Community Property Flashcards
1.
Community Property Intro Paragraph
California is a community property state.
* In a community property state, the marital economic community begins upon marriage and ends at divorce, death of a spouse, or a permanent separatiom
* 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.
* 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.
Community Property Presumptions
Community Property Presumption - 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 California is presumptively CP.
**Separate Property Presumption: ** Property acquired by either spouse before marriage, by gift or inheritance during the marriage, or after divorce or permanent separation is presumed separate property.
Special Community Property Presumption - **Anti-Lucas **Legislation (after January 1, 1984)
* As of 1987, all jointly held property acquired during marriage (tenancy in common, joint tenants, etc.) is presumed to be CP at death or divorce.
* This presumption can be **rebutted **by an express writing evidencing the spouses’ intent to hold the property as SP.
* If a spouse contributes SP to the purchase of the property, she/he has a right to reimbursement for the amount of contribution (but not any increase in value).
**Lucas: **Property taken into joint for was presumed to be CP and any SP used to purchased the property was presumed to be a gift and no right to reimbursement.
Lucas does not apply to real property.
Title Presumptions
Form of title can be used to rebut presumption: The form of
title for a piece of property may rebut the original presumption as CP or SP when title is inconsistent with the original presumption.
Source of funds SP, but title is CP: When the source of funds for a property is SP, but title is taken jointly, it is presumed to be a gift to the community and characterized as CP, unless there is a contrary written intent, subject to reimbursement at divorce (Lucas)
Source of funds CP, but title is SP: When the source of funds for a property is CP, but title is taken by one spouse only, the property will retain its characterization as CP, unless there is a written transmutation.
**Exception where title is evidence of a gift: **Where a spousr intends to give the other spouse a gift and title is taken in a way to evidence that gift, the property will be the SP of the gifted spouse. There is no writing requirement.
Quasi-Community Property
Quasi-CP is property that is acquired while the couple is domicled outside of CA that would have been treated as CP if they had been domiciled in CA.
QCP retains its separate property nature when the parties become domiciled in California. It will be treated as CP upon divorce or death of the titleholding spouse.
Commingling and Tracing
**Commingling **
Commingling occurs when the SP of one spouse is mixed or combined with CP or the SP of another.
**Tracing: **
When property is acquired using funds from a commingled account, the burden of proof is placed on the SP to proponent to show that SP funds were used to purchase the asset. The SP proponent must use either the exhaustion method or the directing tracing method to do so.
**Exhaustion: ** 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).
**Direct Tracing: **The spouse proves that there (1) were sufficient SP funds available at the time the asset was purchased and (2) she intended to use his SP funds to purchase the asset.
Pre-Marital Agreements
Premarital Agreements can are enforceable but they must be in writing and voluntary.
* Voluntary requires that: (1) independent counsel or waived right to independent counsel in writing; (2) 7 days to independently review; (3) acknowledgment of understanding of the terms in writing.
No:
- promote divorce.
- Can’t be unconscionable, if also no disclosure.
- Can’t waive child support
(unless detrimental reliance)
Title Presumptions
Title Form: Can be used to rebut presumption but NOT dispositive.
* Source of funds SP, but title CP, presumed gift to community
* Source of Funds CP, but title is SP, property is retained as CP unless transmutation
- Special Title Presumption rebuttable presumption that title is as stated at death
Jointly Titled Property: Applies to jointly titled property where there is an SP contribution
* Lucas: at death all jointly titled property of either spouse is presumed CP at the death of either spouse, unless express agreement otherwise
* * No Right to reimbursement for SP contributions
* Anti-Lucas: at divorce/separation all jointly titled property is presumed CP, unless express agreement otherwise.
* Right to reimbursement for SP contributions
Transmutation
Transmutation allows a spouse to change the character of property from CP to SP, SP to CP, or from one’s SP to the other.
Transmutation requires: (1) a writing; (2) signed by the party giving up the property; and (3) express intent and acknowledgement of transmutation.
*Prior to 1985 Oral agreements were sufficient to transmute property as long as supported by evidence.
Spousal Gift Exception
A gift need not meet the above requirements if: (1) to the other spouse; (2) for their personal use; and (3) of insignificant value to their combined economic status
This is limited to personal, tangible gifts such as clothing and jewelry.
However, if the gift is substantial in value (considering the financial circumst
Non-married Couples
Putative Spouse: A putative spouse may rely on community property principles and is entitled to a share of the community property upon death or divorce. However, the putative spouse’s rights stop accruing when he/she discovers the marriage is not valid.
- The property acquired during the good-faith time is quasi-marital property, treated as CP.
Unmarried Cohabitants: An unmarried couples’ property will be distributed based on contract principles. Express contracts setting forth the distribution of property will be enforced unless they are based upon sexual services (prostitution).
Fiduciary Duties & Management/Control
Fiduciary Duties
* Duty of Good Faith and Fair Dealing: Don’t take advantage of each other
* Disclosure of Material Facts: Equal information and full disclosure of all assets and debts
Management: Each spouse has exclusive mgmt and control of his SP and equal mgmt and control of CP. Either spouse can buy, sell, or spend all CP. EXCEPT:
* Personal Property Gift: spouse may not make a gift or dispose of CP personal property for less than fair and reasonable value without written consent of spouse
* Real Property: Both spouses must jointly execute written instrument in order to validly convey CP real property. A sale to a BFP can be clawed back w/in 1 year
* Testamentary Limits/Elections: Spouse can only dispose of 1/2 CP through wills or trusts. If they give more than that, surviving spouse will have the option to take their share under the will or elect to have the CP returned.
**Breach: ** The innocent spouse can seek a greater share of CP due to the breach of fiduciary duty
Improvements
or
Contributions from one Source to Another
SP to CP: Reimbursement
SP to other SP: ÷When a spouse uses her SP to improve the other spouses SP there is a statutory right to reimbursement.
CP to SP: When a spouse uses CP to improve the other spouse’s SP, the community is entitled to either:
* reimbursement for the funds expended or
* the enhanced value of the property, whichever is greater.
**Loans: **
In the absence of evidence that the seller relied “solely” on the purchaser’s SP in extending credit or a loan, the acquired property or loan will be characterized as community property.
Community property mortgage payments
on separate property
**Moore: **
When community property is used to make mortgage payments on separate property, the community acquires a proportional ownership interest in the property to the extent that the payments reducce the principal debt.
**CP interest **= the amount CP contributed to the principal
reduction ÷ total original amount of loan/balance.
CP share = the CP interest (see above) is multiplied by the
amount of capital appreciation
Payments toward interest, taxes, and insurance are excluded because they do not contribute to the equitable interest. In re Marriage of Moore, 28 Cal. App. 3d 366 (1980).
Tort Recovery
Personal Injury
Personal injury awards and settlements are CP if the cause of action arose (the injury occurred) during the marriage. If it arose before the marriage of after permanent separation, then the award or settlement is the SP of the injured spouse.
**@ Divorce: **
Despite the CP characterization, upon divorce, CP personal injury awards and settlements are assigned entirely to the injured spouse so long as they have:
1. not been commingled with CP funds; and
2. the interests of justice do not require otherwise.
A cause of action that arises after permanent physical separation is the injured spouse’s SP, but the injured spouse must reimburse the community or the other spouse’s separate estate for expenses paid for the injury.
Pensions Plans
“Time Rule”:
years married while earning pension total years working at job = % of pension that is CP. Divide in half to get each spouses share.
If earned entirely before marriage: SP
Stock Options
Hug: Used as reward for past work or as incentive for employment: [(Date of Hire - Date of Seperation) ÷ (DoH - Date of Vesting)] * Shares Exercised = CP.
Nelson: Used as incentive for future work. [(Date of Grant - Date of Separation)/(DoG - Date of Vesting)] * Shares Exercised = CP.
