Community Property

Question 1

Marital agreements (Transmutations)

Answer 1

Transmutation can be by gift or agmt.
Requirements:
1. In writing
2. Expressly declare change in ownership
3. Consent of adversely affected spouse

EE not admissible to interpret transmutation agmt
Statements in will or trust not admissible

Presumption of undue influence when one spouse gains advantage

Question 2

Pereira

Answer 2

Pereira accounting is used when the increase in value of an SP business is primarily the result of the spouse’s management, skill, and/or talent (community labor). The SP is given its initial value plus a fair rate of return. The remainder is CP.

Question 3

Van Camp

Answer 3

Van Camp accounting is used when character of the separate business is largely responsible for its growth or productivity (.e. when appreciation is mostly passive). Using Van Camp, determine a fair salary for the community labor and multiply that by the years of the marriage. Then subtract any salary already received and any amounts paid for community expenses. The result is the CP share. The rest is SP.

Question 4

Education acquired during marriage

Answer 4

Not property but right of reimbursement
-Education and training acquired during marriage aren’t treated as divisible property, but at divorce, unless the parties sign an agmt to the contrary, there is an equitable right of reimbursement, with interest, to the community when:
[1] Community funds are used either to pay for education or training or to repay a loan related thereto, and
[2] The education or training substantially enhances the earning capacity of the party

Equitable defenses to reimbursement duty
1. Community has already substantially benefited from the education or training (presumed if >10 yrs have elapsed since degree awarded, but can be rebutted)
2. Other spouse has received community-funded education
3. The need for spousal support is reduced as a result of education or training.

Question 5

Goodwill

Answer 5

• Goodwill is the difference between the total value of a business and the sum of its assembled physical assets.
• To the extent that goodwill is earned during marriage, it is CP.
• Courts use 2 valuation techniques:
  [1] Market sales valuation - When a professional practice benefits from goodwill during the marriage, the court will account to the community its share of the goodwill possessed during the marriage.
  [2] Capitalization of excess earnings - The excess earnings method can be used to calculate the present value of the future stream of income generated by the goodwill developed during the marriage.