Community Property Flashcards
Community property preamble
California is a community property state. All property acquired during marriage is presumed to be community property. Property acquired by either spouse prior to marriage; or after permanent separation or by gift, devise, or bequest; or aquired with separate property or profits from separate property, is presumed to be separate property.
Quasi-community property is property acquired while a couple are domiciled in a noncommunity property state. Quasi-marital property is property acquired during a void or voidable marriage.
Permanent separation
A complete and final break in the marital relationship where one spouse has communicated to the other spouse his intent to end the marriage and the spouses conduct is consistent with his intent to end the marriage.
Premarital agreement
- Must not promote divorce
- Writing required, signed by both parties
- Voluntary
i. rep by independent counsel
ii. Presented with agreement and advised to seek independent counsel at least seven calendar days before signing
iii. if unrepresented must be fully informed in writing
iv. not under duress - Must not be unconscionable
Child support may not be waived
Presumptions inferred by title
1. Source SP Title CP 2. Source CP Title SP 3. Gift
- community property presumed
- community property presumed unless written transmutation
- presumed SP if proportional to income
Lucas and anti-Lucas
- Lucas - at death all jointly titled property is presumed CP. No right to reimbursement for SP contributions.
- Anti-Lucas - at separation all jointly titled property is presumed CP. Right to reimbursement for SP contributions.
Tracing methods for comingled accounts
- Family expenses are presumed to be paid with CP
- Exhaustion method - burden to show that at the time the property was purchased all CP funds were exhausted and so there was only SP in the account.
- Direct tracing method - requires showing a direct link and that sufficient SP funds were available and the owner intended to use SP to make the purchase.
Transmutations
An agreement between spouses made during marriage to alter the ownership characterization of property. Requires a writing describing the change in ownership and consent.
Community property fiduciary duties
- Full disclosure
- Good faith and fair dealing
Management of community personal property
- Management and control of community personal property belongs to either spouse with absolute power of disposition.
- A spouse may not make a gift or otherwise dispose of community property for less than fair and reasonable value without the written consent of the other spouse.
Community property testamentary limitation
Each spouse may only dispose of half of the CP by will or trust.
Conveyance of community property to a BFP
Presumed valid but may be voided by the other spouse within one year.
CP contributions to SP business
- Pereira approach favors the CP estate and is used when the spouse’s management skill are the primary reason for the business’ growth.
1. SP interest = SP contribution + reasonable rate of return (10%)
2. CP interest = value of business - SP interest - Van Camp approach favors the SP estate and is used when the character of the business is the primary reason for the business growth.
1. CP interest = Fair market value salary - family expenses paid with business expenses - salary taken
2. SP interest = value of business - CP interest
CP used to improve spouse’s own SP
CP is reimbursed for cost of improvement or increased value of SP.
CP contributions to SP real property
CP gets a proportional ownership interest.
CP interest = CP paid to principal ÷ loan balance
CP share = CP interest x capital appreciation
SP contributions to other spouse’s SP
Reimbursed without interest.
SP contributions to CP
Reimbused without interest.
SP contributions to CP business after separation
- Reverse Pereira
1. CP interest = CP contribution at time of separation + reasonable rate of return
2. SP interest = value of business - CP interest - Reverse Van Camp
1. SP interest = fair market value salary - family expenses - salary taken since separation
2. CP interest = value of the business - SP interest
Personal injury recovery in community property
If spouse was injured during marriage recovery is community property. Upon divorce awarded entirely to the injured spouse. Reimbursement is allowed for money spent on medical expenses.
CP Pension plans and stock options
CP = Total pension x (years married ÷ total years pension)
If stock options are given for past performance then CP. If compensation for future services SP.
Apply to disability/workers comp, severance pay, and bonuses depends what it is seemingly for may be marital earning, post-divorce earnings, or replace a pension (use formula)
Education acquired during marriage
Is not CP. At divorce community is entitled to reimbursement for CP contributions with interest. Reimbursement may be reduced if the community already substantially benefited (10 years presumed), education is offset by other spouses education, or education reduced the need for spousal support.
CP life insurance
Whole life insurance provides lifetime death benefit coverage and acts an investment that accumulates cash value. CP and SP have an interest to the extent they paid for the premiums.
Term life insurance provides death benefit coverage for a specified term in exchange for payment. The policy is SP or CP depending on which paid the latest premium.
CP Business goodwill
Calculated by difference between similarly situated business.
Credit acquired during CP
Rebuttable presumption that property purchased with borrowed funds is CP debt. May rebut by showing that the lender relied exclusively on SP, if based on earning capacity CP.
CP liability for debt
CP is liabile for all debts before or during marriage by either spouse. Exception, earnings of a nondebtor spouse are not reachable if they are held in a separate deposit account over which the debtor spouse has no right to withdraw.
CP liability for injury damage by other spouse
If for benefit of the community then CP first then SP. If not then SP first then CP.
Divorce
All community assets and debt are split evenly and each spouse retains their separate property debt and assets.
Death
Decedent may devise all separate property and half of the community property.
If a spouse dies intestate the surviving spouse is automatically entitled to the entire CP and 1/3 to 1 whole of the SP depending on if the decedent left issue. (All if none, half if one or parents, 1/3 if 2 or more issue)
