Community Property Flashcards
What is the Community Property Presumption in California?
California is a community property state. All property acquired during marriage is presumed to be community property (CP), irrespective of title. Earnings from marital labor during marriage are considered CP.
What constitutes Separate Property (SP)?
Separate property includes property acquired:
- before marriage or after separation;
- by gift or inheritance;
- as profits from separate property: AND
- with separate funds.
How do courts determine the character of an asset?
To determine the character of an asset, courts trace back the source of funds used to acquire property. A mere change in the form of property does NOT change its characterization.
What happens to CP at divorce or death?
At divorce or death, all CP is divided equally between spouses, while a spouse’s SP remains their own.
What is Quasi-Community Property (QCP)?
QCP is property acquired while living outside of CA that would have been considered CP if the party had been living in CA when the asset was acquired.
What happens to QCP at divorce or death?
At divorce, QCP is treated like CP – divided equally.
At death, the surviving spouse has a 1/2 interest in QCP titled in the decedent’s name.
What is an Illusory Transfer of QCP and what may a surviving spouse do about it?
The surviving spouse may compel an inter vivos transferee of QCP to restore 1/2 of the property value when an illusory transfer exists.
An illusory transfer exists when:
- the decedent died while domiciled in CA;
- consideration of substantial value was NOT received;
- the transfer was made without the surviving spouse’s written consent or joinder; AND
- the decedent retained some interest or control of the property – where decedent
- had a possession, enjoyment, or the right to income from the property,
- had a power to revoke or to consume, invade, or dispose of the principal for the decedent’s own benefit, OR
- held property with another that had a right of survivorship.
What is the Married Woman’s Special Presumption?
The presumption gives the wife SP if title is in her name alone and the property was acquired before 1975.
When does the economic community end?
The economic community ends when either spouse dies or there is permanent physical separation.
What is a Putative Spouse?
A putative spouse has a good faith belief that he/she is married and is entitled to quasi-marital property (QMP), treated like CP at death or divorce.
What are the rights of Unmarried Cohabitants under the Marvin case?
Courts may enforce express agreements between cohabiting couples, as long as they are not based on illicit sexual acts.
What are the equal rights of spouses regarding property management?
Each spouse has equal rights to manage and control CP without the other’s consent, with exceptions for personal property transfers, business management, community real property, and inter vivos gifts.
What are the fiduciary duties of spouses?
Marriage imposes a duty of good faith and fair dealing on each spouse, prohibiting unfair advantage.
What is the Moore Principle regarding commingled funds?
When property is acquired with commingled funds and no title presumption, CP and SP are apportioned based on their contributions.
What is the Anti-Lucas Statute regarding jointly titled property?
Jointly titled property acquired from 1987 to present is presumptively CP at divorce, but SP used for purchase is entitled to reimbursement.
How are personal injury awards treated during marriage?
If the cause of action arose during marriage, personal injury awards are CP. If it arose before, after marriage, or after separation, they are SP.
How are disability and workers’ compensation payments treated?
Disability payments replacing marital earnings are CP; those replacing post-marriage earnings are SP.
What are the Pereira and Van Camp tests for SP businesses?
Pereira applies when business growth is due to spouse’s labor; Van Camp applies when growth is due to the nature of the business.
How is goodwill of a business characterized?
Goodwill generated by community labor is CP and valued by either market value or capitalization of excess earnings methods.
How is whole life insurance characterized?
CP interest in a whole life insurance policy is apportioned using the Buy-in Rule based on premium payments.
How are stock options characterized in marriage?
Stock options are CP if exercisable during marriage; if awarded during marriage but exercisable after, their character depends on how they were earned.
What is the pro-rata rule for community property funds used to pay separate property loans?
Community is entitled to a pro-rata share of the property for amounts that reduced the principal debt on the asset.
What is a transmutation?
A transmutation is an agreement to change the character of an asset during marriage, valid only if in writing and signed by the adversely affected spouse.
What are prenuptial agreements?
Prenuptial agreements allow parties to contract out of community property laws and are valid if in writing and signed by both parties.
What is required for CP to be transmuted into SP by gift between spouses?
CP can be transmuted into SP by gift if the gift is: (1) tangible property of a personal nature; (2) used solely by the recipient spouse; AND (3) insubstantial in value considering the lifestyle of the parties.
What was the status of oral and written transmutations prior to 1985?
Prior to 1985, oral (express and implied) and written transmutations were valid.
What are the requirements for a prenuptial agreement to be valid?
Prenuptial agreements are VALID if in writing and signed by both parties.
Under what conditions are oral prenuptial agreements enforceable?
Oral agreements are enforceable if: (a) made orally and fully performed; OR (b) if the party detrimentally relied on the agreement.
What makes a prenuptial agreement unenforceable?
A prenuptial agreement will be deemed unenforceable if it is (a) involuntary, (b) unconscionable, OR (c) encourages divorce.
What defines an unconscionable prenuptial agreement?
A prenuptial agreement is unconscionable if: (a) the terms are unfair; OR (b) if a spouse did not know the extent of the other spouse’s property before signing.
What conditions must be met for a prenuptial agreement to be considered voluntary?
A prenuptial agreement is deemed involuntary UNLESS: (1) the party was represented by independent legal counsel; (2) the party had not less than 7 days to review the agreement; (3) if unrepresented, the party was fully informed of the terms and proficient in the language; AND (4) the agreement was not executed under duress, fraud, undue influence, or lack capacity.
What can creditors reach to satisfy debts?
Creditors MAY reach CP to satisfy debts incurred before or during the marriage, including debts for child and spousal support.
When are a non-debtor spouse’s earnings protected from creditors?
A non-debtor spouse’s earnings are protected if: (1) the debt occurred before the marriage; AND (2) the earnings were held in a separate account with no comingling.
What can generally be reached to satisfy personal debts?
A person’s SP can only be reached to satisfy their personal debts, including debts incurred after marriage.
What are exceptions where both CP and SP may be reached to satisfy debts?
Exceptions include: Necessities (food, shelter, medical expenses) and Tort Liability (if the debtor was acting to benefit the community).
Under what conditions can creditors reach CP awarded after divorce?
Creditors CANNOT reach CP awarded to a spouse after divorce UNLESS: (a) that spouse incurred the debt; OR (b) was assigned the debt by the court.
When is a debt considered incurred?
A debt is incurred at the time the obligation to pay arises.
What is the general rule for distribution of community assets upon divorce?
Upon divorce, each spouse gets 1/2 of each community asset UNLESS the court determines a different division is required.
What are some exceptions that may change the division of community assets?
Exceptions include: (1) misappropriation by one spouse; (2) separate debt; (3) educational debts assigned to the spouse who received the education; (4) tort liabilities assigned to the tortfeasor spouse; (5) family home awarded to the custodian of minor children; and (6) closely held corporations.
