Community Property

Question 1

Global Intro

Answer 1

CA is a CP state. All property acquired during the marriage is presumed to be CP, while all property acquired before marriage, after permanent separation, or by gift or inheritance is presumed to be SP. (Property acquired in a SP state by either H or W before they became domiciled in CA is QCP. QCP is treated like CP upon death/divorce.)

Characterization of an asset as either CP or SP depends on 3 factors: (1) the source of the asset, (2) any actions by the parties that may alter the character of the asset, & (3) any statutory presumptions that apply to the asset.

Generally, to determine the character of an asset, the courts will trace back to the source of the funds used to acquire the asset. A mere change in form does not change its character.

Question 2

3 Guiding Principles

Answer 2

1. Equality – spouses share an equal ½ interest in CP regardless of the actual contribution to the acquisition.
2. Tracing – the tracing principle holds that the source of the property determines its character. When determining the character of an asset, the court will trace back to the source of funds used to acquire the asset. Equality is achieved through tracing or accounting. For that reason, the state is also interested in articulating tracing rules.
3. Contractual Modification – parties retain the right to alter most default CP rules by agreement.

Question 3

Legal Marriage

Answer 3

CA CP law applies when the parties (1) have a legal marriage & (2) are domiciled in CA. Req’ts for a valid marriage: Legal capacity, over 18 + performance of legal procedures. And if a couple followed the rules in another state, the marriage will be recognized as valid in CA.

Question 4

QCP

Answer 4

is property acquired by either spouse that would have been CP had the spouse been domiciled in CA at the time of acquisition. QCP retains its SP nature when the parties become domiciled in CA. QCP is triggered by divorce/death of the titled spouse.

Question 5

Marital Economic Community

Answer 5

The marital economic community begins upon marriage & ends at (1) divorce, (2) death of a spouse, or (3) permanent physical separation (actual separation w/ no intent to resume the marital relationship).
- When did the MEC begin?
- When did the MEC end?
- Compute the length of marriage if given #’s or dates.

Question 6

C/L Marriage

Answer 6

CA does not recognize common law marraige that originated in CA. However, CA recognizes marriages from other jx’s if the marriage would be valid by the laws of that jx.

Question 7

Putative Spouse Doctrine (PSD)

Answer 7

an innocent spouse w/ an objectively reasonable & good faith belief in a valid marriage has the same property rights as a lawful spouse upon dissolution of marriage or death of spouse. All assets acquired are QMP and are treated like CP or QCP.

Question 8

Registered Domestic Partnerships

Answer 8

RDP’s are afforded the same rights and protections as married persons.
- 2 persons not related by blood
- at least 18 years old
- capable of consent
- neither person is married or in a RDP w/ someone else

Question 9

Revocation of PS status

Answer 9

to remain a PS, one must maintain a good faith belief that the marriage is valid. Once a PS learns or has reason to know that her marriage is invalid, PS status is revoked & the PS becomes a meretricious spouse. The PS, however, retains all quasi-marital property rights acquired during her good faith belief of valid marriage. All property otherwise acquired is SP since unmarried cohabitants’ property rights are governed by K.

Question 10

estoppel under the PSD

Answer 10

a spouse who knew or had reason to know the marriage was invalid (induced another into marriage) will be estopped from later claiming there was never a marriage & CP protections may attach.

Question 11

unmarried cohabitants

Answer 11

K principles govern distribution of property acquired by unmarried cohabitants: (1) an express K will be enforced, unless based on meretricious sexual services, (2) if no express K, a court examines the parties’ conduct to determine whether they had an implied K or understanding, & (3) equitable remedies may be available.

Question 12

premarital agreements

Answer 12

A premarital agreement avoids CA CP law.

Question 13

pre - CA premarital agreement act

Answer 13

Before 1986:
- Case law allowed evidence of implied modification or retraction based on oral agreement or conduct
- Consideration came in the form of mutual consent
- Undue influence, duress, deceit or fraud made the K unenforceable for lack of consideration.
- Spousal support waivers were against CA public policy & unenforceable.

Question 14

CPAA 1986

Answer 14

From 1986-2001, (1) must be in writing, (2) signed by both parties, AND (3) is enforceable w/o consideration. An oral agreement may be enforced when: (1) the promise is fully executed by the promisor, OR (2) the promisee relies to his/her detriment on the oral agreement.

Question 15

CPAA 2002

Answer 15

An agreement made after Jan 1, 2002 must be (1) in writing, (2) signed by both parties, (3) voluntary, & (4) and not unconscionable (fair, reasonable, full disclosure of property or financial obligations of parties).
- To be voluntary, the party against whom enforcement is sought must be (a) represented by independent counsel at the time of signing OR advised to seek independent counsel & expressly waived in writing such representation, (b) had not less than 7 calendar days between time first presented w/ agreement & advised to seek independent counsel & the time signed, (c) did not execute under duress, fraud, or undue influence, & had capacity, & (d) informed of rights & obligations.

Question 16

Enforceability of Spousal Support Waiver

Answer 16

Spousal support waivers will not be enforceable unless the party was actually represented by independent counsel at the time the agreement was signed. Even if independent counsel represented that party, spousal support provisions will still be held unenforceable if they are unconscionable at the time of enforcement. An unconscionable spousal support provision will never be enforced.

Question 17

Challenging the Premarital Agreement

Answer 17

to protect the economically inferior spouse, premarital agreements can be challenged based on fraud, duress, or undue influence.
Undue Influence: taking a grossly oppressive & unfair advantage of another’s necessities or distress.

Question 18

Child support waivers

Answer 18

always invalid and unenforceable

Question 19

QMP

Answer 19

is property acquired during a void/voidable marriage, which would have otherwise been CP/QCP. property of a PS is QMP & treated the same as CP or QCP.

Question 20

Defenses to enforcement of PA

Answer 20

equitable defenses limiting the time for enforcement, including laches (unreasonable delay & prejudical effect) & estoppel (detrimental reliance), are available to either party.

Question 21

Transmutation

Answer 21

is an agreement between spouses, made during marriage, to alter the ownership characterization of property.

Question 22

pre-1985 transmutations

Answer 22

prior to 1985, transmutations could be done by conversations, conduct, and even silence. (no formalities)
- The transmutation took effect as soon as the agreement or statement was made.
- If intended to apply to assets not yet acquired, the transmutation effect was the instant of acquisition.
- An oral agreement transmuting real property was valid, not w/standing the SOF! To create a joint tenancy, however, a writing was req’d. (anti-Lucas 1984)

Question 23

transmutations since 1985

Answer 23

eff. Jan 1, 1985, the legislature requires an express declaration in writing, signed or accepted by the spouse whose interest is adversely affected, UNLESS the gift exception applies.

Question 24

gift exception to transmutation statute

Answer 24

no writing req’d for insubstantial personal gifts between spouses. Gift limited to:
- A gift of clothing, wearing apparel, jewelry, or other tangible articles of a personal nature (no automobiles);
- That is used solely by the spouse to whom the gift is made; &
- That is not substantial in value, taking into consideration the circumstances of the marriage.

Question 25

source rule

Answer 25

Tracing determines the source of a property’s acquisition to establish its character.

Question 26

jointly titled bank account

Answer 26

Jointly titled accounts are presumed CP unless traced to SP and there is no contrary agreement.

Question 27

direct tracing method (second)

Answer 27

Funds can be directly traced to SP if (1) there are SP funds available, & (2) the SP proponent intends to use the funds for an SP asset. (heavy burden to keep adequate records)

Question 28

Exhaustion method (first)

Answer 28

The SP proponent proves the funds are SP if the CP funds are exhausted at the time of acquisition of the property.

Question 29

family expense doctrine

Answer 29

Available CP funds are presumed to pay for family expenses. Absent a reimbursement agreement, a gift is presumed when SP funds are used to pay family expenses.

Question 30

commingled property

Answer 30

When CP & SP are commingled, the contributing sources retain their character until they can no longer be distinguished from one another. At the point of confusion, the law transmutes SP into CP by operation of law.

Question 31

pro rata apportionment

Answer 31

when the couple uses both community & separate funds to purchase or improve property, the portion of separate property is in direct proportion to the contribution toward the purchase price. (pro rata apportionment)

Question 32

apportionment

Answer 32

refers to the process of determining the % character ownership of the asset. The law requires that the proportional ownership shares be identified & separated out. Apportion methodologies can differ by asset & by context. In all cases, the law attempts to balance Family Code protections for community ownership w/ constitutional protections for SP ownership.

Question 33

Rules of proportional ownership apply in 3 circumstances where property is acquired w/ both CP & SP:

Answer 33

1. Untitled property; 2. Property titled in one spouse’s name alone; & 3 Jointly titled property where there is an enforceable agreement to preserve a SP interest… only a writing can rebut a writing. → Look at how title is held to determine whether the rules of proportional ownership are applicable.

Question 34

Apportionment Hypo #1- Zero Appreciation: Assume H&W buy an antique Tiffany lamp for $10k during their marriage. They use $6k for W’s inheritance & $4k from H’s earnings. Unfortunately, they are going through divorce proceedings & they both want the lamp.

Answer 34

Step 1 → Characterization of the lamp starts w/ the GCPP b/c the lamp was acquired during their marriage. Step 2 → Rebuttal: Assuming W can rebut a portion of the CP presumption by tracing to her SP inheritance, the ultimate conclusion will be: The lamp is 60% W’s SP ($6k of the $10k purchase price) The lamp is 40% CP ($4k of the $10k purchase price: $2k to each spouse) Step 3 → Apportionment: If the lamp is worth $10k at divorce: W is entitled to $8k ($6k SP contribution to purchase + $2k as the ½ CP contribution to purchase) H is entitled to $2k ($2k as the ½ CP contribution to purchase)

Question 35

Apportionment Hypo #2 – Increase in Value: → Same facts as hypo #1 but assume the lamp is now worth $30k ($20k increase in value)

Answer 35

Step 4: Pro-Rata Apportionment: Step one: Increase in value ($20k) is apportioned first: 60% W’s SP & 40% CP CP’s Contribution = $20k increase in value times 40% CP Earnings Contribution = $8k then divide by 2 = $4k to each spouse W’s SP Contribution = $20k increase in value times 60% W’s SP Contribution = $12k to W Step two: add the proportional original contributions to the purchase W’s Pro-Rata Apportionment = $6k SP purchase + $2k ½ CP purchase+ $12k SP increase + $4k ½ CP increase = $24K H’s Pro-Rata Apportionment = $2k ½ CP purchase + $4k ½ CP increase = $6k

Question 36

EXAMPLE: Exhaustion v. Direct Tracing Methods of Rebuttal H receives $10k inheritance, his SP, & puts it into his checking account. H also deposits his $5k earnings, CP funds. H purchases a vintage car for $10k. The car is presumed to be CP.

Answer 36

The Exhaustion Method favors CP: SP proponent can rebut the CP presumption if, at the time of acquisition, all community income was exhausted by family expenses. Here, Hati cannot trace to the SP funds b/c the $5k CP funds were still in the account – they had not been exhausted. Thus the car was purchased w/ $5k community fund & $5k SP funds. The Direct Tracing Method favors SP: Under the DTM, H would be allowed to prove: (1) P funds of $10k were available at the time of acquisition & (2) he intended to use those funds to purchase the car as his SP.

Question 37

reimbursement

Answer 37

A spouse is entitled to reimbursement, w/o interest, for certain contributions that can be traced to his/her SP. Includes: SP contributions to down payments, improvements, & reducing the principal of the loan. (Reimbursement is for “DIP”) Exception: written waiver of right to reimbursement or a written transmutation. Does not include: CP expenses (Family Expense Doctrine), payments of interest on the loan or payments for maintenance, insurance, or taxation of the property. Cannot exceed the value of the property at the time of division.

Question 38

SP used to improve other spouse's SP

Answer 38

eff 2005 -- a spouse who uses SP to improve the other spouse’s SP is entitled to reimbursement w/o interest or appreciation of the SP contribution.

Question 39

SP used to improve CP

Answer 39

After 1984, when a spouse uses SP to improve CP, the spouse is entitled to reimbursement for the funds expended.

Question 40

CP used to improve spouse's own SP

Answer 40

When a spouse uses CP to improve his own SP W/O CONSENT, the community is entitled to the greater of (1) reimbursement of improvement costs, or (2) the enhanced value of the property. When a spouse uses CP to improve his own SP W/ CONSENT of the other spouse, then the traditional rule is that the contribution is seen as a gift to the community w/ no right to reimbursement absent a contrary agreement. However, under Marriage of Wolfe, the court may still allow a right of CP reimbursement in the event of divorce w/o an agreement. Under the Allen/Bono rule, where the CP contribution has made a capital improvement to the property, then the community has either a right to reimbursement OR a pro tanto interest in the SP asset. Pro tanto interest formula --> - based on the Total investment (SP and CP) in the property, determine the CP and SP ownership interests. - Then, that ratio (expressed as a percentage) is multiplied by the appreciation in the property's value during the marriage prior to separation.

Question 41

CP used to improve other spouse's SP

Answer 41

pre-2005 --> gift was presumed. 2005 to present --> When a spouse uses CP to improve the other spouse’s SP, there is a split of authority. Either (1) a gift is presumed, but may be overcome by evidence of an agreement to reimburse. OR (2) the community is entitled to the greater of (a) reimbursement of improvement costs, or (b) the enhanced value of the property.

Question 42

Married Woman's Special Presumption

Answer 42

the presumption is that if property was acquired prior to Jan 1, 1975, by a married woman in an instrument in writing, it is presumed to be her separate property. (FC 803) The title in the married woman’s name raises the presumption. The presumption is rebutted not by the source of the funds, but by the intention of the husband. If he did not intend a gift or if he did not intend to change the nature ofthe property, then his testimony can rebut the presumption that the property is the wife’s separate property.

Question 43

Joint Title Special Presumption

Answer 43

As of 1987, all jointly titled property acquired during marriage is presumed CP upon divorce. Rebuttal of the presumption may be by agreement only, not tracing to funds. Evidentiary standard: clear and convincing evidence.

Question 44

Approach to joint tenancy:

Answer 44

1. Characterization - pre-1984 -- the CP presumption may be rebutted w/ oral or implied agreements regarding the character of the property -1984 anti-lucas -- the CP presumption may be rebutted only by a written agreement or a clear statement in the deed or title. 2. Determine right to reimbursement if there has been a SP contribution to the acquisition of the property.(only do this step if property is characterized as solely CP) - pre-1984 Lucas -- Reimbursement is available to the SP contributor only if there is an agreement (oral, implied, or written) to that effect. If there is no agreement to reimburse SP, the contribution is considered a gift to the community. -1984 & after -- Statutory right to interest-free reimbursement based on tracing. Appreciation of the property goes to the community; it is not apportioned.

Question 45

JTSP example: In 1984, H&W bought house for $100k. Deed held as CP. H&W orally agree house is W’s SP. At divorce, H regrets the oral agreement. W argues SP. H argues CP. What result?

Answer 45

→ Oral agreement rebuts CP presumption and house is W’s SP.

Question 46

Joint Tenancy at death

Answer 46

When title is held in JT, the surviving spouse receives a step-up only in the ½ JT interest of the decedent spouse. - Property passes equally to the surviving tenants. - Each tenant is deemed to own an equal, undivided interest in JTWROS property. - Can be unilaterally conveyed by one of the spouses

Question 47

CP at death

Answer 47

When property is held in CP title, & a decedent spouse’s ½ CP interest passes to the surviving spouse, the surviving spouse receives a step-up in the entire property. - Not severable (each spouse hold undivided ½ interest) - Each may devise his/her ½ interest to another person at death. If no devise to another person, CP interest transfers on death to surviving spouse. - Favorable Tax Status: a full step up in basis - Disadvantage: probate or similar proceeding is necessary to transfer title to the surviving spouse

Question 48

CP w. ROS at death

Answer 48

combined the benefits of CP title w/ the JT ROS - Only a married couple may hold - Not severable - Automatic transfer on the first spouse’s death - No probate - Favorable tax status – full step-up in basis

Question 49

cost basis

Answer 49

refers to how much the owner originally paid for the asset

Question 50

stepped up cost basis

Answer 50

cost basis adjusted to the FMV available when the asset is inherited. Stepped-up Basis has to do w/ federal income tax treatment of realization from the sale of property held in either CP title or JT.

Question 51

fiduciary duty

Answer 51

each spouse owes the other spouse a duty to act in the highest of good faith w/ respect to the management & control of CP. A managing spouse is req’d to fully disclose all material facts regarding debts for which the community is or may be liable. A non-managing spouse has a claim against the managing spouse for any breach of fiduciary duty that impairs the non-managing spouse’s present undivided ½ interest in the community estate. Remedies include a greater share of CP.

Question 52

M&C of RP CP

Answer 52

either spouse acting alone may buy, sell, spend, or encumber all CP, except both spouses must join in executing any instrument by which community RP is sold, conveyed, or leased for more than a year. A non-consenting spouse may entirely void any security interest in CP granted to a creditor by the other spouse (Except for a family law attorney’s RP lien). The debt underlying the security interest remains intact.

Question 53

RP Transaction to 3P BFP

Answer 53

If community RP is in one spouse’s name alone, a transfer to a good faith purchaser w/o knowledge of a marriage is presumed valid. A nonconsenting spouse has 1 year to void the transfer.

Question 54

RP Transaction to non-BFP

Answer 54

nonconsenting spouse can void at any time

Question 55

Gift of CP personal to 3P

Answer 55

CA prohibits gifts or disposal of community personal property for less than fair & reasonable value, unless the other spouse gives written consent. After the death of the donor spouse, the non-consenting spouse has the right to (1) ratify the gift, or (2) void the gift up to ½ the value of the gift.

Question 56

Transfers of CP personal to 3P

Answer 56

During marriage, if a spouse improperly transfers community personal property for less than fair & reasonable value w/o the other spouse’s written consent, the non-consenting spouse may (1) ratify the gift, or (2) revoke the gift & sue to recover all of the property.

Question 57

M&C of CP Business

Answer 57

a spouse who is operating or managing a CP business has the primary management & control of the business or interest. - Primary management & control means that the managing spouse may, in good faith, act alone in all business transactions. - Must give prior written notice to the other spouse of any sale, lease, exchange, encumbrance, or other disposition of all or substantially all of the personal property used in the operation of the CP business. - Remedy: validity of the transaction will not be affected. Recourse is found in Fam 1101, which lists the possible remedies such as breach of fiduciary duty and the ordering of an accounting.

Question 58

Bank Account in 1 Spouse's name

Answer 58

while either spouse has management & control of community personal property, there are limits: (Cal. Fin. 851) - When S1 puts earnings in a bank account under her own name, S2 will not have access to that account. So practically, S1 has control over the account. - Remedy? If S2 wants to force the issue, a court order could mandate her name be added to the account. (Fam 1101(c)).

Question 59

CP Business

Answer 59

is a business started during marriage or w/ CP funds. When the couple divorces, the asset is divided equally

Question 60

Goodwill

Answer 60

to the extent a business develops during marriage, there is CP interest in the goodwill. Courts use 2 valuation techniques to calculate goodwill at the date of separation: (1) market sales valuation (MSV) or (2) capitalization of past excess earnings (CPEE).

Question 61

MSV

Answer 61

looks at the price the goodwill commands in a sale of the business or professional practice.

Question 62

CPEE

Answer 62

looks at the present value of the future income stream the goodwill developed during marriage generates in a future business.

Question 63

Appreciation of CP business during separation

Answer 63

if a community business operates during separation & appreciates in value, a court uses either the Pereira or Van Camp formula in reverse to apportion the CP & SP interests.

Question 64

Reverse Pereira

Answer 64

FAVORS SP. is used when the increase in value of the CP business can be attributed to the personal skills, time, & effort of the managing spouse. This approach determines how much of the increase in value of the CP business is due to capital appreciation of the initial CP contribution by valuing the managing spouse’s CP business at the time of separation plus a fair rate of return to yield the CP portion of the business; the remainder is the SP portion of the business. CP = FMV @ separation + (principle * rate of interest * time of marriage). SP = FMV @ separation – CP.

Question 65

Reverse Van Camp

Answer 65

FAVORS CP. is used when the primary reason for the CP business’ increase in value is the character of the business, rather than the labor of the spouse. Under this approach, the court estimates the market salary for the spouse’s services to yield the SP portion of the business less any salary already paid; the remainder is the CP portion. SP = reasonable value of services provided during separation (ie MV of services * years separated) – salary already paid & family expenses. CP = FMV of CP Business at divorce – SP.

Question 66

SP Business

Answer 66

is a business started by a spouse before marriage or during marriage w/ SP funds. When the SP business increases in value during the marriage, the Van Camp & Pereira formulas are used to determine the CP interest in the business at divorce.

Question 67

Pereira

Answer 67

FAVORS CP. Pereira is used when the increase in value can be attributed to the personal skills, time, & effort of the managing spouse. This approach determines how much of the increase in value is due to capital appreciation of the initial SP contribution by valuing the managing spouse’s SP business at the time of marriage plus a fair rate of return to yield the SP portion of the business; the remainder is the CP portion of the business. SP = FMV at marriage + SP FRR (ie principle * interest rate * years married) CP interest = FMV @ dissolution – SP ---principal is the original capital investment

Question 68

Van Camp

Answer 68

FAVORS SP (relatively). Van Camp is used when the primary reason for the SP business’ increase in value is the character of the business rather than the labor of the spouse. Under this approach, the court estimates the market salary for the spouse’s services to yield the CP portion of the business less family expenses and salary already paid; the remainder is the SP portion. CP = Labor contribution - salary received - family expenses SP = FMV @ dissolution – CP --Labor contribution = annual benchmark salary x # of years --Family expenses - annual expense x # of years

Question 69

Credit Acquisition

Answer 69

property purchased w/ borrowed funds (on credit) during marriage is CP debt. The SP proponent can rebut using the intent of the lender test to show that the lender relied exclusively (primarily or solely) on the spouse's SP when extending the credit.

Question 70

Creditors Rights

Answer 70

to satisfy a debt, a creditor may reach any property over which a debtor has the legal right of M&C

Question 71

Premarital debt

Answer 71

earnings of a nondebtor spouse are not liable for premarital debts of the other spouse if these earnings are held in a separate deposit account over which the debtor spouse has no right to w/draw and the funds are not commingled w/ other community funds.

Question 72

Order of Debt Satisfaction

Answer 72

If the debt is for the community interest: CP first, then SP of either spouse. If the debt is for the separate interest: SP of debtor spouse first, then CP. SP debt incurred during marriage: All CP and all debtor spouse's SP but not the SP of the nondebtor spouse, subject to the exception for necessaries of life during marriage &/or common necessaries of life post separation .

Question 73

Common necessaries of life

Answer 73

a married person is personally liable (both CP and SP) for debt incurred for the common necessaries of life (expenses required to sustain life) while the spouses are living apart. If the debtor spouse had SP or CP at the time the debt was paid, the non-debtor spouse can be reimbursed for any SP paid for necessaries.

Question 74

Necessaries of life

Answer 74

a nondebtor spouse's SP is liable for debts of the other spouse if it was incurred during marriage and was for necessaries of life for the spouse or a child. includes food, shelter, and medical care.

Question 75

Education

Answer 75

Education & training acquired during marriage are not treated as divisible property. However, at divorce the community has an equitable right to reimbursement for actual costs incurred for educational expenses IF the education substantially enhances earning capacity.

Question 76

Defenses to education reimbursement

Answer 76

Community has already substantially benefitted. – If more than 10 years have elapsed since the degree was awarded, it is presumed the community has substantially benefitted. The other spouse also received a CP-funded education.

Question 77

remedy for supporting spouse when other spouse obtained education

Answer 77

Primary remedy for supporting spouse is education expenses reimbursed to the community. If unjust, the court may award spousal support (Fam. 2641(c)(1).) CP funds used toward repayment of student loan debt are reimbursed to the community, unless unjust (case-by-case basis).

Question 78

how is education reimbursement calculated?

Answer 78

the amount reimbursed includes interest at the legal rate, beginning at the end of the calendar year in which the CP contributions were made. Reimbursement & assignment of the loan may be reduced or modified if unjust.

Question 79

Charcterization of Employment Related Benefits

Answer 79

- If the benefit can be characterized as ‘earned’ by the EE spouse, the benefits will be CP (if earned during the marriage). → Retirement benefits (earned during marriage), even if received after separation, will be CP. - If the benefits can be characterized as ‘replacing’ future earnings, then the benefits will be SP if received after separation. → Benefits like severance pay replace future earnings & are not tied to EE’s earnings during marriage, so they would be SP.

Question 80

retirement benefits

Answer 80

if the type of employment benefits can be tied to community efforts during marriage, it will be characterized as CP.

Question 81

disability pay / severance pay

Answer 81

if the benefit serves a purpose other than rewarding employment during marriage, it would not derive from employment & could then be charcterized as SP.

Question 82

retirement in lieu of disability

Answer 82

When EE works until retirement, even after becoming disabled, then retirement benefits may not be for personal suffering & loss of earnings. - Retirement benefits accrue b/c the spouse earned them. - If spouse continues working, the time & effort resulting in retirement benefits would be CP.

Question 83

severance pay

Answer 83

is similar to disability benefits. CA courts have held that severance pay is SP when it is intended to forgo future employment and is made because of a future loss of earnings. → If benefits were earned by the EE spouse during marriage, then CP. However, if benefits instead compensate for loss of future earnings & diminished earning capacity after separation, the benefits are SP.

Question 84

deferred wage payment

Answer 84

can be either: Defined Benefit Plans / Pension Plan (DB/PP) – pension that pays out a certain amount each month; or Defined Contribution Plans (DC) – someone contributes a certain amount & that amount is later distributed.

Question 85

Are pensions divisible at divorce?

Answer 85

- Retirement Savings: subject to division at divorce. - Vested Pension: there is a period of time before the pension ‘vests.’ If employee leaves employment before pension vests, there are no rights accrued from pension. If earned during marriage, even if paid at later date, it is CP & divisible at divorce. - Unvested Pension: may never vest due to quitting or being fired. Spouses may divorce prior to pension vesting. It is a mere expectancy, a contingent interest in property upon continued employment.

Question 86

mature pension

Answer 86

even though a pension is vested, it may not yet be mature. It’s matured when it provides an unconditional right to immediate payment. Usually matures when employee reaches the eligible age for retirement. One can continue to work after pension matures.

Question 87

Apportionment Hypo: Employment Benefits Tied to CP – W’s pension vests in 20 years. Of the 20 years, W worked 5 years before marriage (W’s SP = 5/20 or 25%) & 15 years during marriage (CP = 15/20 or 75%).

Answer 87

→ W will receive 25% of her monthly pension as SP, while W&H will split 75% of W’s monthly pension.

Question 88

stock options

Answer 88

If a stock option vests during marriage, it is CP. If it is awarded during marriage but not exercisable until the marital community ended, the portion considered CP is determined by whether it is characterized as compensation for past services, for future services, or both.

Question 89

Pereira Ex: When the Increase in Value is Primarily a Result of Community Labor W owns a SP widget business. The value of the business at marriage is 100k. During a 10 year marriage, W manages the business. The business increases in value to 1 million. H & W divorce. Assume an interest rate of 4%.

Answer 89

SP FRR = 100k principal x .04 rate of interest x 10 years time = 40k so... CP EXCESS PROFITS = 1 million @ dissolution – (100k FMV @ marriage + 40k SP FRR) = 860k (ie. 430k per spouse)

Question 90

Van Camp Ex: When the Increase is Primarily the Result of the Unique Nature of the SP Asset W owns a SP widget business. The value of the business at marriage is 100k. During a 10 year marriage, W minimally manages the business. (Assume that a benchmark salary for W’s work is $35k per year) The business increases in value to 1 million. Family expenses are paid from the business at an estimated 10k per year.

Answer 90

W’s SP = 1 million @ dissolution - [(35k CP labor x 10) - (10k x 10 family expenses)] = 750k. The community gets a reimbursement of 250k (ie 125k each)

Question 91

preemption

Answer 91

Federal law preempts CP law for some federally-authorized benefits. Veterans’ disability benefits, future social security benefits, armed forces life insurance, & pension benefits of railroad workers are owned by retired worker rather than treated as CP. Military benefits are treated according to state law (except for disability pay. – Disability pay elected instead of retirement pay is controlled by federal law.

Question 92

Life insurance

Answer 92

When CP funds a life insurance policy, if the deceased spouse names a beneficiary other than the surviving spouse, the named beneficiary receives the deceased spouse’s ½ CP interest & the surviving spouse takes the other ½ interest.

Question 93

Permanent Separation

Answer 93

end of the marital economic community. Date of separation = the spouse communicates intent to end the marriage AND conduct is consistent w/ intent to end the marriage. consider all relevant evidence

Question 94

Personal injury awards

Answer 94

CP if the COA arose during marriage or before permanent separation. - at death, it's CP - at divorce, recovery is awarded entirely to the injured spouse unless the interests of justice require otherwise. - CP or SP of the noninjured spouse is entitled to reimbursement from the award for any expenses incurred on behalf of the injured spouse (ex. medical expenses)

Question 95

personal injury liability

Answer 95

liability did not occur while acting for the benefit of the community --> first from SP of the tortfeasor spouse, then CP liability occurred while acting for the benefit of the community --> first from CP, then the debtor/tortfeasor spouse SP

Question 96

at divorce

Answer 96

all community assets and debts are divided evenly, and each spouse retains their SP debt and assets.

Question 97

at death

Answer 97

1/2 of the decedent's CP and QCP belongs to the surviving spouse and 1/2 belongs to the decedent's estate. the decedent may devise all of his SP and his 1/2 CP/QCP by will

Question 98

intestacy

Answer 98

if the decedent spouse died w/o a will, the surviving spouse is automatically entitled to all of decedent's share of the CP/QCP, so the surviving spouse takes 100%. the surviving spouse will also take 1/2 or 1/2 of decedent's SP depending if he has surviving issue or parents

Question 99

two marriages - at death

Answer 99

if a spouse is maintaining two marriages, courts will divide assets equally between surviving spouses or PS's.

Question 100

life insurance - term (covers risk of death)

Answer 100

final premium rule: the estate (CP/SP) that paid the most recent premium owns the policy, or in the event of the insured's death, receives the proceeds of the policy.

Question 101

life insurance - whole term

Answer 101

any cash value of policy is apportioned according to the % of premiums mapdi by each estate (CP/SP) proceeds of policy after death of insured (term portion) received according to final premium rule

Question 102

stock options

Answer 102

options that become exerciseable (vest) during marriage are CP If not exerciseable until marriage ends, apportion by % of time between separation and vesting

Question 103

education loans

Answer 103

at divorce, are assigned solely to the spouse who benefitted from the education.

Question 104

debt general rules

Answer 104

the community is responsible for debt incurred before and during the marriage, while each spouse is separately responsible for debt incurred after separation. debtor spouse's own SP is liable for debt incurred by him before or during marriage, but not the other spouse's SP

Question 105

when is debt incurred

Answer 105

at the time a K is made or a tort occurs or the obligation arises.