Community Property

Question 1

Equitable Distribution

Answer 1

Distribution of property based on each party’s individual ability to make money.

Question 2

Marriage Presumption of Property

Answer 2

If married, any property you have obtained during the marriage is presumed to be Community Property.

Question 3

§760 Community Property

Answer 3

Except as otherwise provided by statute, all property real or personal, wherever situated, acquired by a married person during the marriage while domiciled in this state is CP.

Question 4

§770. Separate Property of Married Person

Answer 4

(a) SP of a married person includes all of the following: (1) all property owned by the person before marriage; (2) all property acquired by the person after marriage by gift, bequest, devise, or descent; (3) the rents, issues, and profits of the property described in this section. (b) A married person may without the consent of the person’s spouse, convey the person’s separate property.

Question 5

§771. Earnings and accumulations while living separate and apart

Answer 5

The earnings an accumulations of the spouse, while living separate and apart from the other spouse, are the separate property of the spouse.

Question 6

Tracing Property

Answer 6

You have documents that can show the interest was owned by the father before he married, and he filed the lawsuit before marriage that continued into the marriage. The court traces back the interest to before the marriage to overcome the presumption of CP.

Question 7

Labor during Marriage

Answer 7

There is no such thing as separate labor while you are married.

Question 8

Married Woman’s Presumption

Answer 8

Before January 1, 1975 - any property acquired by acquired by a married woman in her name alone is presumed to be separate property.

Question 9

Family Code § 1611 (Premarital Agreement Act - 1986)

Answer 9

A premarital agreement shall be in writing and signed by both parties. it is enforceable without consideration.

Question 10

Premarital Agreement Act Timeline

Answer 10

Only applied to agreements made on or after January 1, 1986

Question 11

2002 Premarital Agreement Act Amendment

Answer 11

spousal support provisions in premarital agreements will not be enforced unless both parties have independent counsel or if the waiver is unconscionable at the time of enforcement (even with counsel).
 If one party does not have counsel, they can give informed consent in writing to waive attorney, and the other spouse’s attorney must explain their rights.
o §1615(c): presumption that premarital agreement was not voluntarily executed unless the parties are both represented or have 7 calendar days to negotiate or seek counsel.

Question 12

Transmutation Prior to 1985

Answer 12

Easy transmutation or pillow talk. Oral agreements were enforceable.

Question 13

Before 1984 “Lucas”

Answer 13

Property acquired before 1984 in joint tenancy and the copy had an oral or implied agreement: presumption is joint tenancy (CP).

RULE: the CP presumption can be rebutted with an oral or implied agreement if the property was acquired before 1984.

SP contributor can receive a reimbursement only if there was an agreement between the parties. If no agreement, it is viewed as a gift to the community.

Question 14

After 1984 “Anti-Lucas”

Answer 14

If property was acquired in JOINT TENANCY and divorced, the property was presumed CP. Presumption can be rebutted with a written agreement that the parties intended otherwise.

SP contributed to CP (not including maintenance) is presumed to be a non-gift unless there is a written waiver of the right to reimburse.

Question 15

1987 Amendment to Anti-Lucas

Answer 15

Property acquired in any joint form is presumed CP unless there is a writing showing an agreement otherwise.

Question 16

Pre-1975 Joint Management Rule, if CP contributions are made to SP

Answer 16

If manager uses CP to improve other spouse’s SP, it is presumed a gift unless there was an agreement for reimbursement. The amount reimbursed is the actual amount contributed. If manager uses CP to improve manager’s SP, reimbursement is presumed unless W consents to improvement.

Question 17

Post-1975 Joint Management Rule, if CP contributions are made to SP

Answer 17

If CP is contributed to SP, CP can be reimbursed if the other spouse did not consent. Consent is a question of fact.

Question 18

Family Expense Presumptions

Answer 18

(1) available CP funds are presumed to be used to pay for family expenses. SP funds are deemed to be used for family expenses only when community funds are exhausted.
(2) when SP funds are used to pay for family expenses, the separate estate has no right to reimbursement unless the parties agreed to reimbursement.

Question 19

Exhaustion Method of Tracing Commingled Accounts

Answer 19

SP can rebut the CP presumption if, at the time of acquisition, all community income was exhausted by family expenses. Then the property must have been purchased with SP funds.

Question 20

Direct Tracing Method of Tracing Commingled Accounts

Answer 20

When an account is mixed (CP and SP), the SP proponent needs to show that the SP funds were in the account and the SP proponent intended to use the SP to acquire the property in question.

Question 21

Goodwill

Answer 21

The goodwill of an entity is an asset that is a valuable property interest that accounts to “the expectation of continued public patronage.”

Question 22

Ways to Formulate Goodwill

Answer 22

Capitalization: Looks at how much money in the bank would produce the excess earnings. Calculate by: determining excess earnings (net earnings - return of labor and capital) multiplied by interest rate.

Excess Income: Excess Earnings = net earnings - return of labor and capital. What the leftover would be if you were to hire someone to take spouse’s spot.

Comparable Sales: Look at comparable businesses in the area to determine what the excess goodwill is valued at. (The amount of money this business makes more than comparable businesses).

Question 23

Partnership Agreements

Answer 23

Partnership agreements will not prevent spouses from valuing goodwill that have not entered into them. Community efforts go into partnerships, and this investment should not be waived by an agreement without the non-working spouse.

Question 24

Educational Degrees and Loans

Answer 24

There is no community interest in professional licenses and degrees.

Community can be reimbursed for contributions to education, with interest, for community contributions that substantially increase the earning ability of a spouse. EXCEPTION: Living expense loans. Upon dissolution, educational loans are SP. Educational contributions may factor into spousal support.

Question 25

Apportionment of Business Profits

Answer 25

If a spouse owns a business prior to marriage or starts a business during marriage using SP, the business is SP. However, effort that one spouse puts into their SP business is community effort.

If the incremental value of the business is attributable personal activity, ability, or capacity of the spouse use Pereira. If the increase in value can be attributed to community effort (labor), Pereira approach is used. If increase in value is based on something other than community effort, use Van Camp.

Question 26

Pereira

Answer 26

SP business owner deserves a reasonable rate of return (10% unless told otherwise)

Formula: Original SP value multiplied by a reasonable rate of return over the marriage is the current value of SP. Current value of business - current value of SP = CP portion of business.

Question 27

Van Camp

Answer 27

Determines the “reasonable value” of the spouse’s service and allocates that as CP and the remainder is SP.

Apply family expense presumption: reasonable value of services - family expenses = current value of CP. Take current value of business - current value of CP = value of SP

Question 28

Pereira v. Van Camp

Answer 28

If the incremental value of the business is attributable personal activity, ability, or capacity of the spouse use Pereira. If the incremental value of the business is attributable to character of the capital, use Van Camp. Judge has discretion on method used, so discuss both on an exam.

Question 29

Defined Benefit Pension

Answer 29

Time Rule: Caluclation is the amount of time during marriage/ # in the plan total before retirement.
Exception: If the number of years is not the key factor in determining the benefit, the time rule should not be used.

The number of years before retirement is not known until the worker retires, so the court will retrain jurisdiction over the division of the asset.

Question 30

Defined Benefit Pension - Nonvested Rights:

Answer 30

Retirement rights are contractual rights even if a plan is nonvested and nonmatured, which must be divided at divorce. (Before 1976 nonvested rights were a mere expectancy).

Question 31

Defined Benefit Pension - Mature Rights

Answer 31

Non-working spouse is entitled to retirement benefit as soon as the pension plan has matured, even if the working souse was electing to hold off on receiving benefits.

Question 32

Defined Benefit Pension - Right to Reinstate

Answer 32

If worker exercises the right to reinstate, spouse must compensate for the reinstatement, then then the pension will be split 50-50.

Question 33

Defined Contribution

Answer 33

Spouse can get 1/2 interest in CP funds that were contributed to the contribution plan.

Question 34

QDRO

Answer 34

Qualified domestic relations order that allows spouses to collect money directly from a plan rather than a spouse.

Question 35

Pre-1986 Terminable Interest Rule

Answer 35

A nonemployee’s CP interest in the former spouse’s pension plan does not survive the employee’s death. The nonemployee’s interest terminates at their own death.

Question 36

1986 CA Legislation Repealed the Terminable Interest Rule

Answer 36

Repealed terminable interest rule and held that the court shall have the authority to order the division of any retirement benefits payable at death to either party, and may order a party to elect a survivor benefit.

Results: Deceased non-employee’s estate could assert interest in pension plans earned by CP efforts. Nonemployee spouse may assert CP rights after employee’s death.

Question 37

Federal Preemptive Revival of Terminable Interest Rule

Answer 37

Survivor benefit annuity: can be used to protect nonemployee spouses after the employee spouse’s death. Will reduce the employee’s benefits, but will provide payment to the nonemployee after employee’s death.

Branco v. UFCW (2001): ERISA preempts CA law regarding the terminable interest rule, so that a nonemployee spouse cannot pass benefits after nonemployee’s death

Question 38

Credit Acquisitions

Answer 38

Presumption: Everything acquired during marriage, including assets & liabilities are CP.

Rule: If lender relied on SP of spouse, property acquired b y credit is SP. (Old Rule - 1953) lender must have relied primarily on SP. Intent of lender is key.

One spouse’s signature alone is not enough to rebut the presumption of CP.

(New Rule) Lender must have relied solely on SP.

Question 39

Moore-Marsden

Answer 39

Marsden Rule: Any premarital appreciation must be attributed entirely

Moore Rule: if CP is used to pay off SP loan, CP is entitled to % ownership. Community does not get credit for the taxes/interest paid  only pay off on principal

Question 40

Calculating CP % Ownership (Moore-Marsen)

Answer 40

Step 1: (Down payment + loan payment [loan amount – CP payment]) / historical value of house
Step 2: Take % from Step 1, and multiply by appreciation during marriage (i.e. fair market value)
Step 3: Add amount in Step 2 + SP contributions (loan & down) = SP equity
Step 4: Amount of CP contribution / Purchase price of house
Step 5: Step 4 # x fair market value = CP appreciation apportionment
Step 6: Add CP apportionment + community equity
Step 7: Check work – CP + SP equity should = FMV

Question 41

Disability Benefits

Answer 41

SP if they are more-so for personal injury than retirement. An employee cannot unilaterally defeat the nonemployee’s rights by electing to choose disability payments over retirement benefits. If disability is higher than retirement, the employee spouse keeps the difference between the two and the nonemployee spouse is entitled to 1/2 of what would have been paid in retirement benefits.

Question 42

Severance Pay

Answer 42

SP so long as it is compensation for future earnings after the date of separation. If it is compensation for efforts during marriage, or a contractual right, it could be CP.

Question 43

Early Retirement Benefits

Answer 43

If it is an enhancement for early retirement benefits, it is CP.

Question 44

Employee Stock Options

Answer 44

Stock options are SP if the are incentive for future services rendered after separation. They are CP if they are compensation for services during marriage.

If CP, use time rule for division.

Question 45

Gift of CP

Answer 45

If a spouse makes an unauthorized gift of CP, the other spouse has the right to have it returned. During Life of gifting spouse -> non consenting spouse can get 100% of unauthorized gift back. After death -> non consenting spouse can get 50% of unauthorized gift back. (It is deemed a gift if there is no consideration).

Question 46

Fiduciary Duty

Answer 46

When a spouse undertakes the management and control, they have a responsibility to act in accordance with the general rules governing fiduciary duty. Deliberate misapportionment = breach. Mishandling money/negligence is not a deliberate misapportionment. There must be sufficient evidence of misapportionment to warrant reimbursement.

Crime = gross negligence = deliberate misapportionment

Question 47

Equal Division Requirement

Answer 47

Item Theory - Each CP asset must be divided in kind, and each spouse is entitled to a 1/2 interest. EXCEPTION: when circumstances justify awarding one spouse a greater interest or using the aggregate theory.

Equal division should generally be made unless there is a written agreement or in court agreement.

Question 48

Post-Judgment Forgotten Assets

Answer 48

Community assets not listed in the pleadings can be divided later. There is no collateral estoppel or res judicata.

Question 49

Relief from judgment

Answer 49

Judgment may be set aside within 1 year if there is a breach of fiduciary duty (includes intrinsic fraud, failure in duty to disclose, duress). Mere inequity is NOT enough.

Question 50

Property Acquired by nondomiciliaries

Answer 50

If both spouses are now CA domiciliaries:

Real Property: if it would have been CP had it been acquired in CA, it is quasi-CP. Property does not change automatically, there must be a death or divorce. If spouse does not have enough contacts for PJ, CA will defer JX to state where property is located.

(personal property always follows domicile of couple)

Question 51

When Does Marriage End Before 2015 and After 2017

Answer 51

A marriage ends upon divorce. However, the economic community ends when (1) there is permanent separation AND (2) intent NOT to resume the marital relation by one party.

Question 52

When Does Marriage End Between 2015-2017

Answer 52

There must be a physical separation.

Question 53

Transmutation Post 1985

Answer 53

Agreement during marriage to change the character of a particular asset. Process of changing property from one form to another. [community property to separate property OR separate property to community property].

Question 54

Marital Economic Community

Answer 54

The marital economic community begins at marriage and ends at one spouse’s death or on the date of separation.