Community Property

Question 1

Transmutation

Answer 1

A valid transmutation must:
1. Be in writing, and
2. Contain express declaration of the adversely affected spouse that the characterization/ownership of asset is being changed

Question 2

Gift Exception to Transmutation

Answer 2

No writing required for gift of personal property if:
1. Gift between spouses
2. Gift is tangible item of personal nature used principally by donee spouse, and
3. Not substantial in value considering wealth of couple

Question 3

Gift Exception to Transmutation

Answer 3

No writing required for gift of personal property if:
1. Gift between spouses
2. Gift is tangible item of personal nature used principally by donee spouse, and
3. Not substantial in value considering wealth of couple

Question 4

Special CP Presumption at Divorce

Answer 4

All jointly held property is presumed CP - joint tenancy, tenancy in common, or tenancy by the entirety

Question 5

Property Purchased from Commingled Account

Answer 5

1. Exhaustion Method - trace to SP funds by showing that C expenses exceeded C income at time of acquisition
2. Direct Tracing - funds were deposited at time of withdraw for purpose of buying the property and intended to withdraw those funds

Question 6

Pereira

Answer 6

Use if primary contributing factor to increase in growth/profits from SP business is spouse’s activity/ability/capacity

1. Calculate share of SP portion
   (initial value of business) + ((FMV at time of marriage) x (10%)) x (# years of marriage) = SP
2. Calculate value of CP portion
   (FMV at time of divorce) - (SP portion) = CP

Question 7

Van Camp

Answer 7

Use if primary reason for increase in value/profit is character of the business

1. Allocate CP and SP share
   CP = (reasonable value of spouse’s services - annual family expenses) x (years of marriage)
   SP = (FMV at time of divorce) - CP
2. If spouses was undercompensated –> equitable apportionment of CP estate

(value of business) - (total salary received)

Question 8

Reverse Pereira

Answer 8

If CP business increases in value after separation due to spouse’s efforts/labor

1. Calculate CP share
   CP = (FMV at separation) + ((FMV at separation) x (10%) x (years of separation))
2. Calculate SP share
   SP = (FMV at divorce) - (CP)

Question 9

Reverse Van Camp

Answer 9

If increase due to market conditions after separation

1. Calculate SP share
   SP = (reasonable value of spouse’s services during separation) - (SP expenses paid during separation)
2. Calculate CP share
   CP = (FMV of business at divorce) - (SP)

Question 10

Good Will of Business or Professional Practice

Answer 10

Community Property

Question 11

Property Acquired during Marriage on Credit

Answer 11

Presumed CP

Rebut - lender’s intent rule

Question 12

Capital Improvements to Real Property

Answer 12

• SP used to improve SP of other spouse –> right to reimbursement unless waiver or transmutation
• SP used to improve CP –> right to reimbursement if funds can be traced to SP source
• CP used to improve SP –> CP has right to greater of (1) reimbursement or (2) pro rata interest in enhanced value of SP

Question 13

Spousal Fiduciary Duties

Answer 13

1. Duty to disclose all material facts and information re assets/debts of community
2. Duty to account
3. Duty to obtain consent

Question 14

Remedies for gift or sale of CP

Answer 14

During marriage –> can revoke gift and sue to recover property
Divorce/death –> void the gift but only recover their 1/2 CP share

Question 15

Stock Options - Allocation of CP Share

2 Formulas

Answer 15

1. Hug Formula - if compensation for past services
2. Nelson Formula - incentivize continued employment

Question 16

Special Title Presumption at Death

Answer 16

Presume form of ownership in title is the ownership at death

Can rebut with C&C evidence that spouses did not intend to hold the property as stated in title

Question 17

Hug Formula

Answer 17

If stock options granted to compensate employee

CP = (DOH - DOS) / (DOH - DOV) x # of shares

SP = # of shares - CP

Question 18

Nelson Formula

Answer 18

If stocks granted to incentivize continued employment

CP = (DOG - DOS) / (DOG - DOV) x # of shares

SP = # of shares - CP