Community Property

Question 1

General Rule—cp

Answer 1

CA is a community property state. All property acquired during the course of marriage is presumed to be CP. All property acquired before or after permanent separation is presumed to be SP. In order to determine character of an asset, courts will trace back to the source of funds used to acquire the asset. A mere change in form of the asset does not change its characterization. With these basic principals, we can now turn to the specific items of property involved in this instance.

Question 2

Quasi-Community Property

Answer 2

Quasi-community property (QCP) is property acquired by either spouse that would have been CP if the couple had been domiciled in CA at the time of acquisition

Question 3

End of economic Community Property

Answer 3

(a) if there is (i) a permanent physical separation, and (ii) an intent not to resume while the marital relation [question of fact] OR
(b) death

Question 4

Distribution of Property at Death

Answer 4

In a will: a spouse can transfer all of his SP and 1/2 of his CP

If intestate: surviving spouse gets deceased spouse’s 1/2 share of CP and at least 1/3 of deceased’s SP, PLUS all of QCP

Question 5

Transmutation: Marital Agreement

Answer 5

An agreement during the marriage to transform character of property from CP to SP, or give SP from spouse to spouse.

Before 1985: Marital agreement could be oral (look for awareness: was the non-acquiring spouse aware of how title was taken or know there was a purchase)

After 1985: A proper transmutation must: (a) be in writing, (b) signed by the spouse whose interest is adversely affected, and (c) expressly state that a change in ownership is being made
* Unless: item of personal nature and insignificant in value

• transmutation cannot be proven through a will.

Question 6

Anti-Lucas Rule

Answer 6

Applies only on divorce / separation [not death]

Property acquired during marriage in joint form (JT, TIC, CP) is presumed CP but can be rebutted on written agreement [no presumption of gift] including:

(1) an express statement in the deed or other instrument that the property is SP; or

(2) written agreement by the parties that the property is SP.

If no agreement and property is CP: at divorce, contributing spouse is entitled to limited reimbursement for acquisitions / improvement of CP [“DIP” contribution for down payment, improvements, principal mortgage payment]

Question 7

Pereira // biz owner before marriage and value goes up during CP

Answer 7

• Pereira:
o Management, skills & labor were key to the business’ growth
§ Favors CP
o If business profits result from more than minimal efforts of
owner/manager spouse, then CP entitled to proportionate share
because ‘time, energy & services’ is a community asset o Background:
§ There are two reasons for growth in a business:
• (i) The management, skill & labor of one spouse
• (ii) The character of the business
o I.e. outside market conditions
§ With Pereira (i) is the operative reason
o Result:
§ SP gets initial value + ordinary/reasonable rate of
return on capital from time of marriage to separation or divorce, and CP gets rest
• Only the ‘ordinary’ rate because most of increase is due to spouse’s labor during marriage (which is CP)