Community Property

Question 1

Quasi-Community Property

Answer 1

Property acquired by one of spouses while domiciled in non-CP state that WOULD have been CP had spouse been domiciled in Cal or any other CP state at the time of acquisition is QCP.

Remains SP of acquiring spouse until divorce or death, at which time it’s treated same as CP (including for purposes of creditors’ rights).

Question 2

Jointly Acquired Property in non-CP State

Answer 2

If property is acquired by both spouses in joint title in a non-CP state, follow the joint title rules

Question 3

Quasi-Marital Property

Answer 3

All property acquired during the putative marriage is labeled as quasi-marital property – whether it otherwise would’ve been CP or QCP had marriage been valid.

Question 4

Community Interest in Bonuses & Pensions

Answer 4

Multiply total amount of stock, compensation, or other benefits by a fraction.

Numerator = total number of years during marriage where stock or other compensation is earned

Denominator = total number of years for stock or other compensation

Question 5

Community Interest in Stock Options

Answer 5

Multiply total value of stock options by a fraction.

Numerator = period of marriage from date options are granted until divorce or legal separation

Denominator = period from date options are granted until date options exercisable.

Question 6

Personal Injury Damages

Answer 6

PI damages are characterized based on date of occurrence.

CP if personal injury cause of action arises during marriage.

SP if injury arises before marriage or post-separation. Also SP if injury is caused by tort of other spouse.

Question 7

Term Life Insurance

Answer 7

For TLI, which covers only risk of death, character of proceeds is character of LAST premium paid.

If last premium paid with CP, surviving spouse gets ½ and B gets ½ of proceeds.

Question 8

Disability Pay

Answer 8

Disability pay (including workers’ comp) is characterized by what it is intended to replace.

Replacing earnings during marriage > community property.

Replacing earnings before or after marriage > SP.

Question 9

When to apply Van Camp/Pereira

Answer 9

Use when:

(1) spouse
(a) brings SP business/investment into marriage,
(b) inherits SP business during marriage, or
(c) inherits money and starts business, all during marriage;

(2) either spouse works in the business; and
(3) business value increases at least in part due to efforts of either spouse.

Question 10

Pereira Test

Answer 10

SP portion = Value of SP at Marriage + ( Value x 10% x Years of Marriage)

CP Portion = Value at Divorce - SP Portion

Question 11

Van Camp

Answer 11

CP Portion = (Market Salary - Family Expenses - Salary Taken) x Years of Marriage

Question 12

Business Valuation Methods

Answer 12

Businesses are valued using either
(1) market sales valuation of comparable businesses (expert opinion), or
(2) based on capitalization of excess earnings, based on standard for particular industry

Question 13

Goodwill Definition

Answer 13

Treated like CP if created during marriage - (difference between a business’ total value and value of assembled physical assets)

Question 14

Education/Training

Answer 14

NOT community property even if acquired during marriage.

However, absent agreement contrary, the community has right of reimbursement, with interest, when community funds are
(1) used to pay for education or training, or repay student loan, and
(2) the education or training substantially enhances earning capacity of educated party.

Question 15

Reduction of Reimbursement (Education/Training)

Answer 15

Reimbursement may be reduced or eliminated if
(1) community has already substantially benefitted from the education and training (10 year presumption) OR

(2) education reduced educated spouse’s need for spousal support

Question 16

Prenuptial Agreements

Answer 16

Do not require consideration, but must be in writing signed by both parties to satisfy the SOF.

Prenuptial agreement will not be enforced if they
(1) “promote divorce,” or
(2) are not “voluntary.”

Question 17

Prenuptional Voluntariness

Answer 17

Voluntary if:
(1) represented by independent counsel or expressly waived representation;
(2) had 7 days to review before execution and advised to seek independent counsel; and
(3) if unrepresented, party is
(a) fully informed in writing,
(b) proficient in language of the agreement, and
(c) no duress, fraud, or undue influence

Question 18

Transmutation Pre-1985

Answer 18

Oral Agreement is OK

Question 19

Transmutation Post 1/1/1985

Answer 19

Anti-Lucas Legislation: Express Declaration in Writing

Question 20

Jointly Owned Property Rules

Answer 20

Divorce: All jointly held property acquired during marriage is presumed CP at divorce and legal separation, absent collateral written agreement or separate statement to contrary.

Death: NOT presumed CP, remains JT and goes to surviving spouse

Question 21

SP Contributions to Jointly Owned Property

Answer 21

SP contributions to acquisitions of property are reimbursed to SP contributor without interest or appreciation.

Question 22

Credit Acquisitions

Answer 22

Loans or credit obtained during marriage are community debts.

Can only be overcome by evidence that lender primarily relied on borrower’s SP in extending the credit.

Question 23

Tracing of Funds General Rule

Answer 23

If commingling, the owner of separate funds may attempt to trace these funds to claim SP interest in funds or asset

Question 24

Tracing of Funds Presumptions

Answer 24

(1) Family expenses are presumed to be paid first from community funds.

(2) When SP funds are used to pay family expenses, presume a gift of the SP to the community.

Question 25

How to Trace SP Funds Comingled with CP

Answer 25

(1) Exhaustion: CP funds were exhausted by payment of family expenses, so only SP left..

(2) Sufficient funds: Always sufficient SP funds, no need to comingle.

Question 26

Spouse Buys SP before marriage, but uses CP to make payments

Answer 26

Moore formula:
CP interest = (Payment on Loan/Purchase Price) x Value of Property

Question 27

CP Improvements to SP

Answer 27

community entitled to greater of
(1) Reimbursement or
(2) Amount by which the improvement increases the value of the asset.

Question 28

CP Improvements to Other Spouse’s SP

Answer 28

When a spouse makes community payments to improve the other spouse’s SP,
(1) presumed to be a gift (traditional), or
(2) reimbursement (modern).

Question 29

Property Sale w/o Spouse’s Consent

Answer 29

Both MUST execute instrument.

A transfer to a BFP without knowledge of marital relationship is presumed valid. Remedy:

Non-consenting spouse can overcome presumption if
(1) brings an action to void the transaction within one year; and
(2) demonstrates she did not consent to or participate in the transfer.

Question 30

Personal Property Sale w/o Spouse’s Consent

Answer 30

Spouse cannot sell household furnishings, clothing, and the like without other spouse’s consent. If that’s done, community is entitled to reimbursement.

Question 31

Creditor’s Rights

Answer 31

Creditors’ rights follow management rights. Thus, a creditor may reach any property over which a debtor has the legal right of management and control.

Discuss:
(1) Which property is liable
(2) In what order

Question 32

Types of Debts - When Occurred

Answer 32

(1) Contracts - when contract made
(2) Tort - when tort committed
(3) Criminal - when crime committed
(4) Support - debt incurred before marriage

Question 33

Debts BeforeMarriage

Answer 33

All the CP, and the debtor’s SP, are liable for contractual debt incurred by the debtor spouse before marriage.

The SP of non-debtor spouse is never liable for pre-marriage contractual debt.

Question 34

Debts During Marriage

Answer 34

All the CP, and the debtor’s SP are liable for a debt incurred by the debtor spouse during the marriage.

The SP of non-debtor spouse is liable only if contractual debt for “necessaries” (food, shelter, medicines, etc.).

Non-tortfeasor spouse’s SP not liable (unless that spouse would be liable for the tort).

Question 35

Order of Satisfaction for Tort Debts

Answer 35

Benefit: If activity in which spouse commits tort benefits the community:
(1) first satisfied from CP,
(2) then, if necessary, debtor spouse’s SP.

Not for benefit: If activity not for community benefit:
(1) first be satisfied from debtor spouse’s SP,
(2) then, if necessary, from the CP.

Question 36

Assignment of Debt at Divorce

Answer 36

Community debts are assigned to the community.

Separate debts are assigned to the debtor spouse. Those include
(1) incurred by spouse before marriage, or
(2) debts for non-necessaries incurred post-separation.

Question 37

Breach of Fiduciary Duty

Answer 37

In management and control of community assets, each spouse must act in accordance with general rules governing fiduciary relationships

Question 38

Bad Faith Exception

Answer 38

If spouse expends funds in bad faith, deliberately dissipates CP, or acts with recklessness or gross negligence resulting in loss of CP, community is entitled to offset or reimbursement. However, mere negligence is not grounds for reimbursement.

Question 39

Spousal & Child Support Reimbursement

Answer 39

Spousal and child support from a prior marriage is considered prior debt, and payable from CP. But if, at time of payment, SP was available to pay the support, community is entitled to reimbursement on divorce

Question 40

Pre Marital Debt - Separate Bank

Answer 40

If the non-indebted spouse put their earnings into a separate bank account in the spouse’s sole name to which debtor spouse had no access, those funds cannot be reached to pay any pre-marital debt of the debtor spouse.

Question 41

Widow’s Election

Answer 41

Applies when testator-spouse tries to bequeath surviving spouse’s share of CP.

Survivor may elect to take benefits under the will or ½ of their CP, but not both.

Question 42

Preemption Application

Answer 42

Preempted Assets:
(1) federal homestead law,
(2) armed forces life insurance benefits,
(3) US Savings Bonds, social security law,
(4) railroad retirement benefits, and
(5) VA disability benefits.

Not Preempted:
(1) federal civil service and foreign service retirement benefits, and
(3) ERISA pension benefits in a divorce are divisible under CP law.