Community Property

Question 1

Basic Presumptions

Answer 1

California is a community property state. All property, earnings, and property purchased with earnings acquired during marriage is presumed community property (“CP”). All property, earnings, and property purchased with earnings acquired before marriage or after permanent separation are presumed to be separate property (“SP”). In addition, any property acquired by gift, devise, or bequest is presumed to be SP.

In order to determine the character of any asset, courts will trace back to the source of funds used to acquire the asset. A mere change in form of an asset does not change its characterization.

Question 2

Three Principals of CP System

Answer 2

1) Equality–spouses share 50%;
2) Tracing–prop takes on character of its source;
3) K Modification–CP is default but can be modified before/during M.

Question 3

CP at Death and DV

Answer 3

During M–equal ownership/mgmt/control;

At DV–equal div 50% CP each.

At death:
–testate–at least 50% of CP to surviving S;
–intestate–100% CP and QCP to surviving S; and anywhere from 1/3 to 100% SP (if decedent has issue / surviving parents then surviving S takes less SP).

Question 4

SP vs. CP

Answer 4

SP–all prop owned before M, acquired during M by gift/inheritance (lucrative title) and all prop gen by such SP (i.e. traceable to an SP source); and all prop acquired after sep.

CP–all PP and RP acquired by married P during M while in CA; anything produced by time/effort/skill of married P is presumptively CP (even a gift made in recognition of your efforts/services).

Question 5

Quasi CP

Answer 5

Property that would have been CP if the couple had been domiciled in CA at the time of acquisition.

QCP is treated like SP until the death (or dissolution) of the MEC, when it is subject to treatment like CP.

But that does not mean S is entirely free to transfer QCP inter vivos…

Question 6

Quasi CP–Right to Set Aside Transfers

Answer 6

In California, the surviving spouse can set aside inter vivos QCP transfers by the decedent if:
(1) the decedent died domiciled in California;
(2) the decedent transferred the property to a third party without the written consent of the surviving spouse and for less than valuable consideration; and
(3) the transfer is the type whereby property is held at the time of the decedent’s death by the decedent and another with the right of survivorship.

Question 7

PMAs–EMPHASIZE

Answer 7

1) Pre-86: enforceability determined by case law;

2) 86-02: applicability non-retroactive;

3) >02: retroactivity of amendments; spousal-support waivers cannot be unconscionable at time of enforcement (pre-86 unenforceable; 86-02 Pendleton dictum/public policy); SS waiver NOT enforceable if P not rep by indp counsel (not retroactive pre-02).

Question 8

Enforcement of PMA

Answer 8

4 Factors–NOT vol PMA Unless:

1) P against whom enforcement sought not rep by indp counsel (can be waived but NOT waived for SS);

2) 7 days b/t presentation of PMA and signed–regardless of whether P had counsel;

3) If no counsel–fully informed of terms and basic effect of PMA;

4) PMA not signed under duress, fraud or UD, nor lack capacity.

Question 9

Retroactivity

Answer 9

Retroactivity does NOT apply if it would sub interfere w/ the effective conduct of the proceedings or rights of the Ps

Violated DPC if would impair vested prop right–2 considerations:
1) the signif of st’s interest served by law; and
2) extent of reliance on former law

Question 10

Transmutations–EMPHASIZE

Answer 10

From CP to SP during M:

Post-84 Reqs–Must be explicit/unambiguous language; trans of RP/PP not valid unless made in writing by express declaration that is made, joined in, consented to, or accepted by S whose interest in prop is adversely affected; extrinsic evidence NOT allowed; presumption of UDI–can be raised by disadvantaged S to disprove trans; trans irrevocable and statement in will NOT admissible.
*Applies to BOTH interspousal prop transactions and prop acquisitions from 3P (e.g. life ins policy–presumed CP even if policy solely in one S name); a sig on grant deed b/t S or an interspousal transfer deed satisfies writing reqs.
*Depositing CP earnings into checking account in 1 S’s name alone does NOT qualify as transmutation–i.e. still need signed writing.

Gift b/t S Exception–above reqs do NOT apply to gifts b/t S if:
1) clothing, jewelry or other tangible articles of personal nature used solely by S who received gift; AND
2) gift NOT substantial in value taking into account circumstances of M

e.g. gift of porsche not “personal in nature” ; diamond ring has sub value so gift exception does not apply–i.e. character not trans from CP to SP

Question 11

Presumption of UDI

Answer 11

To rebut presumption of UDI–advantaged S must show that transfer was “freely and vol made” w/ full knowledge of all facts.

–Presumption of UDI overcomes all other presumptions.

Question 12

PMAs vs. Transmutations–EMPHASIZE

Answer 12

PMAs:
–No confidential rel pre-M; just obs of mutual respect/fidelity;
–Cannot promote dissolution of M;
–Writing req–CL exceptions to SOF admissible; i.e. oral agreement and estoppel;
–CL K defenses apply; i.e. fraud/duress/UD

Transmutations:
–Confidential rel–duty of highest good faith and fair dealing;
–NO CL exceptions to SOF
–CL K defenses apply

Question 13

Long M Presumption

Answer 13

If prop poss during a LT M–gen 10 yrs or more–presumptively prop acquired during M.

Short-term M–Poss alone NOT suff to establish date of acquisition in order to raise CP presumption; i.e. CP proponent has burden to establish acquisition during M.

Question 14

Brace

Answer 14

Post-75–during M titled prop acquired from a 3P in JT is presumptively CP unless valid trans (must satisfy writing 852 writing reqs post-84).

DV–ROR for SP contributions
Death–does NOT change form of title; JT w/ ROS.

Question 15

Special Title Presumption

Answer 15

Historically–at DV CP presumption applied to prop acquired during M that was untitled or titled in 1 S’s name alone
*This can be rebutted by tracing funds used to purchase entirely to SP.
*Vs at Death–presumption that form of ownership on title reps form of ownership so ct can consider an asset titled in 1 S’s name alone to be SP if the source of funds used to purchase is traced to SP.

After Brace–during M titled prop acquired from 3P in JT is presumptively CP–thus CP presumption governs over gen title presumption and 1 S cannot unilaterally sever JT w/o consent of other S.

Question 16

Special Community Prop Presumption at DV

Answer 16

For purpose of DV–prop acquired in JT during M is presumed CP–presumption may be rebutted by either:
1) clear statement in deed; or
2) proof of written agreement that prop is SP–i.e. tracing to SP NOT enough; reqs writing signed by adversely affected S.

Question 17

ROR for SP Used to Improve CP

Answer 17

Applies to SP contributions used to improve CP.

To be reimbursed–SP proponent must trace contributions to SP source; *Reimbursement is w/o interest and cannot exceed net value of prop at time of DV–i.e. value of prop declines below SP contribution.

Question 18

Look out for problem “title taken in joint form”

Answer 18

Signals NO % interest at DV–ONLY reimbursement.

Also improvements to prop–do NOT acquire % interest; just get reimbursement if SP prop can trace.

Question 19

Apportionment of Ownership at DV–CP Contributions to Purchase of 1 S’s SP

Answer 19

Applies to:
1) sep titled prop acquired pre-M when CP has been used to pay debt;
2) also prop acquired during M if CP presumption rebutted by SP tracing (e.g. gift/inheritance).

Vieu Formula–apply if purchase $ debt fully paid:
SP/CP contribution to purchase / Purchase price
X FMV=SP/CP interest

Moore–apply if unpaid balance:
–Any loan balance included in numerator of fraction applying intent-of-lender test;
–ONLY payments of principal on loan included in calc of CP interest.

E.g. CP–$6K principal payments / $57K purchase price X $160K FMV at DV=$16.8K CP interest

SP–$17K SP down + $34K ($40K loan – $6K CP payments) / $57K purchase price X $160K FMV = $143.2K SP
*SP Estate pays $34K loan balance, net amt=$109.2K

Question 20

Credit Acquisitions

Answer 20

If loan taken out during M–creditworthiness is comm asset so very difficult for SP proponent to satisfy; CP presumption applies in establishing character of loan and any prop acquired by loan–SP proponent can rebut CP presumption by tracing intent of lender (i.e. loan proceeds/unpaid balance assigned to SP estate if lender intended to look primarily or solely to SP funds for repayment of loan).

Question 21

MW’s Presumption

Answer 21

Applies to acquisitions/trans pre-75:
1) prop acquired by MW in writing is presumed her SP;
2) prop acquired by MW and other P presumed TIC–unless diff intention in writing;
3) prop acquired by H&W described as “H&W” presumed CP–unless diff intention in writing; if JT taken in unqualified form–i.e. names only–prop presumed held by W (50%) by and by CP estate 50% as TIC.

Question 22

Family Expense Presumption

Answer 22

If both CP/SP in commingled account–CP funds presumed to have been used to pay family expenses.

SP deemed to have been used to meet family expenses ONLY when CP exhausted–when SP used to pay family expenses, NO ROR to sep estate unless agreed otherwise.

Question 23

Tracing into Commingled Accounts

Answer 23

If SP funds cannot be traced–presumed CP

Indirect Tracing (i.e. Exhaustion)–CP presumption rebutted if SP prop can show CP funds exhausted

Direct Tracing–SP prop must provide financial records that are character and date specific and identify the net character of funds on deposit.

Question 24

Community Interest in SP Business

Apply Apportionment of Business/Investment Growth–Van Camp / Pereira

Answer 24

If during M SP prop exerts more than min effort in managing SP business–increase in value is in part CP/SP.

Two Formulas:

Van Camp–if mkt forces responsible for growth:
–comp for labor – family expenses = amt for CP
–value of investment at DV – amt for CE = SP amt

Pereira–personal effort more responsible for increase in value:
–original value of investment + aggregate rate of return (interest) = SP amt
–value of investment at DV – SP amt = CP amt

Formulas do NOT apply to CP business, BUT if court finds that the MEC ended before a sub increase in CP business value, then it will need to apply the formulas in reverse to allocate the increased value for the time period in between separation and divorce to the SP and CP.

Question 25

Assets Difficult to Classify–Recovery of Damages

Answer 25

CA Unitary Approach–if S is injured and gets damages, the $ is CP if acquired during M and before DV; but NOT divided equally at DV unless commingled w/ other assets, thus assigned to injured S.
*Ct may award up to 50% to non-injured S based on econ need “in interest of justice.”

Question 26

Mgmt and Control of Comm RP

Answer 26

Both S must join in executing any instrument by which comm RP is sold, encumbered, or leased >1 yr (even if MEC has ended–i.e. sep but pre-DV)

–Non-consenting S has 1 yr to void conveyance; if so then:
–Grantor still alive–grantee returns prop but gets $ back;
– Grantor dead–TIC

However if buyer is innocent purchaser–i.e. RP was sold in 1 S’s name alone thus buyer did not know it was CP–then ct may not opt to void the sale and instead req seller S to disgorge profits from the sale and reimburse the comm.

Question 27

Comm PP

Answer 27

Either S has absolute power of disposition of comm PP.

Exceptions:
1) Business–prior written notice if selling all PP used in business; but failure will not invalidate;
2) Personal belongings–cannot sell PP used as family dwelling (e.g. mobile home) or furniture of family w/o written consent–non-consenting S can void; and
3) Gift of CP–cannot dispose of PP for less than fair/reasonable value w/o written consent; non-consenting S can either ratify or revoke and sue for return of prop; S that disposes of PP for less than fair value may also be in breach of FD; if grantor dead then set aside 50%.

Question 28

Fiduciary Duties

Answer 28

Post-02: Imposing duties gen owed a non-marital business partner, including:
1) Duty to disclose w/o demand info reasonably req:
2) Duty to account and to obtain consent;
2) DOC; and
3) DOL

Finding a breach of FD reqs–proof of deliberate misapprop or grossly neg or reckless conduct.

Remedies for breach include (action must be brought w/in 3 yrs of knowledge of breach):
1) right to accounting;
2) adding a name onto title;
3) a greater share of CP at dissolution; and
4) atty’s fees and costs

Question 29

Necessaries of Life

Answer 29

SP of non-debtor S liable for (according to ability to pay):
–Debts incurred by other S while living together (or after sep and before DV) for necessaries–i.e. food, clothing, shelter, medical
–If CP funds or debtor SP funds available–then non-debtor S has ROR.
–Otherwise SP of non-debtor SP not liable for debts of other S before or during M if no community benefit–e.g. gambling.

Question 30

Liability for Death/Injury

Answer 30

If act/omission while benefitting comm–liability first satisfied from CP funds and then from SP of tortfeasor S

BUT if not benefiting comm–then SP of tortfeasor S first then CP.

Question 31

Liability After Prop Division

Answer 31

SP owned at division by non-debtor S NOT liable for debt incurred by debtor S before (debt before M confirmed w/o offset to debtor S) or during M–UNLESS debt assigned to non-debtor S.

The comm estate is liable for debts incurred by either S before or during M if for the benefit of the comm–including
(1) K debts for benefit of comm (i.e. loan to comm);
(2) Tort liability when act done for benefit of comm–e.g. driving kids to school

Question 32

Putative S

Answer 32

Reqs:
1) Determination is made that M is void or voidable; and
2) Either P or both Ps believed in GF that the M was valid.

–Prop divided is “quasi-marital”
–GF belief is subj–consider TOC; i.e. efforts to create valid M, P’s personal background, what P knew and was told, and conduct post-M.

Question 33

Non-Marital Cohabitation

Answer 33

Provision of Family Code do NOT apply–instead gen K/prop do; express K should be enforced and consideration indp of sexual rel; if not express then implied? Tough to prove.
–Also equitable principles like quasi-marital–i.e. reasonable value of services – living expenses, provided services directly benefited P.

Question 34

Termination of MEC

Answer 34

DV–comm ends at date of sep

Date of Sep–means complete and final break in marital rel, evidenced by:
–S communicated to other S intend to end M; and
–Conducts of S is consistent w/ intent (can still occupy same house as other S and still be considered sep).

Question 35

CA=no-fault DV

Answer 35

Two Grounds:
1) Irreconcilable differences;
2) Perm legal incapacity to make decisions

Question 36

Marriage Settlement Agreements

Answer 36

Except upon written agreement of the Ps or oral stipulation of the Ps in open ct, ct shall divide comm estate accordingly:

–can order in-kind div of each asset;
–can order comm asset sold
–where econ circumstances warrant, award asset to 1 S–e.g. family business to 1 S depending on allocation of risk / earning capacity of 1 S would be jeopardized.

Question 37

Statutory Exceptions to Equal Div of CP

Answer 37

1) Award / offset of an amt deliberately misapprop by 1 S;
2) Comm estate PI damages;
3) CE < $15K and other S can’t be located.

Question 38

Statutory Exceptions to Equal Div of Liabilities

Answer 38

1) Education loans assigned to S who received education;
2) S incurs tort liability while NOT acting for benefit of comm;
3) If comm debt > comm assets, excess assigned as ct deems just

Question 39

CP Contributions to Education/Training

Answer 39

ROR For (unless written agreement to contrary):
1) Direct expenses–i.e. books/tuition;
2) Payments on loan–that sub enhance educated S’s earning capacity

Reimbursement Reduced If:
1) Rebuttable presumption of sub benefit for comm–i.e. if made more than 10 years before DV (no sub benefit < 10);
2) Both S receive training;
3) Education reduces need for SS

Question 40

Assets Difficult to Classify–Retirement Benefits

Answer 40

Defined Benefit Plans:

1) If employee S is retired at DV–pension benefits divided using time rule–i.e. period employment during M / total period employment

2) If employee NOT retired at DV–two options:
1) Cash-out–determine % owned by comm using time rule (above) X present value
2) Wait-and-See–determine % interest owned by comm X later payments (presumably larger).