Community Property Flashcards
Community Property Presumptions
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
Quasi-Marital Property and Putative Spouses
Putative Spouse – one with a good faith belief that he is lawfully married, even though he isn’t
All property acquired during a putative marriage is labeled as quasi-marital property, regardless of it being CP or QCP, but is treated the same as CP
Always refer to QMP rather than CP or QCP but treat it as CP; SP is still discussed as SP
Unmarried Cohabitants
Apply K principles &, if applicable, restitutionary remedies (unjust enrichment, constructive or resulting trust)
Consideration may not include sexual services
Quasi-Community Property Definition
Property acquired by one spouse during marriage that would’ve been CP had the spouse been domiciled in a CP state at the time of the acquisition
QCP During Marriage
If they move to a CP state, until divorce or death, the QCP remains SP of the acquiring spouse
QCP at Divorce or Death of Acquiring Spouse
Treated as CP
QCP at Death of Non-Acquiring Spouse
Remains SP of acquiring spouse
Pension Time Rule
CP Interest = (total assets earned) x (years asset earned while married/total number of years in which asset is earned)
Personal Injury Damages
CP if personal injury arises during marriage
SP if personal injury arises before marriage or post-separation
SP if injury is due to tort of other spouse
Life Insurance
Term Life – character of proceeds is character of last premium paid (if made from CP, all proceeds are CP)
Whole Life – cash value allocated based on proportion of premiums paid by SP & proportion paid by CP; term amount based on character of last premium paid
Disability Pay
If it replaces earnings during marriage, CP
If it replaces earnings before or after marriage, SP
Van Camp Rule
Increase in value primarily due to character of business or external circumstances
CP = (market salary – actual salary – family expenses paid from salary)*years married
SP = value of business at divorce – CP portion
Pereria Rule
Increase in value primarily due to management efforts of the spouse
SP = value of business at marriage + [fair rate of return (0.1)value at marriageyears married]
CP = value at divorce – SP portion
Business Goodwill
Difference between a business’s total value & the value of its assembled physical assets
Goodwill is treated as CP if created during marriage
Two valuation methods: 1) market sales valuation or 2) capitalization of excess earnings
Education and Training Right to Reimbursement
Community has an equitable right of reimbursement, with interest, if community funds are:
1) Used either to pay for education or training, or are used to repay a loan used for education or training; &
2) The education or training substantially enhances the educated spouse’s earning capacity
Education and Training Right to Reimbursement Exceptions
Reimbursement reduced or eliminated if either:
Community already substantially benefited from the education or training (10 years since degree earned means no reimbursement (reverse presumption true too)); or
The education reduced the educated spouse’s need for spousal support
Prenuptial Agreements
Agreements made before marriage don’t require consideration, but must be in a writing signed by both parties
Premarital agreements aren’t enforceable if they promote divorce or aren’t voluntary
Voluntariness of Prenuptial Agreements
The party against whom enforcement is sought:
1) Was represented by independent counsel, or expressly waived representation; or
2) Had at least 7 days to review before execution & was advised to seek independent counsel; &
3) If unrepresented, the party is
a. Fully informed in writing of the terms & rights they would be giving up;
b. Proficient in the language of the agreement & the explanation; &
c. No duress, fraud, or undue influence
Alternatively, can set aside a prenuptial that’s unconscionable when executed & he didn’t & couldn’t have had adequate knowledge of the other party’s wealth, & didn’t waive his right to disclosure of such wealth
Transmutation - Pre-1985 Agreements
Such agreements can be made orally, & courts can rely on the parties’ behavior to determine intent
Transmutation - Post-1/1/85 (anti-Lucas)
All transmutation agreements must be in writing in the form of an express declaration of intent to change
Property acquired during marriage in joint tenancy after 1/1/1985 or tenancy in common after 1/1/1988 is presumed CP at divorce & legal separation. But at death, use joint tenancy/tenancy in common rules
SP contributions to purchase of the property are reimbursed to SP contributor without interest or appreciation
Property acquired in joint tenancy before 1/1/85 (or tenancy in common before 1/1/88) retains its joint character & is treated as SP
Credit Acquisitions
Presumption is that a loan is a community debt
Presumption overcome with evidence that lender primarily relied on the borrower’s SP in extending the credit
Tracing Funds - Presumptions
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
Tracing Funds - Methods
Exhaustion - at the time the funds are used to purchase the asset, the community funds have been exhausted by payment of family expenses from the account. Thus, all that’s left are separate funds, so the asset is a SP asset
Sufficient Funds - if CP balance never fell below SP amount, presume all family expenses paid from CP, leaving the SP intact & available both as SP funds & to purchase SP assets
Community Payments on Purchase Price of Separate Property (Moore)
Spouse brings SP into the marriage, and makes payments on it with CP funds
CP interest = (principal paydown during marriage/purchase price)*value at divorce
Community Payments to Improve Separate Property
If a spouse uses community funds to improve their own SP, the community is entitled to the greater of 1) reimbursement or 2) the amount by which the improvement increases the value of the asset
When a spouse uses community funds to improve the other spouse’s SP, it’s a gift (traditional) or right to reimbursement (modern)
Sale of Community Property without Spouse’s Consent
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 the recording of transfer; &
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
When Debts are Incurred
K debts are incurred at the time the K is made
Tort debts & criminal liability arise when the tort or crime is committed
Child & spousal support from a previous marriage is incurred pre-marriage
Debts before Marriage
All CP & debtor’s SP are liable for a K debt incurred by debtor spouse pre-marriage
Non-debtor spouse’s SP is never liable
Debts During Marriage
All the CP & the debtor spouse’s SP are liable
Non-debtor spouse’s SP is liable if the debt is a contractual debt for necessaries (food, shelter, medicine)
Non-tortfeasor spouse’s SP not liable unless that spouse would be liable for the tort
Order of Satisfaction - Contract Liability
No order
Order of Satisfaction - Tort/Criminal Liability - Community Benefit
Debt is first satisfied from the CP, then, if necessary, from the debtor spouse’s SP
Order of Satisfaction - Tort/Criminal Liability - No Community Benefit
Debt is first satisfied from debtor spouse’s SP, then, if necessary, from the CP
Bad Faith Exception
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
Child Support Exception
Child support from a prior marriage is prior debt, & payable from CP. But if, at the time of payment, debtor spouse’s SP was available to pay the support, community is entitled to reimbursement
If the non-indebted spouse puts their 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
Widow’s Election
Applies if decedent-spouse attempts to bequeath surviving spouse’s CP interest to a 3rd party
Survivor must elect either to take benefits under the will OR their ½ of CP
Federal Preemption - deemed to be SP
Federal Homestead law; Armed forces life insurance benefits; U.S. savings bonds;* Social security law; Railroad retirement benefits; VA disability benefits
