Community Property Flashcards
General CP Rules Statement
California is a community property state; absent an agreement to the contrary, all property acquired during marriage by the labor of either spouse is presumptively CP, unless acquired by gift or inheritance, in which case it is presumptively SP.
Overcoming CP Presumption
The CP presumption may be overcome by a showing of any of the following:
- Statutory facts: property acquired by gift, bequest, devise, etc.
- Parties agreed property would not be CP (transmutation)
- One spouse took title in a form that evidences a gift to the other spouse
- Purchase funds traced to an SP source
Marital Economic Community
Marital economic community begins at marriage and ends at the death of one spouse, or when there is a permanent physical separation and an intent not to resume the relationship.
Personal Injury Recovery
If the cause of action arises during marriage, then any recovery received is CP; however, at divorce, the CP portion of damages will be awarded entirely to the injured spouse, unless the interests of justice require otherwise.
Pension Time Rule
Vested and unvested retirement pensions are CP tot he extent that the right to benefits was earned during marriage (doesn’t matter if distributed post-divorce).
Pro-ration applies: CP = (years service while married) / (total years employed)
Disability Pay and Workers Comp
To the extent that they are intended to replace marital earnings, they are treated as CP; to the extent intended to replace separate, post-divorce earnings, treated as SP
Severance Pay
Typically understood as replacing a worker’s earnings until able to find a new job; to the extent that they replace marital wages, severance pay is treated as SP
Stock Options - Marriage of Hug
If designed to compensate for past services:
CP = (Years employed to end of marriage) / (Years employed to date option exercisable)
Stock Options - Marriage of Nelson
If designed to encourage employee to stay with the company:
CP = (Years from date granted to end of marriage) / (Years from granting to exercisable)
Business Goodwill
To the extent that developed during marriage, treated as CP.
Evaluated by either a market sales valuation, or capitalization of past earnings.
Education and Training
Education and training acquired during marriage are not treated as CP; however, upon divorce there is an equitable right of reimbursement, with interest, when:
- Community funds used to pay for education or training, or repay a related loan, AND
- Education or training substantially enhances the earning capacity of the spouse
Education and Training - Defenses to Reimbursement
- Community has already substantially benefitted from the education (presumption when 10 years have passed)
- Other spouse recieved a community funded education
- Need for spousal support is decreased as a result of education/training.
Loans outstanding at the time of divorce are assigned to the acquiring spouse.
Term Life Insurance
Pure insurance with no cash surrender value; character of the last premium paid controls
Whole Life Insurance
Cash value; investment feature.
Pro-rata distribution between premiums paid with CP and those paid with SP
Premarital Agreements
Parties may avoid the CP presumption/system by premarital agreement.
Must be in writing, signed by both parties (to satisfy the S/F), unless: there was an oral agreement that was fully executed, and estoppel based on detrimental reliance
Premarital Agreements - Defenses to Enforcement
- Voluntariness: a premarital agreement is not voluntary, and is thus unenforceable, unless the following are satisfied:
- Represented by independent legal counsel (or waived in a separate writing)
- Given at least 7 days to sign
- If not represented by counsel, fully informed in writing of the terms and effect of agreement - Unconscionability: if, when made, there was:
- No full and fair disclosure of the other party’s property or financial obligation,
- Right to disclose was not waved in writing
- Party had no knowledge of the other party’s circumstances
Transmutation Agreements
Parties can agree to alter the character of property, so long as it is in a signed writing that explicitly states that a change in ownership is being made. A statement in a will is insufficient to constitute a transmutation agreement.
(Pre 1985: transmutation agreements could be oral, whether by express or implied agreement)
Exceptions to Writing Requirement of Transmutation Agreements
A transmutation agreement does not need to be in writing if it is a gift of personal property between spouses that is not substantial in nature, considering the financial context of the marriage.
Taking Title in Joint and Equal Form
If spouses take title in joint and equal form (title lists both spouses), there is a presumption that the property is CP for purposes of divorce.
JT: upon death, entire estate held as surviving spouse’s JT
SP funds used on CP - Marriage of Lucas (Death)
Applies upon the death of one spouse.
When there have been SP contributions to CP: taking title in joint and equal form gives rise to a presumption that the property is CP, and absent an agreement that one spouse is to have an SP interest based on contributions, the spouse will be presumed to have made a gift.
SP funds used on CP - Anti-Lucas (Divorce)
Applies upon divorce.
When there have been SP contributions to CP, the presumption that property taken in joint and equal form is CP can be rebutted by:
- Express statement in the deed or instrument that the property is SP, or
- Written agreement that the property, or a portion thereof, is SP
-Contributing spouse is entitled to reimbursement without interest for contributions made to down payments, improvements, or principal payments (DIP)