community property Flashcards
CP Presumption
California (CA) is a community property (CP) state. There is a community presumption, meaning that all property acquired during marriage is CP. This includes wages of either spouse and labor of either spouse during marriage. There are areas of separate property (SP): (1) property acquired before or after marriage, (2) property acquired during marriage by either spouse through gift, will, or inheritance, (3) Property acquired from SP funds, and (4) profits, rents, and issue of SP. The burden is on the spouse opposing SP to defeat the CP presumption. Courts use the source rule to determine the character of property by tracing the source of funds used to acquire the property.
Martital economic community
begins at marriage and ends at death of either spouse, divorce, or with the intent of either spouse to not resume the marital relationship coupled with conduct indicating that intent. If spouses maintain the facade of marriage the MEC has not ende. Prior to 2017, a valid separation ending the community also required that the spouses lived separate and apart. However, this requirement is no longer necessary
Generally on divorce CP is divided
equally in kind, meaning on a per-item basis unless a special rule requires deviation via a writing or stipulation by the court
Pension is determined by the
time rule
time rule
Courts consider the amount of time the spouse worked during marriage to get the pension divided by the amount of time total the spouse worked to get the pension.
what is the rationale of the time rule
spouse’s labor during marriage is CP and any funding earned from spouse’s labor is CP.
transmutation agreement and wha tis needed
may alter the character of CP to SP,
SP to CP, or one spouse’s SP to another spouse’s S. must be in writing, accepted by the adversely accepted party (signed), and expressly state
that ownership of the property is being transferred
Exception to writting requirement for transmutation
gifts of personal property given by one souse to another spouse that are not
substantial in value and used in the home
When property is acquired in joint and equal form, there is a presumption that the property is
CP and if any SP was used to purchase the property is subject to
Lucas and Antilucas
Antilucas applies when and how do you get your money back
applies on divorce and SP spouse is entitled to a refund of downpayments, improvements and prinicipal
Lucas
Any SP used to purchase the
property was presumed to be gift and there was no right to reimbursement (unless there
was an agreement).
When CP funds are used towards SP property, the character of the property does not
change. Rather, the community gets
pro rata ownership share in the property.
Courts use the principal debt reduction method to discern the community’s ownership share in the
property. The community is entitled to the amount it
expended to feather the nest of CP and the pro rata increase
with regards to the loan, what affects CP
If the lender looks to SP as security, the mortgage is likely SP.
However, if the lender looks to the spouse’s standing in the community or CP property as
security, the loan is likely CP.
When there is CP and SP (Commingled funds) the burdent is
is on the spouse claiming that property acquired with funds from that account is SP to show that SP funds were used to acquire the property.
How do you satisfy the burden for commingled funds
Direct-indirect out methood
Exhasuation rule
Under the direct-in-direct-out rule the spouse claiming SP must
show
that there were sufficient SP funds in the account and that the spouse had the intent
to purchase the asset with SP funds
Exhaustion rule
the spouse
claiming SP must show that all the CP funds were used in the account and all that was left
in the account was SP.
family expense presumption
expenditures for community
items, such as living, rent, food, etc. are presumptively made from CP
how to defeat the family expense presumption
there are not adequate records and commingling occurs, it is presumed the SP funds used
for family expenses are a gift to the community
Fiducary duty as a spouse
Where
one spouse gains a better position in a transaction as compared to the other spouse, there
is a presumption that the spouse in the better position breached that duty.
. With regards to PI settlement awards, if
the cause of action arose during the MEC, the settlement award is CP, UNLESS the
settlement award is from the other spouse when the other spouse is the tortfeasor in order for them not to benefit too
Although PI funds awarded from a cause of action that arose
during marriage are CP, upon the divorce the court usually awards the funds .
exclusively to
the injured spouse as SP
If title was taken in one spouses name,
court would not hold this as conclusive evidence that the house was the spouses SP absent some manifestation by the other spouse that the house was intended as a gift
If H and W took the title to the house as JT w/ right of surviorship, each spouse has a
1/2 undivided interest during whole life and on death, title controls
Under CA’s anti-lucas statute, property is treated as CP with
right to reimbursement for any SP used by either spouse to improve the home
All debts incurred by either spouse prior to or during the course of marriage are
community debts.
Tort Obligations are incurred when
tort occurs not when the judgement is handed down
When does the tort order of payment come from the CP and wont touch SP
when it was committed for the benefit of the community
When a tort is not committed during an activity for the benefit of the community, the debt
will be satisfied first by
Tortfeasors SP then CP but not the other spouses SP
Reimbursement to the CP for paying any obligation arising from a tort arises when
the tortfeasor’s SP was available to pay
Typically, a judge will allocate a tort debt to the tortfeasor spouse if
f the tort was incurred not
during an activity for the benefit of the community. However, a judge may take into account ability to pay to effect a more just allocation of debts
Equal Management
Each spouse generally has equal rights to manage community property
Equal Management includes the
right to sell and encumber property
Real Property and = Mangement
one spouse may not encumber community owned real property without the
other spouse’s consent. If one spouse, without consent, sells or encumbers community
real estate, the non-consenting spouse has the power to void that transaction within 1
year.
What can you be liable for post separation
necessities
Necessities are
refer to food, shelter, and medical expenses.
All property acquired during marriage while domiciled in a non-CP state that would be
CP if domiciled in CA, is presumed to be
Quasi CP
Personal Injury award is determined when
the cause of action arose, not when the spouse receives the settlement
What happens to the personal injury award at divorce
it will be awarded entirely to the injured spouse unless the interests of justice requires
Stock options depend on which formular is use and that depends on
what the intent was when granted
If the intent was to reward the employee for past services for the stock option the formula is
The numerator is the years that the employee was married until the
economic community ended and the denominator is the years the employee was married until the options become exercisable. The community gets a larger percent
under this formula because community labor is community property.
If the employer’s
intention was to grant the options as an incentive to continue working for the company
the formula is:
The numerator is the date the option was granted until the economic
community ends and the denominator is the date the option was granted until the date
the options became exercisable. The fraction represents the community property interest
Child support payments from a previous marriage are treated like a debt incurred before marriage. Who is liable for the debt
CP is liable and parent spouses SP is lable but the other spouses SP is not. Community is entitled to reimbursement made with community funds to the extent SP was not used
Prenupital Agreement must be
voluntary, unconscionable, signed by both parties, and in writting
A court will find a prenup unconscionable if
if the terms are unfair, or if a spouse did not know the extent of the other spouse’s property before signing the agreement
Prenupital agreements is not voluntarily executed if
if a spouse is not represented by counsel before
signing the agreement, if they did not have more than 7 days before the wedding to review it, and they are not aware what the spouse is claiming as SP
to rebut the presumptin of involuntariness w/o counsel
spouse not represented by counsel must be advised to seek the advice of counsel in writing, and must waive that right in writing.
What happens when the spouse waives that right in writting
she must be allowed 7 days between the presentation of a prenuptial agreement and the signing of it, and she must also write, in a separate writing, that she understands the
rights she is giving up, and from whom she received the information regarding what the extent is of her spouse’s property.
When title is taken in joint form presumption is that the property is
CP unless in the title doc states otherwise
Lucas
a court will not allow tracing to determine the funds used to
purchase a jointly titled home through the source rule and the property will be deemed
CP
Lucas does not apply to
bank accounts
Bank account rule
a court will allow jointly titled bank accounts to be traced to determine the
source of funds and how it should be characterized
Proration rule
community property is used to pay an installment payment
on separate property, the community gains an interest in the property.
How do you calculate the proration rule
calculated by the expenditure of community
property towards the installment payment over the total purchase price
Pereira applies to
allotment to CP when the increase
in the value of the SP business comes from the efforts of the spouse
Under the pereira formula, SP is calculated as
[(FMV of business at marriage) * (fair rate of return) * (years of marriage)].
The CP is then calculated by subtracting the SP calculated above from the FMV at time
of separation.
Van Camp applies to the allotment of CP when the increase in the value of the business
due to reasons other than the spouse’s efforts, such as
market forces or characteristics inherent in the business, rather than the efforts of the spouse
Van Camp Formula
[(FMV of spouse’s efforts in
business) minus (family expenses paid from business)] multiplied by years of marriage.
Reverse Pereira applies to the alotment of CP when
increase in the value of the business comes from the efforts of the spouse
The SP is then calculated by subtracting the CP calculated above from the FMV at time of divorce.
Reverse Pereira
(FMV of the business at
separation) + [(FMV of business at separation) * (fair rate of return) * years of separation)]
Reverse van camp applies to the allotment of CP when
the increase in the value of the business is due to reasons other than the spouse’s efforts, such as market forces or characteristics inherent in the business, rather than the efforts of one spouse
Reverse van camp forumla
[(FMV from spouse’s efforts
from business) minus (family expenses paid from business)] multiplied by years of separation
Goodwill of CP business
refers to its community reputation and future business
prospects and earning potential. If the goodwill of the business is earned during
marriage, then it will be a CP asset.
When separate property and community property are commingled, a spouse may
establish that the source of funds was separate property through and how many types are there
tracing
Direct and Indirect
Direct Tracing
A spouse may trace the source of funds to separate property by directly linking a
deposit of separate property to a purchase, so long as the spouse had intent to purchase the property as separate property.
Exhausting
CP funds in commingled acct were exhausted
When a spouse receives disability or other payments, the court will first look to whether
the payments are intended to compensate for past work or to replace future earnings
When disability payments that replace future earnings are received by a spouse after permanent separation,
those payments are that spouse’s SP
Clawback Rule
Where quasi-community property owned by a deceased spouse and given away without paid-for consideration, but while retaining some ability to exercise ownership or control
over the property (such as a trust or joint tenancy property ownership), the surviving spouse may “claw back” the property to their own possession as community property at
the death of the spouse.
