Community Property Flashcards
General Community Property Statement
CA is a Community Property State. Consequently, ALL property acquired DURING MARRIAGE is presumed to be CP; all property acquired before or after marriage is presumed to be SP.
In addition, CA has a specific presumption that EARNINGS ARE CP, and any property acquired by GIFT OR DEVISE is SP.
Individual Asset Factors
To characterize property as CP or SP, the courts look to three factors:
1) the SOURCE of the property;
2) ACTIONS taken by either party that may have altered the character of the property; and
3) WHETHER there are any STATUTORY or COMMON LAW PRESUMPTIONS that determine the character of the property.
Source Rule
Property takes the character of the item used to acquire or produce it.
Earnings
Presumed CP during marriage, SP before/after. Special Categories:
>Stock Option - when vested? if after marriage, look to intent of investment.
>Pension Benefits - # Years employed DURING MARRIAGE /# Years Necessary for Pension
>Disability, Worker’s Comp, Severance - argue as wage replacement (CP) or pension replacement (SP).
Quasi Community Property
Any property acquired by either spouse that WOULD HAVE BEEN Community Property HAD THE SPOUSE BEEN DOMICILED IN CA at the time of acquisition.
Personal Injury Damage
If TORT RECOVERY = if the Cause of Action arose during marriage, CP (unless spouse was tortfeaser, then SP).
If TORT LIABILITY = if committed for CP or SP (arose from SP Fraud claim, use SP), then satisfy out of that first, then reach for other assets (non-tortfeasor spouse’s SP not in reach).
Life Insurance
Life Insurance payouts take character based on how they were funded and what type of policy it is.
- If policy FUNDED by CP, but benefits a 3rd Party, 1/2 is CP, and 1/2 goes to 3rd party upon payout.
- If a TERM POLICY, the last payment indicates character (from CP makes it CP).
Education and Training
Education is NOT CP; if funded with CP money it is subject to reimbursement upon divorce.
Exception: the Community has SUBSTANTIALLY BENEFITED from education (10+ years from education ending). If both parties received education, they offset.
Actions
Certain actions taken during the course of marriage can alter the character of the community’s property. These include Pre-Marital Agreements, Transmutations, Gifts, and Comingling of funds.
Pre-Marital Agreements
To be valid, a pre-nup must be IN WRITING and SIGNED BY BOTH PARTIES. If not valid on it’s face, can still show validity if DETRIMENTALLY RELIED UPON by the parties.
Defenses to Enforcement:
- INVOLUNTARILY SIGNED (presumed involuntary if party does not have independent counsel + 7 days to review)
- UNCONSCIONABILITY (court can find if NOT FULL DISCLOSURE of party’s finances at time, or not independent legal counsel)
Transmutation
An agreement during marriage that changes the character of property, such as a promise. DOES NOT NEED CONSIDERATION. Validity depends on date:
1984 or earlier - oral agreements are valid
1985 or later - must be i) in writing, ii) signed by opposite spouse, and iii) expressly state change.
Gifts
If a gift to the spouse, there must be i) a writing, ii) intent, and iii) actual delivery of property. (MAY BE IMPLIED, when a spouse pays down CP debt with SP).
If a gift to a 3rd party with CP, MUST HAVE spouses CONSENT. If no consent, either restored to CP estate, or if after death, spouse receives 1/2 of gifted property.
Comingling
If CP and SP are mixed (commingled) during marriage, the property IS NOT TRANSMUTED, but is subject to a PRESUMPTION OF CP (FAMILY EXPENSES are presumed CP).
Exception:
-EXHAUSTION (no more CP and a deposit of SP for an asset = asset is SP)
Apportionment (Van Camp/Pereira)
When a BUSINESS IS SP to begin with, and the time, energy, or direct services of a spouse are used to ENHANCE THE VALUE OF A BUSINESS, then property is subject to either Pereira or Van Camp valuation methods of accounting.
Pereira - used if the MANAGEMENT, SKILL and LABOR of one spouse was the PRIMARY cause of growth. Business is classified as SP, apportioned market growth (7%), and any additional gains are CP.
Van Camp - used if the CHARACTER or GOODWILL of one spouse was the PRIMARY cause of growth. An annual salary is assigned to that spouse (CP), EXPENSES PAID FROM CP is subtracted, and remainder goes to SP.
Reverse Van Camp/Pereira
When a BUSINESS IS CP, but increased in value AFTER SEPARATION but BEFORE DIVORCE proceedings.
Reverse Pereira - IF an increase in value the MANAGING SPOUSE IS entitled to any gains above market growth (7%).
Reverse Van Camp - IF an increase in value the COMMUNITY is entitled to the remainder after salary and expenses are deducted from gains.
