Community Property

Question 1

Basic Community Property Presumption

Answer 1

All property acquired during marriage is presumed to be community property, unless acquired by gift or inheritance, in which case it is presumptively separate property

Question 2

Putative Spouses

Answer 2

One that has a good faith belief that he or she is lawfully married, even though he or she isn’t

Question 3

Quasi-Marital Property

Answer 3

All property acquired during a putative marriage is labeled as quasi-marital property, regardless of it being CP or QCP, but treat it under normal CP and QCP rules

SP is still discussed as SP

Question 4

Unmarried Cohabtiants

Answer 4

Apply K principles and, if applicable, restitutionary remedies (unjust enrichment, constructive or resulting trust)

Consideration may not include sexual services

Question 5

Quasi-Community Property

Answer 5

Property acquired during marriage by the spouses that would’ve been CP had the spouses been domiciled in a CP state at the time of the acquisition

Question 6

Under QCP, if the spouses move to CA, until divorce or death, the QCP…

Answer 6

Remains SP of the acquiring spouse

Question 7

Under QCP, property acquired in a non-CP state by spouses while domiciled in a CP state is

Answer 7

CP

Question 8

Under QCP, at divorce, or on the death of the acquiring spouse, as well as for the purposes of creditors’ rights, QCP is treated

Answer 8

The same as CP

If the non-acquiring spouse dies first, QCP remains the SP of the acquiring spouse

Question 9

Pension, Stock Bonuses, and Options

Answer 9

If acquired in part during marriage and in part outside of marriage, use the pension time rule

CP Interest = (total assets earned) x (years of marriage in which asset is earned/total number of years in which asset is earned until payable)

Question 10

Personal Injury Damages - Characterized based on when the injury occurred

Answer 10

CP if the personal injury cause of action arises during marriage

SP if before marriage or post-separation

SP if injury is due to tort of other spouse

Question 11

Life Insurance - Term Life

Answer 11

Character of proceeds is character of last premium paid (if made from CP, then entire proceeds are CP)

Question 12

Life Insurance - Whole Life

Answer 12

Cash value allocated based on proportion of premiums paid by SP and proportion paid by CP; term amount based on character of last premium paid

Question 13

Disability Pay

Answer 13

If it replaces earnings during marriage, CP

If it replaces earnings before or after marriage, SP

Question 14

If a business is developed entirely during a marriage, it is

Answer 14

CP

Question 15

Van Camp/Pereira rules apply if

Answer 15

Spouse brings SP business into marriage, or spouse inherits SP business; and

Either spouse works in the business and business value increases at least in part due to efforts of either spouse

Question 16

Van Camp

Answer 16

Use when increase in value primarily due to character of business

CP = (Market salary – actual salary – family expenses paid from salary)*years married

SP = FMV of business at dissolution – CP portion

Question 17

Pereira

Answer 17

Use when increase in value primarily due to management efforts of the spouse

SP = value of managing spouse’s SP business at time of marriage + [fair rate of return (0.1)value at time of marriageyears married]

CP = Value at dissolution – SP

Question 18

Business Goodwill Calculation

Answer 18

Goodwill is treated like CP if created during marriage (the difference between a business’ total value and the value of its assembled physical assets)

Two valuation methods: 1) market sales valuation (expert opinion) and 2) capitalization (past excess earnings attributable to good will)

Question 19

Education and Training - Right to Reimbursement

Answer 19

Community has an equitable right of reimbursement, with interest, if community funds are:

Used either to pay for education or training, or are used to repay a loan used for education or training; and

The education or training substantially enhances the educated spouse’s earning capacity

Question 20

Education and Training - Reimbursement Exceptions

Answer 20

Community already substantially benefited from the education or training (10 years since degree earned means no reimbursement); or

If the education reduced the educated spouse’s need for spousal support

Question 21

Joint Title Rules (anti-Lucas)

Answer 21

All jointly held property acquired during marriage is presumed CP at divorce and legal separation. Applies to joint tenancy from and after 1/1/85, and to tenancy in common from and after 1/1/88

At death, use joint tenancy rule – all to survivor

SP contributions to the purchase of the property are reimbursed to the SP contributor without interest or appreciation (increased property value is CP)

Question 22

Tracing Funds - Two Presumptions

Answer 22

Family expenses are presumed to be paid first from community funds

If SP funds are used to pay family expenses, presume a gift of the SP to community

Question 23

Tracing Funds - Two Methods

Answer 23

Exhaustion - Community funds exhausted by payment of family expenses, so only SP left

Sufficient Funds - If CP balance never fell below SP amount, presume all family expenses paid from CP

Question 24

Community Payments on Purchase Price of Separate Property (Moore Formula)

Answer 24

Used for property purchased before marriage but uses CP to make payments after marriage

Moore Formula: CP = (principal paydown during marriage/total purchase price)*value at divorce

Question 25

Community Payments to Improve Separate Property

Answer 25

When a spouse makes community payments to improve their own SP, the community is entitled to the greater of reimbursement or the amount by which the improvement increases the value of the asset

When a spouse makes community payments to improve the other spouse’s SP, presumed to be a gift (traditional) or right to reimbursement (modern)

Question 26

Sale of Community Property without Spouse’s Consent

Answer 26

A transfer to a BFP without knowledge of the marital relationship is presumed valid

The non-consenting spouse can overcome this presumption only if she 1) brings an action to void the transaction within 1 year of recording the transfer; and 2) demonstrates she didn’t in any way consent to or participate in the transfer

If successful, she may void the conveyance, but must first return the purchase price

Question 27

Contract debts arise…

Answer 27

At the time the K is made

Question 28

Tort/Criminal liabilities arise…

Answer 28

When the tort/crime is committed

Question 29

Debts Before Marriage

Answer 29

All CP and debtor’s SP are liable for a K debt incurred by debtor spouse pre-marriage

The SP of a non-debtor spouse is never liable

Prior marriage spousal support and child support payments, if paid from CP when SP available, must be reimbursed to the community on divorce

Question 30

Debts During Marriage

Answer 30

All the CP, and the debtor spouse’s SP, are liable

The SP of a non-debtor spouse is only liable if the debt is a contractual debt for necessaries

Non-tortfeasor spouse’s SP not liable, unless that spouse would be liable for the tort

Question 31

Order of Debt Satisfaction - Contract Liability

Answer 31

No order of satisfaction for K liability

Question 32

Order of Debt Satisfaction - Tort/Criminal Liability for Torts Arising During a Community-Benefitting Activity

Answer 32

Debt is first satisfied from the CP, then, if necessary, from the debtor spouse’s SP

Question 33

Order of Debt Satisfaction - Tort/Criminal Liability for Torts Arising During a Non-Community-Benefitting Activity

Answer 33

Debt is first satisfied from debtor spouse’s SP; and then, if necessary, from the CP

Question 34

Bad Faith Debt Exception

Answer 34

If spouse expended CP in bad faith, or acted with recklessness or gross negligence, the community is entitled to offset or reimbursement. Mere negligence is insufficient

Question 35

Child Support Debt Exception

Answer 35

Child support from a prior marriage is prior debt, and payable from CP. But if, at the time of payment, SP was available to pay the support, community is entitled to reimbursement

Also, if the non-indebted spouse puts their CP earnings into a separate bank account in that spouse’s sole name to which debtor spouse had no access, those funds can’t be reached to pay past child support

Question 36

Widow’s Election

Answer 36

Applies if testator-spouse attempts to bequeath surviving spouse’s CP

Survivor may elect either to take benefits under the will OR their ½ of CP

Question 37

Federal Preemption (deemed to be SP)

Answer 37

U.S. savings bonds