Community Property Flashcards
Separate property
- Owned or claimed prior to marriage
- Acquired during marriage by gift, devise or descent
Community property
- 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.
Gifts between spouses
When one spouse gives a gift to another during the marriage, any income from the gift is presumed to be separate property
Income from separate property
Interest and dividends earned on separate property are community property, but increases in the value or return of capital are separate property
Tracing
The community property presumption can be overcome by tracing the property back to separate property.
Commingled Property
1) Identical sum inference (or clearing house method) - deposit of separate property and the same amount is withdrawn shortly thereafter
2) Community-out doctrine: presumption that community funds are withdrawn first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)
Reimbursement
- 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
Stock options classification
Depends on when it vested - if it accrues during marriage, community property, if it accrues before or after marriage, separate property.
Trust corpus classification
Trust income that could have been taken by the beneficiary is treated as community property, with the exception of the continuing gift theory.
Mineral interests
Payments for a royalty or working interest are separate property if the underlying interest is separate property, but delay rentals are considered community property.
Quasi-community property
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.
Credit during marriage
Community estate is obligated to pay debt incurred during the marriage, and assets acquired with debt constitute community assets.
Transferring assets to a spouse
Spouse’s separate property that is put into the other spouse’s name is presumed to be a gift
Life insurance
Measured by the inception of title
Defined benefits plan
Pro-rated by the amount of time of services while married, over the total time of services for the company
Military disability pay
Separate property
Increase of a business value
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
Limits on pre-marital agreements
1) Adversely affect child support
2) violate public policy
Setting aside a marital agreement
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.
Joint management property
- Sole-management property that has been commingled
- Requires consent to transfer or the transfer is void.
Liability to third parties
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
Personal liability after marriage
Creditor may collect judgment for a liability incurred prior to divorce from the joint-management community property awarded during the divorce
Property division upon divorce
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.)
Spousal maintenance
- 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
Modification
-Material and substantial change of circumstances, but can only be modified down.
Gifts of community property
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
Restitution for fraudulent transfer of community property
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.
