Community Property Flashcards
Factors Considered on Appeal:
Age and Physical Health of the parties Relative earning ability and power Future support needs Size of estate Benefits spouse would have received from continued marriage Fault
Standard of Review on Appeal:
Abuse of Discretion: the division is so disproportionate as to be manifestly unfair and unjust
Characterization of Marital Property arises in
- Death
- Divorce
- Purposes of creditor’s rights
- Purposes of Management and Control
Standard for Division of marital property
Just and Right Division
Separate Property
- Proper acquired by 1 spouse before marriage or after divorce
- Property acquired by gift or inheritance
- Property that is acquired as a result of personal injury recovery
“Gift to the community” =
Gift of 50% to each spouse
Gift purchased with separate property funds and placed in donee spouse’s name =
Separate property gift to that spouse
Gift purchased with community property funds and placed in donee spouse’s name =
Presumed to be community property
Gift purchased with community property funds and placed in donee spouse’s name, stated as separate property and both spouses participate =
Separate property of the donee spouse
Community property
Anything that is not separate property and acquired by the spouse during marriage
Assets acquired during the marriage
Assets purchased on credit during the marriage
Assets possessed by the spouses at the time of divorce, at time of creditor’s claim, and at time of death
Objection to Community Property Presumption
Objecting spouse must show clear and convincing evidence that it is not community property
Documentary evidence required
Spousal testimony insufficient
Inception of title rule
Characterization of property is determined at the first point when the property is acquired
Assets acquired over time > when first payment is made
Assets purchased with commingled bank account funds during marriage =
presumed to be community property
Tracing methods
- Community Out First Rule
- Lowest Intermediate Balance
Used to determine whether separate or community property when purchased with commingled funds
Community Out First Rule
In determining whether the moneys left in a bank account are separate property or community property, the rule is that community property moneys are used first
Lowest Intermediate Balance Rule
If a bank account has both separate funds and community funds, and the balance of the account drops at some point below the amount of the separate property funds deposited, the court determines what portion of the commingled account should be separate funds by determining the lowest balance during the period between the date that the separate property was first deposited and the date of divorce.
Equitable Interests
- Economic Contributions - cases filed before 2009
2. Reimbursement - cases filed after 2009
Economic Contributions
Community will get a percentage of the current equity, based upon the community contribution that went towards debt reduction, as a fraction of total debt reduction.
Reimbursement
The amount the community has actually contributed
Can also contribute time, toil, and talent
Things that do not qualify for reimbursement
- Living expenses
- Student loan payments
- Payment of child support, maintenance, or alimony from a prior marriage
- Financial contributions towards a professional degree
Income from separate property stock =
Cash dividends = community property
Stock Dividends/Split = separate property
Capital Gain = separate property
Stock Options = apportion value based on amount of time involved during the marriage; ratio applies to number o shares that can be exercised; that amount is community property
Trust Income Interests
A trust is separate property, as is income from that asset
Exception: community property if the spouse has an unrestricted right to invade the trust corpus
Mineral Interests =
Separate property mineral interests that generate income remain separate property
Delay rentals = community property
Quasi-community property
Applies at divorce
if the property would have been community property had the couple been domiciled in TX when the property was acquired
Life Insurance Policies =
Characterization of first premium payment
Community made be entitled to reimbursement for any premiums paid with community funds
Retirement Benefits =
Community property if earned during marriage, vested or not
Defined Benefit Plan =
based on number of years of service
Employee spouse’s years of service while married/ Total years of service = community property fraction
Value of benefits frozen at time of divorce by JAR
Determine spouse’s interest in a defined benefit plan by
- Cash-out - present cash value at time of divorce
2. If, as, and when received decree
Defined Contribution Plan =
Use tracing methods to separate amounts contributed while employee was married from amounts while not married
Military Retirement Benefits
Determine in accordance with state law
Military Disability Benefits
Preempted by federal law –> not community property
Workers’ Compensation Benefits =
Follow the time rule
If lost earning capacity during marriage, community property
Before or after, separate property
Business Interests
The amount of reimbursement is calculated using the value of time, toil, and talent expended, less the value of time, toil, or talent reasonably necessary to maintain the business, and less any compensation already received by the operating spouse
Partnership Distributions
if the partnership was created before marriage, the partnership and related assets are considered separate property, but any distributions during the marriage are community property.
Personal Injury Awards =
Generally separate property, except for -
- Lost earning capacity
- Lost wages
- Medical expenses paid by the community
A valid premarital agreement must be
- In writing
- Signed by both parties
Does not need consideration
Scope of a Premarital Agreement
- Characterization of an asset
- Distribution of assets upon death or divorce
- Spousal support
- Choice of law
- Any other matter that does not violate public policy
Cannot be a conversion agreement
Cannot agree to modify, waive, or relinquish child support
Challenges to Premarital Agreements
- Establish the agreement was executed involuntarily
2. Establish the agreement was unconscionable
Must show a premarital agreement was unconscionable by showing
- there was no full and fair disclosure of assets and obligations
- There was no waiver of the right to receive such disclosure
- Party had no way of discovering the other party’s assets and obligations
Post-Marital Agreements
- Conversion Agreement
- Partition Agreement
- Community Property Survivorship Agreement
- Palimony Agreements between Unmarried Cohabitants
Conversion Agreement
Separate property will be converted into community property
Intent of the parties is key
Must be clearly set out in the agreement
Partition Agreement
Parties can agree to an unequal distribution of community property
Defenses to a Partition Agreement
Common law defenses
Must be involuntary or unconscionable
Community Property Survivorship Agreement
Allows for the right of survivorship for community property upon death
Requirements for Community Property Survivorship Agreement
- Must contain the language, “with the right of survivorship” in order to pass to the surviving spouse
- Must be in writing and signed by both parties
- Agreement can be revoked by either spouse by written notice to the other
- Agreement is valid and does not need a court order (although one may be needed for enforcement)
Palimony Agreements - requirements
Valid if in writing and signed by party against whom agreement is to be charged
Property acquired by Adverse Possession =
If started before marriage, but ended during = community property
If started before marriage under color of title = separate property
Types of Marital Property for Management Purposes
- Separate property
- Sole Management Community Property
- Joint Management Community Property
Management of Separate Property
Each spouse has management and control over his separate property
The other spouse has no management powers over her spouse’s separate property
Sole Management Community Property
If the property is held in one spouse’s name or is in the possession of one spouse without any documentation regarding joint ownership, the property is presumptively that spouse’s sole management community property
Management of Sole Management Community Property
Under the sole management and control of one of the spouses
Joint Management Community Property
If property is titled in both spouses’ names, it is presumptively considered joint management community property, and both spouses must agree upon any encumbrance or disposition of the property.
Joint management community includes sole management community property that is mixed together with the other spouse’s sole management community property
Management of Joint Management Community Property
both spouses have equal rights to manage and control the property
General Presumption regarding Contract Liability
Debts acquired during the marriage are joint debts, which subject all separate and community property to satisfy the debt
If only one spouse is obligated on a contract
Creditors can only reach property over which the debtor spouse has management and control
Tort Liability
depends on when the tort occurred
During the marriage: creditor can reach all community property
Before the marriage: can only reach property under tortfeasor’s management and control
Factors Considered in the Division of Community Property
- Spouses’ capabilities and abilities
- Benefits that the innocent spouse would have derived from continuation of the marriage
- Each spouse’s relative business opportunities, financial condition, obligations
- Education of each spouse
- Physical Health
- Age disparities
- Size of separate property estates and assets
- Nature of assets
- Duration of the marriage
- Fault
Spousal Maintenance
Temporary rehabilitative measure
Eligibility for Spousal Maintenance
- He or she lacks sufficient property to provide for his or her minimum reasonable needs AND
- One of the following:
a. Spouse was the victim of an act of family violence that happened within the prior 2 years before the date on which dissolution was filed, and that the other spouse was convicted or received a deferred adjudication for an act of family violence
b. The spouse was unable to support herself through employment because of an incapacitating physical or mental disability
c. The spouse was the custodian of a child of that marriage who requires substantial care and supervision because of a physical or mental disability, rendering it so that the spouse cannot be employed outside the home.
d. The spouse was married to the other spouse for more than 10 years and lacks the ability and earning capacity to seek employment that would provide for his or her minimum reasonable needs
Defense to Spousal maintenance
Party seeking maintenance has not exercised due diligence in earning sufficient income or in developing the necessary skills to provide for his or her own minimum reasonable needs
Factors Determining Maintenance
- Each spouse’s ability to provide for his or her minimum reasonable needs
- Education and employment skills of the spouses and the time necessary to acquire sufficient education or training to become financially independent
- Duration of the marriage
- Age, employment history, earning ability, and physical health and conditions of the spouse seeking maintenance
- Effect on each spouse’s ability to provide for his or her minimum needs and also provide for child support
- Acts by the parties that resulted in excessive or abnormal expenditures or destruction of community property or jointly held property (economic misconduct)
- Contributions of the spouses to the education, training, or increased earning capacity of the other spouse
- Separate property owned by each spouse
- Contributions of a spouse as a homemaker
- Marital Misconduct, including adultery and cruel treatment
- History of family or domestic violence
Duration of Spousal maintenance award
5 years: marriage was 10-20 years;
Exception to Duration of Spousal Maintenance
- Physical or mental disability of the spouse seeking maintenance
- Spouse seeking maintenance is the custodian for a young child of the marriage
- Any significant, compelling impediment to seeking employment and meeting reasonable financial needs
Amount of Maintenance
Lesser of $5,000 per month or 20% of the obligor spouse’s monthly gross income
Modification of Spousal Maintenance
Court only has discretion to modify downward
Awarded upon showing of material and substantial change to the circumstances of the parties
Termination of Spousal Maintenance
Either party dies
Party receiving maintenance remarries or cohabitates
Effect of Bigamous Marriage
Two people knowingly enter a bigamous marriage: property not in the community property system
Putative Spouse: 1/2 to the preexisting marriage as community property; 1/2 to putative spouse as tenants in common
General Rule for Gifts of Marital Property
A spouse can make reasonable gifts of community property without the other spouse’s consent. But best practices dictate that both spouses should agree to any gift or transfer of community property
Challenging a gift of community property
Challenging spouse claims that there has been a fraud perpetrated on him that was unreasonable
Factors determining whether gift is reasonable
- Relationship between the donor spouse and donee
(unrelated –> presumed to be fraud) - Relative amount of the gift as it is compared to the size of the community estate in general
- Whether the non-consenting spouse is adequately provided for out of the remaining community estate
- Whether the gif was made from the donor spouse’s sole management community property, and
- Whether there were offsetting gifts
Remedy for Fraud on the Community
Reconstitution
Court can grant any legal or equitable relief to achieve a JAR division
