Community Property

Question 1

Community Property Presumptions

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

Quasi-Marital Property and Putative Spouses

Answer 2

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

Question 3

Unmarried Cohabitants

Answer 3

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

Consideration may not include sexual services

Question 4

Quasi-Community Property Definition

Answer 4

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

Question 5

QCP During Marriage

Answer 5

If they move to a CP state, until divorce or death, the QCP remains SP of the acquiring spouse

Question 6

QCP at Divorce or Death of Acquiring Spouse

Answer 6

Treated as CP

Question 7

QCP at Death of Non-Acquiring Spouse

Answer 7

Remains SP of acquiring spouse

Question 8

Pension Time Rule

Answer 8

CP Interest = (total assets earned) x (years asset earned while married/total number of years in which asset is earned)

Question 9

Personal Injury Damages

Answer 9

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

Question 10

Life Insurance

Answer 10

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

Question 11

Disability Pay

Answer 11

If it replaces earnings during marriage, CP

If it replaces earnings before or after marriage, SP

Question 12

Van Camp Rule

Answer 12

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

Question 13

Pereria Rule

Answer 13

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

Question 14

Business Goodwill

Answer 14

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

Question 15

Education and Training Right to Reimbursement

Answer 15

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

Question 16

Education and Training Right to Reimbursement Exceptions

Answer 16

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

Question 17

Prenuptial Agreements

Answer 17

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

Question 18

Voluntariness of Prenuptial Agreements

Answer 18

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

Question 19

Transmutation - Pre-1985 Agreements

Answer 19

Such agreements can be made orally, & courts can rely on the parties’ behavior to determine intent

Question 20

Transmutation - Post-1/1/85 (anti-Lucas)

Answer 20

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

Question 21

Credit Acquisitions

Answer 21

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

Question 22

Tracing Funds - 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 - Methods

Answer 23

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

Question 24

Community Payments on Purchase Price of Separate Property (Moore)

Answer 24

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

Question 25

Community Payments to Improve Separate Property

Answer 25

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)

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 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

Question 27

When Debts are Incurred

Answer 27

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

Question 28

Debts before Marriage

Answer 28

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

Question 29

Debts During Marriage

Answer 29

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

Question 30

Order of Satisfaction - Contract Liability

Answer 30

No order

Question 31

Order of Satisfaction - Tort/Criminal Liability - Community Benefit

Answer 31

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

Question 32

Order of Satisfaction - Tort/Criminal Liability - No Community Benefit

Answer 32

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

Question 33

Bad Faith Exception

Answer 33

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 34

Child Support Exception

Answer 34

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

Question 35

Widow’s Election

Answer 35

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

Question 36

Federal Preemption - deemed to be SP

Answer 36

Federal Homestead law;
Armed forces life insurance benefits;
U.S. savings bonds;*
Social security law;
Railroad retirement benefits;
VA disability benefits