Community Property 16-30 Flashcards
Personal Injury Awards – Against 3rdParties
During marriage/divorce
vs.
Before or after marriage
During marriage: personal injury awards/settlements are CP.
At divorce: assigned entirely to the injured spouse (unless funds were comingled or there is economic hardship).
Before/after marriage: award is SP of injured spouse.
Priority: HIGH
Personal Injury Awards – Against Spouse
Who receives a personal injury award when the cause of action is against the spouse?
Personal injury awards/settlements against a tortfeasor spouse are ALWAYS the SP of the injured spouse.
Priority: HIGH
When will courts use the Pereira Method to determine CP/SP business interests at divorce?
When business growth is mostly due to the spouse’s labor and abilities.
Owning spouse receives original principal value, plus a 10% annual rate of return. Remaining value of business is CP.
Priority: HIGH
When will courts use the Van Camp Method to determine CP/SP business interests at divorce?
When business growth is mostly due to the character and nature of the business itself.
The community receives a reasonable salary REDUCED by expenses, and remaining value of the business is the SP of the owning spouse.
Priority: HIGH
How is the “Goodwill” of a
business defined?
The intangible value of the business reputation beyond personal skill or value of assets.
*When goodwill is generated by community labor it is deemed CP.
Priority: Medium
How is Goodwill valued?
By either:
The Market Value Method – price in sale of business; OR
Capitalization of Excess Earnings Method – present value of the future stream of income that the goodwill developed during marriage.
Priority: Medium
How do courts determine the CP interest in a Whole Life Insurance Policy that was paid for with CP and SP funds?
They use the Buy-in-Rule, which states that CP value is apportioned using the formula below:
of premium payments made with CP
÷
total number of premium payments
Priority: Low
Is Term Life Insurance designated as CP or SP?
Under the Final Payment Rule, it is designated as CP or SP according to the characterization of the last payment made.
Priority: Low
How are stock options deemed if they were awarded during marriage, but become exercisable after marriage?
It depends on how they were earned and intent of employer.
If awarded for past services: CP value is the time employed during marriage divided by the time employed until the date the option becomes exercisable.
If awarded to encourage the employee to stay: CP value is the time from the date the option was granted to the economic community ended divided by the time from the option was granted to the date the option becomes exercisable.
Priority: Medium
Is a Loan taken out during the marriage considered a community or separate debt?
The personal credit of a spouse belongs to the community during marriage. Thus, a loan taken out is community debt (unless the lender’s primary intent for giving the loan was the spouse’s SP used as collateral).
Priority: Medium
What does the Anti-Lucas Statute state?
That upon divorce, any SP used to acquire jointly titled property is entitled to reimbursement.
At death, SP used to acquire jointly titled property is presumed to be a gift (no reimbursement is allowed), UNLESS otherwise agreed.
*Reimbursement includes: down payments, payments for improvements, and principal payments.
Priority: Medium
CP used to improve the other spouse’sSP
vs.
CP used to improve a spouse’s own SP
CP used to improve the other spouse’s SP: Courts are split. In some courts, CP is presumed a gift. Other courts have held that the community is entitled to reimbursement.
CP used to improve a spouse’s own SP: The community is entitled to reimbursement (for either cost of improvement or the increase in value of SP).
Priority: Medium
SP used to improve CP
vs.
SP used to improve other spouse’s SP
SP used to improve CP: the spouse is entitled to reimbursement (for either the cost of the improvement orincrease in value).
SP used to improve other spouse’s SP: the spouse is entitled to reimbursement for the amount of contribution made.
Priority: Medium
When is the community entitled to reimbursement for Professional Degrees acquired during the marriage?
When:
CP funds are used to pay educational expenses including loans; AND
The education enhanced the spouse’s earning capacity.
Priority: Medium
When is reimbursement NOT required to the community for Professional Degrees acquired during a marriage?
Where:
The community has substantially benefited from the education (after 10 years a benefit is presumed);
The other spouse received community funded education; OR
The education lessens the need for spousal support.
Priority: Medium
