Community Property Flashcards
Quasi-Community Property
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).
Jointly Acquired Property in non-CP State
If property is acquired by both spouses in joint title in a non-CP state, follow the joint title rules
Quasi-Marital Property
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.
Community Interest in Bonuses & Pensions
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
Community Interest in Stock Options
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.
Personal Injury Damages
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.
Term Life Insurance
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.
Disability Pay
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.
When to apply Van Camp/Pereira
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.
Pereira Test
SP portion = Value of SP at Marriage + ( Value x 10% x Years of Marriage)
CP Portion = Value at Divorce - SP Portion
Van Camp
CP Portion = (Market Salary - Family Expenses - Salary Taken) x Years of Marriage
Business Valuation Methods
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
Goodwill Definition
Treated like CP if created during marriage - (difference between a business’ total value and value of assembled physical assets)
Education/Training
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.
Reduction of Reimbursement (Education/Training)
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
Prenuptial Agreements
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.”
Prenuptional Voluntariness
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
Transmutation Pre-1985
Oral Agreement is OK
Transmutation Post 1/1/1985
Anti-Lucas Legislation: Express Declaration in Writing
Jointly Owned Property Rules
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
SP Contributions to Jointly Owned Property
SP contributions to acquisitions of property are reimbursed to SP contributor without interest or appreciation.
Credit Acquisitions
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.
Tracing of Funds General Rule
If commingling, the owner of separate funds may attempt to trace these funds to claim SP interest in funds or asset
Tracing of Funds Presumptions
(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.
How to Trace SP Funds Comingled with CP
(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.
Spouse Buys SP before marriage, but uses CP to make payments
Moore formula:
CP interest = (Payment on Loan/Purchase Price) x Value of Property
CP Improvements to SP
community entitled to greater of
(1) Reimbursement or
(2) Amount by which the improvement increases the value of the asset.
CP Improvements to Other Spouse’s SP
When a spouse makes community payments to improve the other spouse’s SP,
(1) presumed to be a gift (traditional), or
(2) reimbursement (modern).
Property Sale w/o Spouse’s Consent
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.
Personal Property Sale w/o Spouse’s Consent
Spouse cannot sell household furnishings, clothing, and the like without other spouse’s consent. If that’s done, community is entitled to reimbursement.
Creditor’s Rights
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
Types of Debts - When Occurred
(1) Contracts - when contract made
(2) Tort - when tort committed
(3) Criminal - when crime committed
(4) Support - debt incurred before marriage
Debts BeforeMarriage
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.
Debts During Marriage
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).
Order of Satisfaction for Tort Debts
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.
Assignment of Debt at Divorce
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.
Breach of Fiduciary Duty
In management and control of community assets, each spouse must act in accordance with general rules governing fiduciary relationships
Bad Faith Exception
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.
Spousal & Child Support Reimbursement
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
Pre Marital Debt - Separate Bank
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.
Widow’s Election
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.
Preemption Application
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.
