Community Property

Question 1

How do you know it’s a CP MEE Question?

Answer 1

• Names of parties start with H and W
• Prompt always ends with “answer according to CA law”

Question 2

When does marital community begin

Answer 2

With a valid marriage

Question 3

When does marital community end

Answer 3

1) permanent separation
2) divorce
3) death of a spouse

Question 4

Permanent separation

Answer 4

1) spouse informs other spouse they INTEND to end the marriage AND
2) spouse’s conduct is consistent with their intent
Note: don’t have to live in separate homes

Question 5

What is CP

Answer 5

1) property acquired during marriage is PRESUMED to be CP
2) income earned from CP assets
3) labor, earnings, and salary of spouse
4) property acquired using CP funds are presumed to remain CP

Question 6

SP general presumption

Answer 6

1) acquired before marriage
2) after divorce or permanent separation
3) by gift or inheritance whenever it’s acquired, EVEN DURING MARRIAGE!!

Question 7

Income from SP

Answer 7

Income from SP remains SP even during marriage

Question 8

Quasi-Community Property

Answer 8

Property acquired by married couple while living in another state that would have been classified as CP if parties were married and domiciled in CA at the time property was acquired

Question 9

When is QCP triggered

Answer 9

ONLY upon the death of the spouse holding title to the property

Question 10

Equal division rule

Answer 10

1) Upon divorce CP and QCP are divided equally (50/50)

Question 11

Tracing

Answer 11

To rebut presumption of CP
- party can trace the source of funds used to acquire the asset to claim a different classification of the asset
- change in form of asset does not change its characterization (SP or CP)

Question 12

Valid marriage elements

Answer 12

1) consent
2) 18+ or with court order and parental consent
3) formal legal procedures

Question 13

Domestic Partnerships

Answer 13

Intimate and committed relationship of mutual caring

Question 14

Common Law Marriages

Answer 14

Although abolished in CA, will still recognize valid CL marriages from other states under full faith and credit clause of US constitution (CP APPLIES TO THIS MARRIAGE)

Question 15

Void marriages

Answer 15

Invalid from its inception
1) incest
2) bigamy (unless thought prior spouse was dead)

Question 16

Voidable marriages

Answer 16

I FU BUD
Valid and legal until declared void by the court
1) underage
2) unsound mind
3) fraud sufficient to get consent (ex. Concealed sterilization)
4) force or duress
5) incurable physical incapacity
6) Bigamy but believed prior spouse was dead

Question 17

Putative spouse doctrine

Answer 17

Protects an innocent spouse in void or voidable marriage from losing CP benefits IF believed in good faith that marriage was valid

Rights stop once discovering marriage is invalid

Question 18

Quasi Marital Property

Answer 18

Property acquired by putative spouse during void or voidable marriage that would otherwise be CP or QCP

It is divided equally like CP or QCP would be

Question 19

Unmarried cohabitants

Answer 19

Only have contractual protections, not subject to CP principals. As long as contract is not based on sexual services as consideration. (Implied contract also applies for unmarried cohabitants)

Question 20

Community Property General Principals Paragraph

Answer 20

California is a community property state

The marital economic community begins upon marriage and ends at divorce, death of a spouse, or a permanent separation with an intent to not 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.
STPSP (state, time, presumption, SP)

Question 21

CP general principals extension (QCP)

ONLY WHEN QCP EXISTS

Answer 21

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

Question 22

Premarital agreements

Answer 22

Must be in writing and signed by both parties

Can be invalidated IF:
- party did not voluntarily sign it
- agreement was unconscionable at time of execution/creation

Question 23

Community property presumption

Answer 23

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 CA is presumptively CP

Question 24

Anti-Lucas legislation

Answer 24

All jointly held property (JT, T in C, T in entirety) acquired during marriage is presumed to be CP upon divorce.

Presumption rebutted by express writing evidencing spouses’ intent to hold property as SP

If spouse contributed SP to purchase of property, she/he has right to reimbursement for the total amount of contribution (but not any increase in value)

Question 25

Transmutation

Answer 25

Refers to changing nature of property (SP to CP, CP to SP, SP of one spouse to SP of the other spouse)

To be valid, MUST be in writing and expressly state ownership of property is being changed by spouse whose interest is adversely affected

Question 26

Transmutation Gift Exception

Answer 26

Okay to not have in writing

Limited to personal, tangible gifts
BUT if gift is substantial in value (considering financial circumstances of marriage), a transmutation will only occur if there’s writing

Question 27

Title in one spouse’s name

Answer 27

Does not change nature of the property if the source was CP (it’s still CP regardless of title)

Question 28

Equal rights and management over CP

Answer 28

Spouses have equal management and control over CP

Both must participate in decisions regarding CP and real property

Question 29

Rules for gifting CP to third parties

Answer 29

If one spouse gifts or otherwise disposes personal CP for less than fair or reasonable value without WRITTEN consent, the non-consenting spouse can ratify or revoke the gift and sue to recover the gift

Question 30

Sale or lease of CP real property

Answer 30

Both must participate if it’s more than one year lease, and always for sale. If title is held only in one spouse’s name and buyer doesn’t know of other spouse, then title transfer is presumed valid. Other spouse has ONE YEAR to file an action to void the transfer

Question 31

Fiduciary duties

Answer 31

(Always mention after equal rights of management)

Each spouse owes to other spouse duty to act in highest good faith. Following Breach of this duty, the innocent spouse can seek greater share of CP.

Question 32

Van Camp and Pereira

Answer 32

Income from SP business is SP. however if spouse contributes labor (which is CP), to the SP business, a court must determine how much of the business is CP upon divorce and how much is SP

Question 33

Pereira

Answer 33

Used if increase in value can be attributed to personal skills and effort (which are CP) of the managing spouse. The formula for determining SP and CP is:

SP= value of SP business at time of marriage + (value at time of marriage x fair rate of return [10%] x years of marriage)

CP = fair market value of business at divorce - SP value

Question 34

Van Camp

Answer 34

Used when primary reason for increase in value is a character of the separate property itself, rather than labor of the spouse

CP = (reasonable value of services - annual family expenses) x years of marriage

SP = fair market value of business at divorce - CP value

Question 35

Improvements

Answer 35

When a spouse uses her SP to improve the other spouse’s SP, generally has statutory right to be reimbursed. Same with SP to improve CP

For CP to improve other spouse’s SP, entitled to either reimbursement for the funds expenses or the enhanced value of the property, whichever is greater

Question 36

Credit/Loans based on CP

Answer 36

When loan is based on CP (like salaries of spouses), the loan is also CP

Question 37

Commingled bank accounts

Answer 37

Person that wants to show that account is actually SP, they need to unpack and trace their funds in the account
Either by
1) direct tracing
2) exhaustion method

Note: need to use dollar amount and explain each method of calculation for full credit

Question 38

Direct Tracing

Answer 38

A method of connecting the dots between separate property (typically assets held before the marriage or an inheritance received during the marriage) and assets acquired or improved during the marriage.

Question 39

Exhaustion Method

Answer 39

The spouse proves that CP funds in the account were already exhausted by the payment of family expenses at the time the asset was purchased (therefore only SP was in the account and SP was used to purchase the asset)

Question 40

Educational Degrees

Answer 40

Acquired during marriage is not treated as CP
Community entitled to reimbursement if
1) CP funds used to pay for costs
2) earning capacity was substantially improved, and
3) the married couple did not contractually waive the right of reimbursement

(10 year exception rule, community assumed to have received value from education, no reimbursement)

Question 41

Personal injury recovery

Answer 41

Injured prior to or during marriage

During marriage or at death, the injured party’s judgment is treated as CP. But once divorce occurs, it’s SP

Question 42

Stock options

Answer 42

If stock options are meant to be payment/earnings, if so then spouse is entitled to half. Otherwise then no entitlement to stock

Question 43

Getting full credit on exam for Distribution of assets

Answer 43

To earn full credit you need to fully explain what each spouse is entitled to with dollar amounts
1) division of property at divorce
2) separation
3) division of prop at death

Question 44

Division of property at divorce

Answer 44

Split down the middle

Question 45

Distribution after Separation

Answer 45

The earnings and accumulations of a spouse after permanent separation from the other is considered SP

Question 46

Division of property at death

Answer 46

Joint tenancy presumed to be joint tenancy, CP presumed to be CP. surviving spouse takes 1/2 of CP and QCP

Intestate: surviving spouse takes 1/2 of CP as well as other 1/2 that deceased owned (100% of CP). Entitled to all SP if decedent has 0 heirs. 1/2 of SP if one heir. 1/3 of SP if two or more heirs

Question 47

Distributing Liability of marital property (Debt) CP and SP liability

Answer 47

Includes contract, tort, other obligations such as child or spousal support from prior marriage

CP liability: community liable for debts incurred by either spouse before or during marriage. Liability does not extend to debts incurred after permanent separation or divorce. The non-debtor spouse can protect her CP earnings by depositing them in a separate bank account that is not accessible to the debtor spouse

SP liability: a spouse’s SP is liable for debts incurred before or during marriage, but not for other the other spouse’s debts

Question 48

Reimbursement and reassignment of debts paid

Answer 48

Non-debtor spouse has 3 years to bring an action for reimbursement if debts/liabilities are paid from the community

Divorce: upon divorce, debts incurred before marriage will be assigned to spouse who incurred the debt. Debts incurred during marriage that were not for benefit of community will be assigned as SP to debtor spouse

Question 49

Necessaries of life

Answer 49

Living costs including food, shelter, clothing, hospital expenses.

Living together: spouse’s CP and SP are liable for the other spouse’s debts relating to necessaries for life. Upon divorce no longer liable

Living apart: CP and SP still liable for other spouse’s debts relating to expenses required to sustain life (essential expenses).
(Ex. Hospital bill after separation considered essential expense)

Question 50

Child and spousal support

Answer 50

Obligation from previous marriage treated as debt incurred before marriage. CP liable for debt unless the non-debtor spouse places her earnings in a separate bank account not accessible to debtor spouse. If debtor spouse has SP to pay obligation but used CP, non-debtor spouse can seek reimbursement to the CP

Question 51

Tort Obligations

Answer 51

Spouse who committed tort was acting for benefit of community (taking couple’s child to school), then liability must first be satisfied from the CP then the tortfeasors SP. if the tortfeasors spouse was not acting for benefit of community, then liability must first be satisfied from the tortfeasor’s SP and then the CP

Question 52

Special presumption for title only in one spouse’s name

Answer 52

Only applies upon death, and it’s not conclusive otherwise

Question 53

Hug

Answer 53

Total months of employment until separation (DOE to DOS)
Divided by
Total months of employment until options vest (DOE to vest)

Then multiply that by the number of shares that could be purchased per option

Question 54

Nelson formula

Answer 54

FUTURE STOCKS

Number of months of date granted til date of separation
Divided by
Period of time of each grant until it’s accessibility

DOG to DOS
Divided by
DOG to vest