Community Property

Question 1

Separate property

Answer 1

• Owned or claimed prior to marriage

- Acquired during marriage by gift, devise or descent

Question 2

Community property

Answer 2

• Any property acquired during marriage that is not separate property.
• Presumption at the end of marriage that all property is community property, must be rebutted by clear and convincing evidence.

Question 3

Gifts between spouses

Answer 3

When one spouse gives a gift to another during the marriage, any income from the gift is presumed to be separate property

Question 4

Income from separate property

Answer 4

Interest and dividends earned on separate property are community property, but increases in the value or return of capital are separate property

Question 5

Tracing

Answer 5

The community property presumption can be overcome by tracing the property back to separate property.

Question 6

Commingled Property

Answer 6

1) Identical sum inference (or clearing house method) - deposit of separate property and the same amount is withdrawn shortly thereafter
2) Community-out doctrine: presumption that community funds are withdrawn first
3) Lowest intermediate balance or minimum sum balance- amount of separate property is the fixed minimum amount in the account that is known to be separate property (e.g., $100 of separate property were deposited, but the balance drops to $70. That’s the new amount)

Question 7

Reimbursement

Answer 7

• Arises when one state provides a benefit that increases the value of another estate
• Subject to equitable principles
• Proper measure of a reimbursement claim is the enhancement of the benefitted estate
• Enhancement is generally measured at the time of the cessation of the marriage

Question 8

Stock options classification

Answer 8

Depends on when it vested - if it accrues during marriage, community property, if it accrues before or after marriage, separate property.

Question 9

Trust corpus classification

Answer 9

Trust income that could have been taken by the beneficiary is treated as community property, with the exception of the continuing gift theory.

Question 10

Mineral interests

Answer 10

Payments for a royalty or working interest are separate property if the underlying interest is separate property, but delay rentals are considered community property.

Question 11

Quasi-community property

Answer 11

Out-of-state property is considered as community property if it would have been community property in Texas had the spouses been in Texas when they acquired it.

Question 12

Credit during marriage

Answer 12

Community estate is obligated to pay debt incurred during the marriage, and assets acquired with debt constitute community assets.

Question 13

Transferring assets to a spouse

Answer 13

Spouse’s separate property that is put into the other spouse’s name is presumed to be a gift

Question 14

Life insurance

Answer 14

Measured by the inception of title

Question 15

Defined benefits plan

Answer 15

Pro-rated by the amount of time of services while married, over the total time of services for the company

Question 16

Military disability pay

Answer 16

Separate property

Question 17

Increase of a business value

Answer 17

If the increase is attributable to the uncompensated or undercompensated time, til, talent, and effort of the spouse, the community estate has a reimbursement claim

Question 18

Limits on pre-marital agreements

Answer 18

1) Adversely affect child support

2) violate public policy

Question 19

Setting aside a marital agreement

Answer 19

1) Involuntary execution
2) No full and fair disclosure, the right to receive disclosure was not waived, the spouse did not have adequate knowledge of the other spouse’s property, AND the agreement is unconscionable.

Question 20

Joint management property

Answer 20

• Sole-management property that has been commingled

- Requires consent to transfer or the transfer is void.

Question 21

Liability to third parties

Answer 21

Contract or tort creditor can reach:

1) Sole management community property
2) joint community property
3) separate property

but NOT the other spouse’s sole management community property

Question 22

Personal liability after marriage

Answer 22

Creditor may collect judgment for a liability incurred prior to divorce from the joint-management community property awarded during the divorce

Question 23

Property division upon divorce

Answer 23

Community property divided in a just and right manner, primarily dependent on earning capacity.

• Business opportunities
• education
• good health
• impact of giving up a career for domestic purposes
• size of the separate estates
• length of the marriage
• age of the parties
• custody of children, to the extent it affects earning capacity
• fault in divorce (cruelty, adultery, etc.)

Question 24

Spousal maintenance

Answer 24

• Spouse must be unable to be self-sufficient through property distribution, including separate property, AND
  1) payor convicted of family violence
  2) incapacitating mental or physical disability
  3) custodian of a child with a physical or mental disability
  4) marriage lasted 10 years or longer

-Primary factor is ability to meet minimum reasonable need

Question 25

Modification

Answer 25

-Material and substantial change of circumstances, but can only be modified down.

Question 26

Gifts of community property

Answer 26

Unreasonable gift of community property during marriage is considered a fraudulent transfer

1) how much was given
2) to whom it was given
3) how much is left

Question 27

Restitution for fraudulent transfer of community property

Answer 27

1) treat the money as though it is still in the community estate;
2) allocate the amount of the gift to the gifting spouse as a portion of the property division

Innocent spouse can only recover against the third-party transferee when there is insufficient community property to reimburse the innocent spouse.