Community Property

Question 1

Premarital Agreements - general requirements

Answer 1

Must be in **writing **

signed by both parties

No consideration is necessary

Question 2

Premarital Agreements - prohibited

Answer 2

cannot include child support payments

should not promote divorce

Question 3

Premarital Agreements - Defenses to Enforceability

Answer 3

Not Voluntarily Executed

Unconscionable when executed

Question 4

Premarital Agreements: when are oral agreements enforceable?

Answer 4

If promise fully executed by promisor or promisee detrimentally relied on oral agreement

Question 5

Defense to Premarital Agreement: Not Voluntarily Executed

Answer 5

Presumed involuntary unless the proponent shows

1. Separate legal representation, unless waived knowingly when fully infomed at least 7 days before agreement was signed
2. Not less than 7 days to sign
3. No fraud, duress, or undue influence

Question 6

Premarital Agreement- Defense to Enforceability- Unconscionable when Executed

Answer 6

Not provided a fair, reasonable, and full disclosure of the property or financial obligations of the other party, lacked adequate knowledge, and did not expressly and voluntarily waive disclosure in writing

Question 7

What are Transmutations?

Answer 7

Transmutations are changing the classification of property by agreement or transfer from CP to SP, or SP to CP.

Question 8

Transmutation Requirements

Answer 8

1. Must be in writing by express declaration of the adversely affected spouse
2. Language must expressly state ownership being changed
3. Documentary Language Controls over extrinsic evidence of spouses intent

Question 9

Transmutation Exception: Gift

Answer 9

1. The gift is between spouses
2. The gift is a personal tangible item, used solely by the spouse whom the gift is made
3. The gift is not substantial in value (taking into account the circumstances of the marriage)

Question 10

General Presumptions Rebutted by what level of proof?

Answer 10

Preponderance of evidence

Question 11

Special Title Presumptions Rebutted by What Level of Proof?

Answer 11

Clear and Convincing Evidence

Question 12

Special Presumption- Title

Answer 12

Applies only at death

Presumption that the title reflects ownership interests of both spouses

Title in one spouses name only (or no title) is SP if purchased with SP funds, and tracing cannot overcome presumption

CP- Jointly held property is CP, contrary intent must be evidenced by clear statement in deed or other writing

Question 13

Two Types of Tracing for Commingled Bank Accounts

Answer 13

1. Indirect Tracing
2. Exhaustion Method

Question 14

Commingled Bank Accounts: Indirect Tracing

Answer 14

Sufficient SP funds were available at time of purchase and intent to use them

Question 15

Commingled Bank Accounts: Exhaustion Method

Answer 15

CP funds in account already exhausted by payment of family expenses at the time of purchase

Question 16

Commingled Bank Accounts- Exhaustion Method- Family Expenses and Presumption

Answer 16

Food, clothing, and recreation

Presumption: CP funds used to pay family expenses, SP funds used only when CP funds are exhausted, and SP funds used for family expenses are a gift to the community

Question 17

Goodwill of CP business

Answer 17

Treated like CP if created during marriage

Valuation- determining market sales valuation of goodwill through expert testimony or

• comparing the past excess earnings of the business to the average earnings of other businesses

Question 18

Education and Professional Degrees

Answer 18

CP reimbursement limited to direct education or training expenses (but not living expenses)

Reimbursed only if educated spouses earning capacity was substantially improved

Question 19

Defenses to Reimbursing Community for Education/Professional Degree

Answer 19

Community benefited from education

Other spouse also got education during marriage

Rebuttable Presumption that community has not substantially benefitted if the community contributions were made less than 10 years ago

Question 20

Retirement Pensions (vested or unvested) treated as SP or CP?

Answer 20

CP

Question 21

Retirement Pensions- Spouse Eligible for benefits upon divorce

Answer 21

Divide years spouse was employed during marriage by the total number of years participating in the retirement plan (time rule)

Question 22

Retirement Pension- Spouse Not eligible for benefits upon divorce

Answer 22

Division in Kind- when spouse retires, other spouse received CP percentage using “time rule”

or

Cash out- non-participant spouse is cashed out upon divorce and awarded assets equal to value to pension benefits

Question 23

Stock Options- CP or SP if granted and vest during marriage?

Answer 23

CP

Question 24

Stock Options: If granted during marriage but vest after date of separation

Answer 24

Part CP part SP

Question 25

Stock Options: Share Formula based on whether options were what?

Answer 25

Granted as either a reward for **past service** or **incentive for future service**

Question 26

Stock option: Formula used for Past Service reward

Answer 26

Hug Formula (compensation for past service) CP= (Date of Hire - Date of Separation) / (Date of Hire - Date of Vesting) x # of shares; SP= # of shares - CP

Question 27

Stock Option: formula used when stock is to incentivize future employment

Answer 27

Nelson Formula CP= (Date of grant - Date of Separation) / (Date of Grant - Date of Vesting) x # of share; SP = # of shares - CP

Question 28

Disability Pay

Answer 28

CP - if intended to replace marital earnings/retirement benefits SP- if intended to replace earnings after dissolution

Question 29

Severance Pay

Answer 29

CP if structured like retirement benefits SP if meant to replace lost earnings after divorce/separation

Question 30

Insurance- Whole life- definition and characterization at divorce

Answer 30

Insurance and Investment Components Divorce- CP in proportion to number of premium payments made with CP

Question 31

Insurance- Whole Life- Death

Answer 31

Mixed Funds- CP in proportion to number of premium payments made with CP Community funds- 1/2 of proceeds to surviving spouse and other 1/2 to third party beneficiary

Question 32

Insurance- Term Life -- Definition plus Death and Divorce

Answer 32

Only covers risk of death Divorce- policy holds no value Death- apportion community interest or trace where the last premium payment came from (CP or SP)

Question 33

Formula Names for SP businesses

Answer 33

Pereira Van Camp

Question 34

Businesses: Pereira Formula and when is it used?

Answer 34

Used when the increase in value attributed to personal skills of the managing spouse Formula SP= Value of SP business at time of marriage + (value at time of marriage x fair rate of return (assume 10%) x years of marriage CP= FMV of business at divorce - SP

Question 35

Businesses: Van Camp Formula and when is it used?

Answer 35

Primary reason for increase in value is character of SP business rather than spouses labor Favors SP portion of estate Formula CP= (reasonable value of services - annual family expenses) x years of marriage SP= FMV of business at divorce - CP

Question 36

When to use Reverse Van Camp and Pereira?

Answer 36

When CP businesses appreciate during separation

Question 37

Reverse Pereira Formula

Answer 37

CP= Value of CP business at time of separation + value at time of separation x fair rate of return x years of separation SP= FMV of business at divorce - CP

Question 38

Reverse Van Camp Formula

Answer 38

SP= reasonable value of services during separation - SP expenses paid during separation CP= FMV of business at divorce - SP

Question 39

Credit purchases and loan proceeds

Answer 39

Presumed to be CP Focus on lenders intent, when the lender does not rely "solely" on the purchasers SP in extending credit

Question 40

Capital Improvements for Real Property when SP is used to improve other spouses SP

Answer 40

A spouse is entitled to reimbursement, without interest, for contribution unless transmutation occurs Excludes: loan interests, maintenance, insurances or taxes

Question 41

Capital Improvements for Real Property when SP is used to improve CP

Answer 41

Reimbursement is available since 1984

Question 42

Capital Improvements for Real Property when CP is used to improve either spouses SP (after 1975)

Answer 42

The community is entitled to reimbursement or enhanced value of property (whichever is greater)

Question 43

Personal Injury Recovery at Divorce when injury is before marriage

Answer 43

Tort recovery is SP and injured spouse must reimburse the community and other spouses SP for any injury related expensesP

Question 44

Personal Injury recovery- Injury during marriage by 3rd party tortfeaser at Divorce

Answer 44

Tort recovery is CP during marriage, but awarded to the injured spouse at divorce (unless spent or commingled with CP funds) Some Recovery may be awarded to non-injured spouse in interest of justice, but no more than half

Question 45

Personal Injury Recovery: At death

Answer 45

CP at death of either spouse

Question 46

Liability for Debt Generally: Liability of Community Estate

Answer 46

Liable for debts incurred by either spouse before or during marriage; upon divorce, the community has right to reimbursement

Question 47

Liability of spouses SP debts incurred before/during marriage

Answer 47

Liable for debts incurred before/during marriage (not for other spouses debts)

Question 48

Liability for Debt: Necessaries of Life- living together vs living apart

Answer 48

Food, clothing, shelter and medical expenses Living Together- married person is personally liable for "necessaries of life" Living apart - Only personally liable for "common necessaries of life" - debts required to sustain life - if debtor spouse had SP or CP funds at time debt was paid, non-debtor spouse can be reimbursed for SP funds

Question 49

Pre-existing child and spousal support

Answer 49

Treated like a debt incurred before marriage, so community is liable unless the non-debtor spouse shields their earnings

Question 50

Tort Obligations, acting for benefit of community vs not

Answer 50

Acting for benefit of community- liability is first satisfied from CP, then tortfeasors SP Not acting for benefit of community- Liability is first satisfied from tortfeasors SP, then from community

Question 51

Right of reimbursement for payments for necessities of life, pre-existing child or spousal support, and tort obligations

Answer 51

There is a right of reimbursement that exists, unless waived Either spouse must exercise right in divorce proceedings or death of a spouse

Question 52

Gifts to third parties (What must spouse get from other spouse)

Answer 52

**Written Consent** Non-consenting spouse can ratify gift or revoke gift and sue to recover property

Question 53

Household goods

Answer 53

Spouse may not sell or give the family dwelling, household furniture, clothing without written consent of the other spouse

Question 54

Power and Control: Community Business

Answer 54

Managing spouse has primary management and control Managing spouse must give prior written notice to other spouse for major actions

Question 55

Fiduciary Duty of Spouses

Answer 55

1. Highest duty of good faith in management/control of CP (duty to disclose, to account and obtain consent) 2. Breach requires deliberate misappropriation, gross negligence, or reckless conduct

Question 56

Joint Deeds and Titles: CP with right of survivorship - when is it permitted and how is it treated at death and divorce?

Answer 56

Permitted if express in deed, treated as CP during marriage and at divorce ROS applies if spouse dies before marriage ends

Question 57

Property purchased with CP and SP funds: Lucas and Anti Lucas

Answer 57

Lucas (before 1984)- property is presumptively CP (rebuttable by C and C evidence) SP funds presumed to be a gift to community, no right to reimbursement Anti-Lucas (after 1984) - CP presumption expanded to include all jointly held property held by married couples

Question 58

How to rebut Anti-Lucas (CP presumption on JT held property)

Answer 58

Rebuttable by express statement in deed or other writing that property is SP, and spouse making SP contribution has a right of reimbursement

Question 59

Apportioning Interest of CP and SP (property purchased with CP and SP funds)

Answer 59

If SP used as a downpayment or contribution to acquire CP, the presumption of CP controls- rebuttable by writing Use Aufmuth Formula

Question 60

Aufmuth formula (rebutting that SP used as downpayment or contribution to acquire CP is CP)

Answer 60

If presumption is rebutted, the pro rata SP share = SP contribution / Purchase price

Question 61

Exceptions to Equal Division at Divorce:

Answer 61

1. Deliberate misappropriation of CP by one party; 2. Personal injury damages (at least ½ assigned to the injured party); 3. If community debts exceed assets, excess debt may be assigned in an equitable manner; 4. Debts for education loans may be assigned to the spouse who received the education; 5. Court may assign sole or joint ownership of a CP pet animal; 6. Tort judgments not incurred for benefit of community may be assigned to tortfeasor; and 7. A civil judgment to pay domestic violence damages may be enforced against an abusive spouse’s CP share

Question 62

Division of Liabilities at Divorce-- incurred during marriage

Answer 62

Divided equally or assigned to one of the spouses if the debt incurred during marriage but after separation

Question 63

Division of Liabilities: Incurred Before Marriage

Answer 63

Assigned to the spouse who incurred the debt

Question 64

Division of Property at death

Answer 64

Character of property is presumptively as expressed in the title Surviving Spouse takes 1/2 of each item of decedent's CP

Question 65

Division of Property At death- Intestate

Answer 65

CP- Surviving spouse entitled to 1/2 of CP as well other 1/2 that deceased spouse owned SP- surviving spouse entitled to entire SP of spouse if no heirs, 1/2 if there is one heir, and 1/3 if there are more than one heir

Question 66

Testate: How much can testator bequest of CP?

Answer 66

1/2 of CP

Question 67

Surviving Spouses Election clause

Answer 67

When testator includes election clause in a will or attempts to pass the surviving will's 1/2 interest in CP, surviving spouse must choose between CP rights or rights under the will (otherwise surviving spouse can assert both CP rights and rights under the will)