzed at the time of enforcement

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23
Q

What is a transmutation?

A

when a spouse makes a gift or she offers or agrees to change status of CP or SP

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24
Q

What are the requirements of a valid transmutation?

A

the adversely affected spouse must, in writing, expressly declare the recharacterization of property

+or this is a gift under the gift exception of something insubstantial

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25
Q

When does the gift exception allow a gift of personal property to a spouse without writing?

A
  • gift is between spouses
  • gift is a tangible item of a personal nature for use principally by the donee spouse AND
  • gift is insubstantial in value (considering the wealth of the couple)
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26
Q

What is a separation agreement?

A

in anticipation of divorce, spouses may enter into a separation agreement to resolve property issues

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27
Q

When may a separation agreement be set aside?

A
  • fraud
  • mistake
  • breach of fiduciary duty owed to the spouse
  • failure to disclose all relevant financial information to the other spouse
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28
Q

What is the rule on child issues in a separation agreement?

A

the agreement may resolve child custody, child support, and spousal support issues

But it may not limit the statutory obligations relating to child support nor divest the court of jurisdiction

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29
Q

What is the standard of proof required to rebut the general presumptions of community property (whether something is SP or CP?

A

a preponderance of the evidence

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30
Q

What is the standard of proof required to rebut a special presumption of community property?

A

clear and convincing evidence of contrary intent

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31
Q

What are the special presumptions?

A
  • CP presumption at divorce/permanent separation that property acquired in joint form during marriage is CP
  • presumption that the form of ownership on the title represents the form of ownership interests of the spouses

[remember the D’s of dissolution]

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32
Q

What is the CP presumption at divorce?

A

all jointly-held property is presumed CP

This includes: joint tenancy, tenancy in common, tenancy by the entirety

+This presumption can be rebutted by an express writing evidencing the spouses’ intent to hold the property as SP

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33
Q

What happens if a spouse makes SP contribution to jointly titled property?

A

the spouse can seek reimbursement (includes down payments, payments for improvement, payments to reduce the principal of a loan [DIP])

Excludes: maintenance, insurance, taxes, investments

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34
Q

What is required to rebut the CP presumption at divorce?

A

written evidence of intent to hold property as SP

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35
Q

What is the special presumption of title at death?

A

The form of ownership on the title is presumed to be the nature of the ownership
interests of the spouses

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36
Q

What is required to rebut the special presumption of title at death?

A

clear and convincing evidence that both spouses did not intend to hold the property as stated in the title

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37
Q

What words are required to form a joint tenancy?

A

“joint tenancy”

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38
Q

What does each spouse hold during marriage in a JT?

A

each spouse holds an undivided half SP interest and can unilaterally convey their interest without the consent of the other spouse

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39
Q

What happens to a spouse’s interest in a TiC during marriage? Upon divorce? Upon death?

A

during marriage: spouse holds SP interest proportionate to their share

upon divorce: the interest is subject to the special CP presumption

upon death: special presumption of title applies and the spouse’s interest passes by will/intestacy

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40
Q

Putting title in the purchasing spouse’s name DOES NOT rebut a CP presumption

A

Ex: a spouse takes title to an asset (bank account, house, stock) in her name alone using CP assets. Despite the fact that it is titled in the spouse’s name only, it remains CP.

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41
Q

What is the presumption when there is a bank account with commingled CP and SP assets?

A

presumed to be CP and any purchased asset is presumed to be CP

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42
Q

How can a spouse overcome the presumption that there is a SP interest in a commingled bank account?

A
  • direct tracing
  • indirect tracing (exhaustion method)
  • if neither tracing methods are possible, it will be assumed to be CP
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43
Q

What is required to demonstrate direct tracing of SP interest in an asset that was purchased with funds from a commingled bank account?

A

the SP proponent must show that the source of the funds used to purchase the asset came from the SP deposits in the account, not the CP deposits. Requirements:

  • sufficient SP funds were available at the time of purchase AND
  • proponent intended to use SP funds to purchase the asset
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44
Q

What is required in the indirect tracing (exhaustion method)?

A

proponent must prove CP funds in the account were exhausted at the time of purchase due to paying for family expenses

This relies on 2 presumptions

1) family expenses are presumed to be paid with CP funds first, then SP funds as needed
2) SP funds used to pay family expenses are presumed to be a gift to the community

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45
Q

What is the rule on educational degrees?

A

Educational degrees and professional licenses acquired during marriage are not CP.

The enhanced earning capacity of a degreed/licensed spouse is not subject to division.

But the community is entitled to reimbursement if CP funds were used to pay for direct educational expenses (tuition/books) (not living expenses) and the spouse’s earning capacity was substantially improved

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46
Q

What is the rule on paying student loans during marriage?

A

the community is entitled to reimbursement if CP funds were used during marriage to repay loans for a degree or license obtained before marriage

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47
Q

How are personal injury proceeds for a claim arising during marriage characterized?

A

CP

Upon divorce, all proceeds are assigned to the injured spouse

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48
Q

How are tort proceeds for personal injury characterized at death of either spouse?

A

CP

49
Q

How are personal injury proceeds for a claim arising before marriage or after marriage characterized?

A

SP of the victim-spouse

50
Q

When do courts apply the “time rule?”

A

When the retirement benefits/pension are based upon the number of years employed and were partly earned before marriage, courts use this rule to determine SP and CP interests

51
Q

What is the “time rule?”

A

number of years employed while married
/
number of years under the retirement plan/pension

52
Q

What is the approach to federal benenfits?

A

Federal benefits including Social Security, military life insurance, pension plans under ERISA, and federal disability are not subject to CP rules until benefits are paid to the recipient
spouse.

But once the federal benefit plan is paid out, CP rules apply

53
Q

When do courts apply the “division in-kind” or “cash out” methods?

A

when the spouse is not yet eligible for benefits at the time of divorce

54
Q

What is the division in-kind method?

A

the court will reserve jurisdiction to supervise payment upon retirement

55
Q

What is the cash out method?

A

if a present value can be ascertained, the non-participant spouse is awarded cash or assets equal to the value of their CP share of the benefits.

56
Q

What is the general rule on stock options?

A

Stock options remain CP so long as they were accrued during marriage, even if they are not exercisable until after divorce

57
Q

What are the two formulas used to determine SP and CP interests in stock options? When are they appropriate?

A

hug formula (to compensate past service or to attract a new employee)

nelson formula (to incentivize continued employment

[It would be weird to hug someone to incentivize. A hug is better used for thanking someone for past acts]

58
Q

What is the Hug formula?

A

DoDos/DoDove
hugging dodos and doves

DOH (hire)-DOS (separation)
/
DOH-DOV (vesting)

then multiply the result by the number of shares to get the number of CP shares. The rest of the shares are SP

59
Q

What is the Nelson formula?

A

[think of a dog named nelson]

DOG (grant)-DOS (separation)
/
DOG-DOV (vesting)

then multiply the result by the number of shares to get the number of CP shares. The rest of the shares are SP

60
Q

What are the two formulas that courts have the discretion to use when a spouse started a business with SP funds before/during marriage? When are they primarily used?

On the exam, remember to use both formulas and then explain which should be used

A

Pereira [think person]: when the increase in value is due largely to the time, skill, and labor of the spouse, not outside market forces

Van Camp [think valuable]: when the increase in value is due to 1) the inherent value of the asset, 2) market forces, or 3) the spouse’s salary and other income or family expenses traceable to the business have already compensated the community for the spouse’s efforts

61
Q

What is the Pereira formula?

A

SP: FMV of SP business at time of marriage + (FMV of SP business at time of marriage x Fair rate of Return(10%) x # of years of marriage)

CP: FMV at time of separation - SP

62
Q

What is the Van Camp formula?

A

CP: (Reasonable value of spouse’s services - annual family expenses) x # years married

SP: FMV at time of divorce - CP

+Only deduct annual family expenses that could potentially be traceable to the business assets

+Spouse may still be eligible for an equitable apportionment if they were undercompensated

SP:

63
Q

What is the “reverse” pereira formula?

A

cp: FMV of CP business at separation + (FMV of CP business at separation x fair rate of return x # years of separation)

SP: FMV of business at divorce - CP

64
Q

What is the “reverse” van camp formula?

A

SP: reasonable value of spouse’s services during separation - SP expenses paid during separation

CP: FMV of business at divorce - SP

65
Q

What is goodwill?

A

goodwill is an intangible quality that includes the reputation and future interest potential of a professional practice. If the business was developed during marriage, any goodwill is a CP asset

Valuation typically requires expert testimony

66
Q

What is the presumed characterization of property acquired on credit/loan during marriage? What is the test?

A

CP

The test is whether the lender intended to primarily rely on SP or CP as security

67
Q

What is the characterization of property that was an installment purchase before marriage, and during marriage CP funds were used to pay a debt for the purchase?

A

this is a commingled asset as the CP estate acquires a pro rata interest in proportion to the amount the principal is reduced by CP payment

+payment towards interest, taxes, and insurance are excluded because they do not add to the equitable interest in the property
+this also applies to property that is inherited during marriage and CP funds pay the mortgage

68
Q

What is a capital improvement to real property?

A

a permanent structural change or restoration that enhances the value of real property

Exs: a deck, patio, room addition to a house

69
Q

What happens when SP is used to improve SP of other spouse?

A

there is a statutory right to reimbursement

+Before 2005, this was presumed to be a gift

70
Q

What happens when SP is used to improve CP?

A

there is a statutory right to reimbursement if funds can be traced to SP source

71
Q

What happens when CP is used to improve SP?

A

the CP contribution does not recharacterize the property

the CP estate has a right to the greater of the following:

  • the funds spent on the improvement will be reimbursed
  • a pro rata interest in the enhanced value of the SP
72
Q

What is the general rule regarding liability for debt before or during marriage?

A

the community is liable for any debt incurred by either spouse before or during marriage

the SP of the debtor-spouse is liable for debts before or during marriage, BUT the SP of the other spouse is not liable for any debt incurred by the other spouse before or during marriage

73
Q

How does a non-debtor spouse shield their CP wages against recovery for the debtor spouse’s pre-marital debts?

A

the non-debtor spouse can place the wages in a separate bank account to which the debtor spouse has no access or right of withdrawal

74
Q

When is the CP estate entitled to reimbursement for child or spousal support payments?

A

the CP estate is entitled to reimbursement only if SP of the debtor spouse was available to pay the debt

75
Q

Upon divorce, what is the general approach of allocating debts?

A

Usually, the Equal Division Rule applies so that CP debts are divided 50/50

76
Q

What are exceptions to the Equal Division Rule?

A
  • when one side has a greater ability to pay, they may, in the court’s discretion, receive more of the CP debt
  • outstanding education loans obtained before or during marriage are assigned to the spouse who took out the loan
  • debt incurred during marriage but not for the benefit of the community can be assigned to the spouse who incurred the debt
77
Q

What is the liability when a spouse commits a tort during marriage?

A

the SP of that spouse and the CP is liable

78
Q

What is the test for determining order of paying for a tort committed during marriage?

A

Did the tort occur during an activity undertaken for the benefit of the community?

  • yes? then the claim is paid first from CP and then from the SP of the tortfeasor spouse
  • no? then the claim is paid first from the SP of the tortfeasor spouse, then the CP
79
Q

What are the duties spouses owe each other?

A

DOA like Jay-Z owes to Beyonce

  • duty to Disclose all material facts
  • duty to Obtain consent before making a gift or transfer of CP
  • duty to Account and provide access to all records
80
Q

What must be shown to establish a breach of fiduciary duty?

A

intentional misappropriation or grossly negligent or reckless conduct

+mere incompetence or negligence is not actionable

81
Q

What are the available remedies for breach and impairment of the non-consenting spouse’s 1/2 CP interest?

A
  • receiving a greater share of the CP
  • an accounting
  • forfeiture of an asset if fraudulently concealed
  • adding the spouse’s name to the title
82
Q

What is the time limit upon learning of a breach of duty?

A
  • during marriage, there is a 3 years limit

- upon divorce or death

83
Q

What is the general rule regarding management of CP?

A

Each spouse has “equal” management and control over community property

84
Q

What are the exceptions to the general rule that each spouse has “equal” management and control over community property?

A
  • bank accounts in other spouse’s name
  • gifts and transfers of CP personal property (needs written consent)
  • community business assets (sale, lease, exchange, or encumbrance of all or substantially all of the personal property used in the business needs written consent)
  • instrument where CP is sold, conveyed, encumbered, or leased for a period longer than 1 year
85
Q

What happens if one spouse impermissibly gives a gift without getting written consent from the other spouse?

A

during marriage: non-consenting spouse may revoke the gift and sue to recover the property (but subject to equitable defenses) OR ratify

upon divorce or death: non-consenting spouse may void the gift, but recovery is limited to surviving spouse’s 1/2 CP share

86
Q

What happens if the decedent spouse attempts to pass their CP interest and the surviving spouse’s one-half CP interest by will to a third party

A

the surviving spouse chooses between the will and her CP rights

87
Q

What is the approach to writing a CP essay?

A

1) explain the CP system and provide rule definitions for CP and SP
2) address any issues to the validity of the marriage and/or premarital agreement
3) take each piece of property/debt and determine how it should be distributed (, presumptions, original characterization/source of funds/title, any change, do any special rules apply)
4) answer the call of the question for each property

88
Q

What is the standard expected of a spouse in their fiduciary duties?

A

the highest good faith and fair dealings with the other spouse and never take unfair advantage of the other

89
Q

What is whole life insurance and what is term life insurance:

A

whole: provides lifetime death benefit coverage and has an investment component that allows it to accumulate a cash value
term: provides death benefit coverage for a specified term of life in exchange for premiums and does not accumulate cash value

90
Q

How is a whole life insurance policy characterized?

A

At death or divorce, a court will characterize the proceeds as community property in proportion to the number of premium payments that were made with community funds. If the policy was paid only with community funds, a surviving spouse gets one-half of the proceeds, and the other half goes to the named third-party beneficiary, if other than the surviving spouse.

91
Q

How is a term life insurance policy characterized?

A

The term policy is CP or SP depending on which estate paid the premium for the latest term

92
Q

How much of a CP life insurance policy can be devised?

A

the decedent can only devise 1/2 to the beneficiary other than their spouse

93
Q

What are the special rules for special assets?

A
  • personal injury
  • pension plan
  • stocks
  • disability pay/workers’ comp
  • bonus
  • education
  • life insurance
  • business goodwill
94
Q

How is disability pay/workers’ comp classified?

A

CP: if used to replace marital earnings

SP: if used to replace pos-divorce earnings

95
Q

How is severance pay characterized?

A
  • CP if used to replace earned retirement benefits from when the couple was married
  • SP if used to replace post-divorce earnings (lost future earnings)
96
Q

How are bonuses classified?

A
  • CP if a reward for good work performed during marriage

- SP if a reward for good work after separation/divorce OR it is like a personal gift

97
Q

What is the formula for an equitable apportionment under Van Camp?

A

Van Camp CP value- total salary received

98
Q

Upon death, how is a term life policy characterized?

A

based on the source of funds (SP or CP) used to make the final premium payment

99
Q

State the memorized introductory paragraph you should start every community property essay with?

A

California is a community property state. In a community property state, the marital economic community begins upon marriage and ends at divorce, death of a spouse, or a permanent physical separation with an intent not to resume marital relationship. Property, earnings, or
debt acquired during marriage are presumed to be community property. Property acquired by either spouse before marriage; by gift or inheritance during marriage; or after divorce or a permanent separation is presumed to be separate property. Finally, property acquired by a
married couple while living in a non-CP state that would be characterized as CP if the couple had been living in CA at the time of acquisition is called quasi-community property.

100
Q

What is the time limit on paying back for degrees?

A
  • less than 10 years before dissolution: presumption that the community has not substantially benefited so must reimburse C
  • more than 10 years before dissolution: presumption that the community has substantially benefited so reimbursement not needed
101
Q

What happens if a husband runs up a gambling debt during marriage?

A

the cp and husband’s sp are liable during marriage. Upon divorce, the court would assign the debt to the husband as his SP because the gambling debt was not for the benefit of the community

102
Q

What happens if spouses are living apart and one spouse gets in an accident requiring medical expenses?

A

the other spouse’s CP and SP are still liable for this debt because it is considered a necessary of life (food, clothing, shelter, medical expenses)

103
Q

What happens if a spouse who owes child support uses CP funds?

A

if the debtor spouse had SP to pay the obligation, the non-debtor spouse can seek reimbursement to the CP

104
Q

What happens if a spouse gets in an accident on the way back from having an affair?

A

the liability must first be satisfied from the SP of the spouse having the affair

105
Q

What is a spouse’s good credit presumed to be?

A

a CP asset

106
Q

What is an equitable apportionment?

A

when a spouse did not receive the fair value of his/her services at the time of dissolution, the court may order additional payments to the spouse

107
Q

When a spouse earns money during marriage and places it in their bank account, what is this money characterized as?

A

CP because it was earnings during marriage

108
Q

What happens if a spouse settles a personal injury case one year after marriage?

A

If the cause of action arose DURING marriage, it will still be CP. BUT the court will award the recovery to the injured spouse unless the court finds that the interests of justice warrants awarding some of the recovery to the non-injured spouse (but no more than 1/2 of the proceeds)

109
Q

When is a reverse Van Camp or Pereira formula used?

A

when a community property business continues to be operated by one of the spouses during separation

110
Q

How long does a spouse have to avoid a unilateral transfer of community property?

A

one year

111
Q

What happens if the spouse seeks to avoid a transfer of property after the end of the marital community?

A

the recovery is limited to the non-consenting spouse’s one-half of the property

112
Q

In California, a conservator for an individual who lacks testamentary capacity can make a will or codicil for that individual IF a court orders him to do so

A

o

113
Q

The special community property presumption, which applies only at divorce, presumes that property acquired in joint form during marriage is community property. The special community property presumption applies to property held in joint tenancy, tenancy by the entirety, and tenancy in common.

A

o

114
Q

While Henry’s moving away evidences their separation, the facts are unclear if they intended not to resume the marriage at that time since W did not file for dissolution until 2015. If H and W only intended to separate on a trial basis with the intent to possibly resume the marriage, then there was no legal permanent separation.

A

o

115
Q

How is child support treated as?

A

a SP debt

116
Q

What should you bring up if a husband uses CP funds for gambling?

A

this is a breach of the husband’s fiduciary duty

The husband committed intentional misappropriation or grossly negligent or reckless conduct

117
Q

If property is acquired as joint tenants, then the CP assumption applies, What is required to overturn this presumption?

A

Clear and convincing evidence that both spouses did not intend to hold the property as CP at divorce

118
Q

What was held in Lucas?

A

The court in Lucas held that when property was purchased with SP and CP funds before January 1, 1984, the property was presumptively CP and the SP funds deemed a gift to the community.

After 1984, when a spouse contributes to the acquisition of property using her own separate property to improve community property, the spouse is entitled to reimbursement for the funds expended if the party can trace the contribution to a separate-property source

+Anti-Lucas legislation applies only at divorce, not death

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