Community Property Flashcards
Community Property Presumption: Guiding Principle
California is a community property (CP) state. The marital economic community (MEC) begins upon marriage and ends at divorce, the death of a spouse, or permanent separation.
All earnings during the marriage, as well as all property acquired with those earnings, are presumed to be CP. All earnings and property acquired before the marriage or after permanent separation or divorce is presumed to be separate property (SP).
In addition, all property acquired by gift, bequest, devise, or descent is presumed to be SP, even if the property is acquired during the marriage.
Quasi-Community Property
Quasi-Community Property (QCP) is property acquired while living in a non-CP state that would be considered CP if the spouse(s) had been living in California when the property was acquired.
QCP retains its SP nature (and may be transferred) until: (a) dissolution/divorce of the marriage; OR (b) death of the acquiring spouse. At divorce, QCP is treated like CP.
At death, the surviving spouse has a 1/2 interest in QCP titled in decedent’s name. However, the decedent DOES NOT have any rights in QCP titled in the surviving spouse’s name.
Married Woman’s Special Presumption
Before January 1, 1975, if a married woman was the title owner to property without her husband or if she was on the title with a third party, then the property was presumptively her SP. A husband could rebut by showing clear evidence that he did not intend to create a gift.
End of the Economic Community
The economic community ends when: (a) either spouse dies; OR (b) there is permanent physical separation
Permanent Physical Separation
Permanent separation occurs when there is a complete and final break in the marital relationship, which must be proved by evidence that:
(i) at least one spouse has expressed the intent to end the marriage and
(ii) the spouse’s conduct is consistent with the intent to end the marriage
Validly Married Couples
Elements of a valid marriage,
1) Consent;
2) Sufficient age to consent: at least 18 years old; If person is under 18, the person needs a court order and parental consent to marry.
3) Formal legal procedures (i.e., license, solemnization, and authentication)
Putative Spouse
A putative spouse is one that has a good faith reasonable belief that he/she is married.
The putative spouse is entitled to “quasi-marital” property (QMP), which is treated like CP at death or divorce.
The right to QMP ends once the person learns he/she is not lawfully married, BUT the person retains rights to previous QMP acquired while the person had the good faith belief.
Unmarried Cohabitants
Generally CP laws doe not apply.
Under the Marvin case, courts may enforce express agreements between cohabiting couples that are not married (a meretricious relationship), as long as they are not expressly based on performance of illicit sexual acts.
Courts may also consider factors that indicate implied agreements in order to protect the parties’ expectations. All funds kept in a separate account of a person in a meretricious relationship (that are not commingled), are deemed separate property.
Equal Rights of Spouses to Manage Property & Transfers to Third-Parties
Each spouse has equal rights to manage and control CP. Thus, a spouse MAY sell, encumber, or otherwise dispose of CP without the other’s consent.
Equal Rights of Spouses to Manage Property & Transfers to Third-Parties Personal Property Exception
Personal property transfers of CP for less than fair and reasonable value (written consent is required) are not allowed
Equal Rights of Spouses to Manage Property & Transfers to Third-Parties Business Management Exception
If one spouse is managing a business, he/she is given primary management and control over the business.
But, that spouse is obligated to provide prior written notice to the other spouse of any sale, lease, exchange, encumbrance, or other disposition of all or substantially all of the property used in the operation of the business.
Equal Rights of Spouses to Manage Property & Transfers to Third-Parties Transfers of Community Real Property Exception
Transfers of Community Real Property require both spouses to join the transaction.
If one spouse sells or encumbers community real estate without consent, the non-consenting spouse may void the transaction (must be voided within one year if sold to a bona-fide purchaser, otherwise it is voidable at any time).
Equal Rights of Spouses to Manage Property & Transfers to Third-Parties Inter Vivos Gifts of CP Exception
Inter Vivos Gifts of CP require written consent. Where one spouse gifts CP to a third-party without consent, the other spouse may void the gift during the donor’s lifetime, or may void half of the gift after the death of the donor.
Fiduciary Duties of Spouses
Marriage is a confidential relationship which imposes a duty of the highest good faith and fair dealing on each spouse, and neither shall take any unfair advantage of the other.
Specific Fiduciary Duties
Specific duties of a managing spouse are the duties to disclose, to account, and to obtain consent. The duty to disclose states that the manager of community property is required to make full disclosure to the non-managing spouse of all material facts and information regarding the existence, characterization, and valuation of all assets in which the community has or may have an interest and debts for which the community is or may be liable. The duty to obtain consent requires that the managing spouse to obtain the consent of the non-managing spouse when making gifts, conveying or encumbering property, disposing of business property, or entering into leases of more than one year.
Fiduciary Duty Breach
The following are a breach of this duty: (1) an intentional, grossly negligent, or reckless dissipation or destruction of property; (2) a gain in financial advantage at the expense of the other spouse. In such instance, the responsible spouse’s SP can be used to reimburse the community.
The spouse who obtained the advantage will have the burden to prove that the transaction was entered into by the other spouse freely and voluntarily, with full knowledge of all the facts relevant to the transaction, and the basic effect of the transaction.
Remedies for Fiduciary Breach
A non-managing spouse has a claim against the managing spouse for any breach of a fiduciary duty that results in the impairment of the non-managing spouse’s present undivided one-half interest in the community estate. Finding a breach of fiduciary duty requires proof of deliberate misappropriation or grossly negligent or reckless conduct. Remedies include the right to an accounting, adding a name onto title, a greater share of the CP at dissolution, and attorney’s fees and costs. The action must be brought within three years from the date the spouse bringing the action had knowledge of the breach.
Taking Title
If a spouse takes title to an asset in their name alone, this will not change the nature of the property, if the source was CP .
Special Community Property Presumption
The special community property presumption applies at divorce and permanent separation and presumes that jointly held property is community property. This means if a married couple holds title to property as joint tenants and the couple divorces or permanently separates, then the property is presumptively CP. The special community property presumption can be rebutted by clear and convincing evidence that both spouses did not intend to hold the property as community property at divorce. Since January 1, 1984, this contrary intent must be evidenced by a clear statement in the deed or another form of writing.
Special Title Presumption
The special title presumption, which applies only at death, presumes that the form of ownership on the title represents the form of ownership interests of the spouses. If the asset is untitled or titled in only one spouse’s name, then the asset may be considered SP if the source of the funds used to purchase the asset is SP. The special title presumption can be rebutted by clear and convincing evidence that both spouses did not intend to hold the property as stated in the title.
Commingled Accounts Accounting Methods & Tracing
Commingling occurs when the SP of one spouse is mixed or combined with the CP or the SP of the other spouse. When property is acquired using funds from a commingled account, the burden of proof is placed on the SP proponent to show that SP funds were used to purchase the asset.
The SP proponent must be able to trace the funds back to a SP source using one of the two following methods: the exhaustion method or the direct tracing method.
Exhaustion Method
AND Direct Tracing Method
**Exhaustion Method
**Under the exhaustion method, the SP proponent must prove that CP funds in the account were already exhausted by the payment of family expenses at the time that the asset was purchased.
**Direct Tracing Method
**Under the direct tracing method, the SP proponent must prove that there were sufficient SP funds available at the time that the asset was purchased and that she intended to use the SP funds to purchase the asset
