Community Property

Question 1

Inter Vivos Transfer of QCP

Answer 1

Inter Vivos Conveyance
QCP is generally treated as the acquiring spouse’s SP
-does not mean that acquiring spouse is completely free to make inter vivos transfers of the QCP –
-if the acquiring spouse transfers QCP during his life for less than FMV while retaining an income right, a right to revoke the transfer, or a right of survivorship
-other spouse has a right to clawback 1/2 of the value of the transferred QCP from the transferee.

Question 2

Tort Obligations

Answer 2

Tort obligations are “incurred” when the tort occurs, not when judgment handed down

If tort committed for benefit of the community, first CP funds used, then SP of tortfeasor, non-torfeasor spouse is not liable

If tort not commited for benefit of the community, then first SP of tortfeasor, then CP. Note: CP may be entitled to reimbursement

Question 3

Allocation of Debt

Answer 3

Judge has disrection to allocate debts, typically judge will allocate debt to spouse who incurred the debt

Question 4

Pereira

Answer 4

Increase in value is apportioned as follows:

Value of the SP portion = initial SP capital used * reasonable rate of return (usually 10%) * per year of marriage

The residual value belongs to the community.

Question 5

Van Camp Formula

Answer 5

community receives a reasonable salary in return for the spouse’s contribution of time and effort, reduced by the amount of community expenses paid by the returns from the business.

The residual is the owning spouse’s SP.

CP = fmv salary – family expenses - salary taken
SP =value of biz - CP

Question 6

Improvement of Separate Real Property with CP

Answer 6

Where CP is used to improve a SP asset, the community is entitled to an interest.

The formula used for calculating such an interest is from In re Marriage of Moore.

The community is entitled to reimbursement for the value of the contributions for down payment, improvements, and payment of principal, plus a pro rata share of the appreciation.

Question 7

Transmutation

Answer 7

(1) express writing
(2) consented by adversly affected spouse
(3) requires both spouse approval if transmuting CP to SP

Question 8

Putative Spouse

Answer 8

(1) not lawfully married, but has subjective good faith belief that he/she is married
(2) all CP / QCP is deemed QMP - quasi marital property, which gives putative spouse same rights as she would have to CP/QCP

Question 9

Child Support

Answer 9

Child support obligation is treated as a debt incurred before marriage, can’t go after other spouse’s SP, but all other assets are OK

Question 10

Non-Married Couples

Answer 10

Putative spouse, treat as married if
◆ Good faith belief
◆ Void/voidable marriage
◆ Estoppel may apply if knew
◆ QMP is property classification

Unmarried—Contracts law applies

Question 11

How is Pre-nup deemed voluntary

Answer 11

◆ Independent counsel or waived in writing
◆ 7 days before signing
◆ Terms/rights in writing in proficient language
◆ No duress, fraud, undue influence
◆ Any other factors court deems

Question 12

Premarital agreements—valid if

Answer 12

Premarital agreement is valid if:
(1) It does not promote divorce
(2) In writing/signed by both
(3) Entered into voluntarily
(4) Not deemed unconscionable and lacking disclosure
(5) Cannot waive child support
(6) Spousal support can be waived if independent counsel agrees at time agreement was signed

** Estoppel and laches available defenses –Equitable defenses limiting the time for enforcement, including laches (unreasonable delay and prejudi cial effect) and estoppel (detrimental reliance) are available to either party.

Question 13

How is Prenup Deemed Unconscionable

Answer 13

Not unconscionable at execution, and
Party against enforcement is sought did not have adequate knowledge of the wealth of the other party and did not waive the right to the disclosure of wealth in writing. b. Child support

Question 14

Source of funds SP, but title is CP:

Answer 14

When the source of funds for a property is SP, but title is taken jointly, it is presumed to be a gift to the community and characterized as CP, unless there is a contrary written intent, subject to reimbursement at divorce

Question 15

Jointly titled prop at death vs. Divorce

Answer 15

Jointly titled prop benefitted by SP –
(1) AT DEATH Lucas: at death jointly held title is presumed CP
◆ No reimbursement
(2) AT DIVORCE Anti-Lucas: at divorce jointly held title is presumed CP
◆ DIP reimbursement
Down payment
Improvements
Principal

***MWSP = W’s name alone prior to 1975 is her SP

Question 16

Tracing Commingled Funds

Answer 16

• Can trace SP to source
• Burden of proof on SP proponent
• Two tracing methods
  (1) Exhaustion method: all CP funds exhausted when property purchased
  (2) Direct tracing - Sufficient SP funds at time of purchase, and Intent to use SP funds

If SP cannot be traced, property is CP * Tracing cannot overcome joint title presumption
**Exception: bank accounts - tracing can be used to overcome the presumption for jointly titled bank accounts since bank accounts are governed by the Probate Code.

Question 17

TRANSMUTATIONS

Answer 17

Writing required
(1) Real or personal property
(2) Describe change in ownership
(3) Consent of adversely affected spouse

Exception
(1) Personal gifts of insubstan tial nature (2) No other exceptions to writing requirement

**Pre-1985: oral and inferred from conduct okay

Question 18

Management and Control : Main areas

Answer 18

(1) Fiduciary Duties
(2) Community personal property
(3) Community business
(4) Community Real property

Question 19

Spousal Fiduciary Duties

Answer 19

(1) Full disclosure of material facts
(2) Good faith and fair dealing

Question 20

Community Perosnal Property - Management and Control

Answer 20

• Equal power to manage CP
• One spouse can’t gift or dispose for less than fair value
• One spouse can’t sell or convey family furnishings with out written consent

Question 21

Community Business - Management and Control

Answer 21

Managing spouse can make all decisions, but must give written notice to sell

Question 22

Community Real Property

Answer 22

Both need to sign to sell or lease for more than 1 yr.
Can’t convey to 3rd party without other spouse consent, Presumed valid to BFP, however if done spouse has 1 year to BFP. If none BFP, can be voided anytime

Question 23

Contribution / Improvements; CP to SP

Answer 23

CP to other spouse’s SP: gift presumed in some jurisdictions

CP to spouse’s own SP: CP reimbursed greater of amount spent on improvement or increase in value

CP to SP real property
CP % = amount CP con tributed to principal/total amount of loan
Then, multiply CP% by capital appreciation
**Payments for interest, tax, and insurance are excluded

Question 24

Contribution / Improvements; SP to other spouses SP

Answer 24

Reimbursed without interest for DIP

Question 25

SP to CP Property or business

Answer 25

SP to CP property or business
* Reimbursement DIP
* Business—Reverse Pereira and Van Camp

Question 26

CP: Personal Injury Recover

Answer 26

Personal injury award from 3rd party
If injury occured During marriage = CP (@ Death=CP, @Divorce awarded to injured spouse

If occured after permanent separation/ divorce = SP
* Can get reimbursement

Question 27

Pension

Answer 27

Earned during marriage = CP, regardless of when fully vested
If earned before and durign marriage, Time Rule to apportion

Question 28

Stock Options

Answer 28

Vests during marriage = CP
*If for past services = Time rule
*If for future service = SP

Question 29

Disability/Workers Comp

Answer 29

Could be SP, CP, or both depends on what it replaces.

CP if used to replace marital earnings: If the disability pay is intended to replace marital earnings, it is CP.

SP if used to replace post-divorce earnings: If the disability pay is intended to replace the spouse’s income after separation or dissolu tion, it is SP.

If intended to replace a pension use the Time Rule:

Question 30

Severance Pay -CP

Answer 30

If replace retirement benefits earned when married = CP
If replace future post-divorce earnings = SP

Question 31

Education Training

Answer 31

Not community asset and CP reimbursed if (1) CP paid for education, and (2)
earning capacity substantially enhanced

Defenses to reimbursement
Community substantially benefited (presumed if >10 years)
Other spouse received education
Reduced need for spousal support in educated spouse

Question 32

Life Insurance

Answer 32

Whole life insurance - lifetime coverage & accumulates cash value. Look to see what the benefit is recieved and then appriotn based on contribution to policy based on CP and SP

Term Life Insurance - coverage for specified term and no cash value

Decedent can only devise ½ to beneficiary not their spouse, unless written consent

Question 33

Community Property - Federal Preemption

Answer 33

Federal preemption: Under the Supremacy Clause, federal law preempts inconsistent state law when specific types of income or liabilities are designated as the sole property of one spouse under federal law, but they otherwise would be community property under state law.
**federal pension, military life insurance, social secu rity benefits, or U.S. savings bonds, always address preemp tion.

Question 34

Goodwil

Answer 34

To the extent that the goodwill is earned during the marriage, it is CP.

Excess earnings mething
=present value of the future stream of income generated by the goodwill developed during the marriage.
-Deducting a fair return for the business, -Determining the professional’s annual net earnings,
-Deducting the earnings of a similarly situated professional, and then capitalizing the excess earnings over the period of the of the marriage

Question 35

Credit acquisitions / CP

Answer 35

• During marriage = CP debt
• Intent of lender = rebut CP by showing lender relied on SP
• Earning capacity

Question 36

What happens at death in CP

Answer 36

½ CP/QCP to surviving spouse, ½ to estate

Dies Testate: can devise all SP & ½ of CP/QCP
** Except not QCP titled in survivor’s name

Intestate: all CP to spouse, 1/3 , ½ or all SP to spouse, depend ing on survivors *
Real property out of Cal.—will probate in jurisdiction