community property Flashcards
What is the paragraph of “general principles of community property law” that you should put at the beginning of every essay?
California is a community property state. In a community property state, the marital economic community begins upon marriage and ends at divorce, death of a spouse, or a permanent physical separation with an intent not to resume marital relationship. Property, earnings, or debt acquired during marriage are presumed to be community property. Property acquired by either spouse before marriage; by gift or inheritance during marriage; or after divorce or a permanent separation is presumed to be separate property. [only if QCP is an issue] Finally, property acquired by a married couple while living in a non-CP state that would be characterized as CP if the couple had been living in CA at the time of acquisition is called quasi-community property.
What is required for a valid marriage?
A valid marriage requires the consent of two parties who have legal capacity to enter into the contract of marriage and formal legal procedures. Married couples’ property will be distributed based on community property principles.
What shows the end of the marital community?
- The marital community begins upon marriage and ends at divorce, death of a spouse, or a permanent separation with an intent not to resume the marital relationship.
- As of 2017, living separate and apart (i.e., physical separation) is no longer required for a permanent separation. Separation occurs when the parties have a complete and final break in the marital relationship. This break must be proved by evidence that: (i) at least one spouse has expressed the intent to end the marriage, and (ii) the spouse’s conduct is consistent with the intent to end the marriage. This law applies retroactively.
how will unmarried cohabitants’ property be distributed?
An unmarried couples’ property will be distributed based on **contract **principles. Express contracts setting forth the distribution of property will be enforced unless they are based upon prostitution. If there is no express contract, a court will look for an implied contract or understanding. A court may also distribute property based on unjust enrichment and fairness principles.
putative spouses
- A putative marriage occurs when one or both spouses have a good faith belief that there is a valid marriage, but it is not a valid marriage. The spouse(s) who have a good faith belief in the validity of the marriage is a putative spouse.
- A putative spouse may rely on community property principles and is entitled to a share of the community property upon death or divorce. However, the putative spouse’s rights stop accruing when he/she discovers the marriage is not valid.
- all property that would have been CP or QCP is called “quasi-marital property” = putative spouse entitled to 1/2
- putative spouse splits with legal spouse
What is required to make a valid premarital agreement?
- allows couples to avoid CA community property system
- must be in writing + signed by both parties
- invalid if a party did not voluntarily sign it or the agreement was unconscionable at time it was executed (e.g. bc the terms so unfair)
Community Property Presumption (what is presumed to be CP?)
Any asset acquired (other than by gift, bequest, devise, or descent) or income earned by a married person while living with his/her spouse in California is presumptively CP.
Separate Property Presumption (what is presumed to be SP?)
Property acquired by either spouse before marriage; by gift or inheritance during marriage; or after divorce or a permanent separation is presumed to be separate property.
Special Community Property Presumption - Anti-Lucas Legislation (after 1984)
- As of 1987, all jointly held property (joint tenancy, tenancy in common, tenancy by the entirety) acquired during marriage is presumed to be CP upon divorce.
- This presumption can be rebutted by an express writing evidencing the spouses’ intent to hold the property as SP.
- If a spouse contributes SP to the purchase of the property, she/he has a right to reimbursement for the amount of contribution (but not any increase in value).
Transmutation
- A transmutation refers to changing the nature of property from SP to CP; CP to SP; or SP of one spouse to the SP of the other spouse.
- Prior to January 1, 1985, oral agreements were sufficient to transmute property as long as there was evidence to support the transmutation (express or implied agreements were acceptable).
- Under the current law, to be valid, a transmutation must be in writing, and contain language expressly stating that ownership of property is being changed by the spouse whose interest is adversely affected.
- EXCEPTION gifts
gifts exception to the transmutation rule
- general transmutation rule: transmutation must be in writing to be valid
- gift rule: personal, tangible gifts are valid transmutations without a written statement UNLESS the gift is substantial in value considering the financial circumstances of the marriage
Title in one spouse’s name (real property, bank account, stock, etc.) - is it still CP?
Yes. If a spouse takes title to an asset in his/her name alone, this will not change the nature of the property if the source was community property.
Equal rights and management over CP + Fiduciary duties
Each spouse has equal management and control over CP. Both spouses must participate in decisions regarding CP personal and real property.
* gifts to third parties: If one spouse gifts or otherwise disposes of personal CP for less than fair/reasonable value without the other spouse’s written consent, the non-consenting spouse can ratify (affirm/approve) the gift or revoke the gift and sue to recover the gift.
* sale or lease of CP real property: Both spouses must participate in the sale or lease of real property for > 1 year. If title to the CP real property is held in one spouse’s name only and an innocent party does not know of the other spouse, the innocent party’s purchase of the property will be presumed valid. The innocent spouse has one year to file an action to void the transfer.
Fiduciary duties: Each spouse owes the other a duty to act in the highest of good faith with respect to the other spouse in management and control of the CP. Failure of a spouse to obtain the consent of the other spouse when making gifts or selling/leasing property, gives rise to a breach of duty. The innocent spouse can seek a greater share of CP due to the breach of fiduciary duty.
Separate Property Business
- Facts: when spouse contributes labor during marriage (CP) to SP business –> upon divorce, how much of business is CP vs. SP
- Pereira: increase in value attributed to personal skills + effort (CP) of the managing spouse
- SP = value of SP business at time of marriage + (value at time of marriage × fair rate of return [use 10% on the exam for fair rate of return] × years of marriage)
- CP = FMV of the business at divorce – SP value ^
- Van Camp: increase in value is bc of character of the separate property itself, rather than the labor of the spouse
- CP = (reasonable value of services – annual family expenses) × years of marriage
- SP = FMV of the business at divorce – CP value ^
Improvements
- since 2005: SP to improve other spouse’s SP –> right to reimbursement
- since 1984: SP to improve CP –> right to reimbursement
- CP to imrpove SP –> community entitled to greater of reimbursement OR enhanced value of property
