Community Property

Question 1

Community Property - BASIC CP PRESUMPTION

Answer 1

CA is a community property state. 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

Community Property - QUASI-MARITAL PROPERTY

Answer 2

All property acquired during a putative marriage is labeled QMP, whether it would have been CP or QCP had the marriage been valid, but is otherwise treated the same under CP/QCP rules.

A putative marriage is one is which at least one of the spouses has a good faith belief that she is lawfully married even though she is not.

Question 3

Community Property - UNMARRIED COHABITANTS

Answer 3

CP principles do NOT apply.

Marvin v. Marvin - cts will enforce a K between the parties creating support obligations or ownership rights so long as consideration is not sexual services.

Question 4

Community Property - QUASI-CP

Answer 4

Property acquired by one spouse while domiciled in a non-CP state that would have been CP had she been domiciled in a CP state at the time of acquisition.

• SP until divorce/acquirer’s death
• treated as CP at divorce/death

Question 5

Community Property - PENSION/BONUS/OPTION

Answer 5

Treated as wages, apply pension time rule.

CP interest = total earned x (yrs of marriage while earning/total yrs to earn)

Question 6

Community Property - P.I. DAMAGES

Answer 6

If CoA arose during marriage = CP unless other spouse was tortfeasor

If CoA arose before/after marriage = SP

At divorce, community estate PI damages are awarded entirely to injured spouse and offset UNLESS interests of justice require otherwise (but never less than 1/2)

Question 7

Community Property - LIFE INSURANCE

Answer 7

Where deceased spouse named a beneficiary other than the surviving spouse, division depends on the policy type.

TERM LIFE - proceeds have the same character as the LAST premium paid

WHOLE LIFE - cash value is allocated in proportion to premiums paid by SP and CP; term amount has the same character as last premium

Question 8

Community Property - DISABILITY/WORKERS’ COMP

Answer 8

Intended to replace earnings during marriage = CP

Intended to replace earnings before/after marriage = SP

Question 9

Community Property - BUSINESS VALUATION

Answer 9

When a business is developed entirely during marriage, it is entirely CP.

When CP enhances the value of a separate business, the increase must be divided between CP and SP.

Question 10

Community Property - PEREIRA

Answer 10

When the primary cause of business growth is the management efforts of either spouse

SP = initial capital x (initial capital x fair rate of return x yrs or marriage while working)

CP = FMV at dissolution - SP

Question 11

Community Property - VAN CAMP

Answer 11

When primary cause of growth is character of business or external circumstances

CP = (market salary - family expenses paid - salary taken) x yrs of marriage while working

SP = FMV at dissolution - CP

Question 12

Community Property - BUSINESS/PROFESSIONAL GOODWILL

Answer 12

Entity value - assembled asset value

If generated during marriage = CP
If generated before/after = SP

Only 2 valuation methods: (1) market sales and (2) capitalization

Question 13

Community Property - EDUCATION/TRAINING

Answer 13

E/T acquired during marriage = SP

Absent agreement to the contrary, community is entitled to REIMBURSEMENT, w/ interest, when: (1) CP funds are used to pay for E/T or repay loan for E/T AND (2) the E/T substantially enhances the earning capacity of the educated spouse

The amount may be reduced or eliminated if (1) community has already substantially benefitted from E/T - presumed if 10+ yrs; OR (2) E/T reduces educated spouse’s need for spousal support

Question 14

Community Property - PRENUP ENFORCEMENT

Answer 14

• Don’t require consideration
• Must be in writing signed by both parties
• Can’t waive child support
• Can’t promote divorce
• Set aside if unconscionable at execution and party did not and COULD NOT have had adequate knowledge of the wealth of the other party and did not waive her right to disclosure

Question 15

Community Property - PRENUP VOLUNTARINESS

Answer 15

1) Party against whom enforcement is sought was represented by independent counsel or expressly waived representation;
2) At least 7 days before execution, agreement was presented to party and party was advised to seek independent counsel; AND
3) if party is still unrepresented:
- -she is fully informed in writing of the terms of the agreement and the right she would be giving up,
- -she was proficient in the language of the agreement and explanation, AND
- -agreement was not executed under fraud, duress, or undue influence

Question 16

Community Property - TRANSMUTATION

Answer 16

Before 1/1/85, agreements during marriage to alter the character of property could be oral and cts would infer intent from behavior

After 1/1/85, such agreements must be in writing in the form of an express declaration; merely taking possession in one spouse’s name will not overcome CP presumption.

Question 17

Community Property - GIFT PRESUMPTION

Answer 17

If one spouse gives the other tangible person property for her personal use that is not of substantial value as measured by the parties’ lifestyle, a transmutation is presumed even absent a writing.

Question 18

Community Property - JOINT TITLE RULES

Answer 18

Under the anti-Lucas legislation, all jointly held property is presumed CP at divorce (not death) unless the parties executed a collateral written agreement or a separate statement in the documentary evidence of title that the property is “SP and not CP”

Any SP contributions to the acquisition shall be reimbursed w/o interest or appreciation.

Question 19

Community Property - CREDIT ACQUISITION

Answer 19

Loan proceeds toward the value of property purchased by a spouse are presumed CP.

The presumption can only be overcome by evidence that the lender relied primarily on the borrower’s SP in granting the loan or extending the credit.

Question 20

Community Property - TRACING PRESUMPTIONS

Answer 20

Where SP funds are commingled, entire asset is presumed CP.

Family expenses:

1) presumed paid 1st from CP funds
2) if SP used, gift to community is presumed

Question 21

Community Property - TRACING METHODS

Answer 21

EXHAUSTION
SP proponent must show that at the time funds are used, CP funds have been exhausted by payment of family expenses from the account

SUFFICIENT FUNDS
SP proponent must show there were always sufficient SP funds such that there was never a need to use CP funds

Question 22

Community Property - CP PAYMENTS ON PURCHASE PRICE OF SP

Answer 22

When spouse brings SP into marriage and makes payments on purchase price from CP, apply Moore formula:

CP interest = (principal paydown/total purchase price) x FMV at dissolution

Question 23

Community Property - CP IMPROVEMENTS TO SP

Answer 23

When a spouse makes CP payments to improve his own SP, the community is entitled to the GREATER of:

1) reimbursement amount, OR
2) amount by which improvement increases value of SP

When a spouse makes CP payments to improve other’s SP:

• Traditionally, there was a presumption the community made a gift
• Modernly, the community is entitled to reimbursement in the absence of a contrary agreement

Question 24

Community Property - FIDUCIARY DUTIES

Answer 24

In the management and control of CP, each spouse must act in accordance w/ principals governing general fiduciary relationship.

• Deliberate, reckless, or grossly negligent loss of CP is actionable
• Presumption of undue influence when one spouse gains unfair advantage over the other in CP transaction
• Obligation to make full disclosure, upon request, of assets in which the community has an interest or debts for which the community may be liable

Question 25

Community Property - SALE OF CP WITHOUT CONSENT

Answer 25

Both spouses must execute any instrument transferring real CP

Transfer to good faith purchaser w/o notice of marriage is presumed valid. Non-consenting spouse can overcome only if she:

• brings an action w/in 1 yr
• demonstrates she did not in any way consent to or participate in the transfer, and
• returns the purchase price

Question 26

Community Property - TORT/CRIM DEBT

Answer 26

If for benefit of community - CP 1st , then debtor’s SP

If not - debtor’s SP 1st, then CP

Question 27

Community Property - K DEBT

Answer 27

Incurred BEFORE marraige - all CP and debtor’s SP only

Prior child/spousal support

• if paid from CP when debtor’s SP was available, debtor must reimburse community on divorce
• if non-debtor put earnings in a separate bank account in her sole name to which debtor had no access, they cannot be reached.

Incurred AFTER marriage - all CP and debtor’s SP; non-debtor’s SP only if for necessaries

Question 28

Community Property - SURVIVOR’S ELECTION

Answer 28

When decedent’s will attempts to leave survivor’s CP interest to a 3P, she must elect to either take under the will OR assert CP rights

Question 29

Community Property - FEDERAL PREEMPTION

Answer 29

PREEMPT:

• Federal homestead rights
• Armed forces life insurance benefits
• U.S. savings bonds
• Social security
• Railroad retirement
• VA disability

DO NO PREEMPT:

• Federal civil service and foreign service retirement
• ERISA pension