Community Property Flashcards
CA Law Community Property Law application
CA Commuunity Property law applies when the parties 1) have a legal marriage, and 2) are domiciled in CA.
Opening Presumption
California is CP state. All property acquired during marriage by the labor or earnings of either spouse is presumed CP. All property acquired before marriage, or after divorce, death or permanent physical separation is presume separate property (SP). All property acquired during marriage by gift, bequest, devise or descent is separate property. At divorce, spouses are entitled to one-half interest in community property. The characterization of an asset as CP or SP depends on 1) the source of the item, 2) actions of the parties that may alter the character of the item, and 3) the statutory presumptions affecting them.
Quasi Community Property
QCP is property that was acquired outsie CA that would be considered CP if it were acquired in CA. QCP is treated as separate property nature until death, dissolution or divorce. At divorce, QCP is considered CP.
Marital Economic Community
Begins at marriage and ends upon divorce, death of either party, or permanent physical separation with no intent to rekindle the marriage. (look for marriage counseling - if Hank and Wanda are attending counseling, they do intend to rekindle the marriage).
Pre-Marital Agreements
A pre-marital agreement allows parties to contract outside of community property laws and is valid if in writing and signed by both parties. These agreements are not valid if involuntary (a party is not represented by independent legal cousnle, a party didn’t have at least 7 days to review the agreement, a party was not fully informed in a language they understand, and the agreement was executed under duress, fraud, undue influence, or lack of capacity) or if unconscionable (terms are unfair or party didn’t understand the otehr party’s property).
A pre-marital agreement allows parties to contract outside of community property laws and is valid if in writing and signed by both parties. These agreements are not valid if involuntary (a party is not represented by independent legal cousnle, a party didn’t have at least 7 days to review the agreement, a party was not fully informed in a language they understand, and the agreement was executed under duress, fraud, undue influence, or lack of capacity) or if unconscionable (terms are unfair or party didn’t understand the otehr party’s property).
Meretricious Relationship
Property is governed solely by the agreement of the unmarried parties. Here, two persons are not holing themselves out as a married couple, but their cohabitation is more than a roommate agreement.
Rights of Each Spouse
Community property may be bought, sold, an manage by either spouse. They may buy or sell CP without the other spouse’s consent. They may not, however, sell property for less than fair market value, an if one spouse is managing a business, they are assume to have primary control over the business’ assets. If the CP is real property, written consent is required of both spouses.
Anti-Lucas Statute
Jointly titled property purchasedd by a married couple after 1987 is presumed community property at divorce. Funds used from separate property to complete this purchase are to be reimbursed to the paying party upon dissolution. Before 1987, Lucas Rule said separate property was presume to be a gift to the community, and not reimburseable.
Fiduciary Duties
Each spouse has a duty to exercise good faith in their marital financial dealings. (Look for the spouse that buys property in their own name with CP funds. Despite titling in their own name, if CP funds are used to purchase, it’s a CP asset.
Joint Checking Account
This is community property and anything purchased from this account is community property, despite any agreement to the contrary.
Personal Injury Awards
If a personal injury award was won by either spouse while married, it will be considere CP. However, upon dissolution, they become SP of the injure spouse. This does not apply in situations where funds were comingled or in cases where the uninjure spouse suffers from some form of economic hardship.
Separate Property Business
If a spouse has a spearate business that gains value through the work of the spouse that owns the business, their work will be accounted for in the CP calculations by using either the Pereira or Van Camp methods. (Remember, if the owning spouse is extremely talented, the CP portion will be larger)
Pereira Method
Used when the spouse’s skill, knowledge, and ability is the driver of growth. Here, the owner spouse recieves the original principal value, plus an annual rate of return calculate at 10% of OPV as SP. The remaining value is CP.
Van Camp Method
Used when the nature of the business itself is the key driver of growth. Community receives a reasonable salary (less business expenses) in return for the community labor. This is the contribution to the community for the owning spouse’s labor. The remaining value of the business is owning spouse’s SP.
Pereira/Van Camp Note
Issue is determing the value of the owning spouse’s labor, which is CP. If the spouse is highly talented, that talent contributes to the CP value (Pereira), but if it was the market that made the business more valuable, the business is SP, then that shouldn’t contribute to CP (use Van Camp.)
Transmutations
In order for spouses to change the nature of an asset, for example SP to CP, they must agree to do so, without the need for consideration. This change must be expressed in writing, signed and consented to by the giver of the gift. Before 1985, they coul be oral, written or inferred. Now, they must be written.
Creditor Access to Property
Creditors may attack CP if the debt was incurred during the course of the marriage. Special rule apply however to debts that were incurred prior to the marriage, where funds of a non-debtor that were not comingled may be untouchable and where SP may be attacked to pay for necessities.
Tracing
When property is acquired during the course of a marriage with co-mingled funds a cout may try to apportion ownership of the asset through tracing. If the record does not provide enough granularity to assign comparative ownership, the property will be considered CP.
Assignment of Debt
Upon dissolution of marriage, the court is free to assign community property debt to either spouse based on their ability to pay.
Loans
In order to determine the character of a loan, the court will look to the intent of the lender. If based on income, the loan will likely be CP, but if based on security consisting of SP assets, it may be deemed SP.
Creditors
A creditor cannot reach the CP of the other spouse after a divorce unless 1) that spouse incurred the debt; or 2) the debt was assigned to that spouse by the court.
Pensions
If a pension is earne during marriage, then it’s CP. Can be paid as received or cashed out and is computed by taking the number of years required to vest, and proportionally dividing the net into CP. As such, if it takes 20 years to vest, and the marriage was for 10 years uring the vesting period, the community property is 50%. Since community property is 50%/50%, the other spouse gets 25%
Medical Bills
Medical bills will be paid from CP. If CP is depleted, SP of the unaffected spouse will be used to make payments, which is entitled to reimbursement by the injured spouse.
Educational Expenses
If CP funds are used for educational expenses, they will be reimbursed to the CP because they personally enhance the receiving spouse’s earning potential. However, exceptions exist if both spouses received CP funds for education, if the education was over 10 years ago, or if the receiving spouse will be better suited pose dissolution to pay for their own needs.
