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Select Topics Part 2 > Community Property > Flashcards

Community Property Flashcards

1
Q

Community Property Presumption

A

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

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2
Q

Community Property Scenarios

A
  1. Parties married in CA - characterization of assets and liabilities as community/separate/mix of both; creditor’s rights to certain assets to satisfy certain liabilities
  2. Parties married in non-community property state that later move to CA - quasi-community property issues as to property acquired during the marriage but before domicile in CA
  3. Parities not legally married but one in good faith thinks they are - putative marriage and quasi-marital property
  4. Parties are unmarried co-habitants - community property laws do not apply
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3
Q

Characterization of Assets (Source Presumption)

A
  1. Who acquired asset;
  2. How was the asset acquired;
  3. When was the asset acquired
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4
Q

Conduct Presumption

A

What did parties do to the asset?

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5
Q

Distribution

A

Final character of the asset

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6
Q

Quasi-Community Property

A

Property acquired by one of the spouses that would have been CP had the spouse been domiciled in CA or any other CP state at the time of the acquisition.

Until divorce or death, the quasi-CP remains SP of acquiring spouse.

Property acquired in non-CP state by spouse while domiciled in CP state is CP, not QCP

At divorce/death of acquiring spouse, QCP treated the same as CP

If non-acquiring spouse dies first, QCP remains SP of acquiring spouse

If property is acquired by both spouses in joint title in a non-community property state, follow the joint title rules.

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7
Q

Putative Spouse

A

One that has a good faith belief that he/she is lawfully married, even though he/she is not.

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8
Q

Quasi-Marital Property

A
  1. Putative Spouse
  2. All property acquired during putative marriage is labeled as QMP whether it otherwise would have been CP or QCP.
  3. Treat it under normal CP and QCP

Only difference is what the property is called.

Might treat putative spouses equally and divide QMP as if it were community property

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9
Q

Pensions, Stock Bonuses, and Options

A
  • Bonuses and pensions treated as wages - presumptively CP
  • Bonuses, pensions, and stock options acquired in part during marriage and in part outside of marriage fall under the PENSION TIME RULE
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10
Q

Bonuses, Pensions, Stock Bonuses - Time Rule

A

CP interest = Total shares of stock/bonus/pension earned [TIMES] (Years of marriage in which asset is earned [DIVIDED BY] Total number of years in which asset is earned until payable)

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11
Q

Stock Options - Time Rule

A

CP interest = Total options [TIMES] Years from grant of options during marriage until dissolution [DIVIDED BY] Years from grant of options until exercise

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12
Q

Personal Injury Damages

A
  1. Characterized based on when they occurred
  • CP if personal injury arises during marriage
  • SP if injury arises before marriage/post-separation
  • SP if injury is due to tort of other spouse
  1. For divorce purposes, community estate personal injury damages are assigned entirely to the injured spouse unless the interests of justice require otherwise
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13
Q

Life Insurance

A

Proceeds are largely CP.

If deceased spouse names a beneficiary other than spouse, determine character:

  1. Term life - character of proceeds is character of last premium paid
    - if last premium is paid with CP, surviving spouse get .5 and beneficiary gets .5 of proceeds.
  2. Whole life - cash value is allocated based on proportion of premiums paid by SP and proportion paid by CP; term amount (death benefit) based on character of last premium paid
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14
Q

Disability Pay

A

Disability pay (includes worker’s comp) is characterized by what it is intended to replace

  • Earnings during marriage = CP
  • Earnings before/after marriage = SP
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15
Q

Business Valuation

A

When a business is developed entirely during a marriage, it is entirely CP.

Van Camp and Pereira rules DO NOT APPLY.

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16
Q

Business Valuation - Pereira/Van Camp Application

A
  1. Spouse brings SP business into marriage; OR
  2. Spouse inherits SP business;

AND

  1. EITHER spouse works in the business;

AND

  1. Business value increases at least in part due to effects of either spouse
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17
Q

Theories for Community Increase

A

If you have separate property business worked on by either spouse, and need to calculate the portion of value belonging to the community:

Pereira - increase in value due to management efforts

Van Camp - increase in value due to character of business

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18
Q

Pereira

A

Management efforts of spouse are primary cause of growth of value of business.

SP portion = Value of managing spouse’s SP business at time of marriage [PLUS] (Fair rate of return (10% per annum) [TIMES] Value [TIMES] Length of Marriage)

CP = Value at dissolution [MINUS] SP portion

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19
Q

Van Camp

A

When character of business, or external circumstances are primarily responsible for business growth in value.

CP = (Market Salary [MINUS] Family Expenses Paid From Salary) [TIMES] Years of Marriage

SP = FMV of business at dissolution - CP portion

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20
Q

Business Goodwill

A
  • Difference between total value and value of assembled physical assets
  • Represents those qualities that generate income beyond that derived from the labor of a spouse and the reasonable return on capital and physical assets (Brand value)
  • Treated like CP if created during the marriage
  • Valuation Methods:
    1. Market Sales valuation (expert opinion)
    2. Capitalization (past excess earnings attributable to goodwill)

Court not bound by valuation agreements

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21
Q

Education and Training

A
  • Not CP

Community has equitable right of reimbursement, with interest, when community funds are:

  1. used to pay for education/training or used to repay a loan used for education or training; and
  2. education or training substantially enhances earning capacity of educated party
22
Q

Education and Training Exceptions

A

Reimbursement reduced or eliminated if EITHER:

  1. Already substantially benefited from education and training (10 year presumption); or
  2. If education reduces educated spouse’s need for spousal support
23
Q

Prenuptial Agreements

A
  • Agreements made before marriage do not require consideration, but must be in writing and signed by both parties to satisfy SOF
  • Will not be enforced if they promote divorce of not voluntary
24
Q

Voluntary Prenuptial Agreement

A

Party against whom enforcement is sought:

  1. represented by independent counsel, or expressly waived representation;
  2. had 7 days to review before execution and advised to seek independent counsel; and
  3. if unrepresented, the party is:

a. fully informed in writing of terms and rights given up;
b. proficient in the language of the agreement and the explanation; and
c. no duress, fraud, or undue influence

25
Q

Unconscionability Test - Prenups

A

Party could set aside a prenuptial agreement that is unconscionable when executed and the party did not and could not have had adequate knowledge of the wealth of the other party, and did not waive her rights to disclosure of such wealth

26
Q

Transmutation

A

Agreements made during marriage to alter the character of property.

27
Q

Pre-1985 Transmutation Agreements

A

Oral transmutation agreements were valid.

Property acquired in joint tenancy (or in tenancy in common before 1988), property retains joint tenancy character and is treated as separate property

28
Q

Post-Jan. 1, 1985 Transmutation Agreements

A

Requires express declaration in writing

29
Q

Joint Title Rules

A

Under Anti-Lucas legislation, all jointly held property acquired during marriage is presumed community property at divorce and legal separation.

At death:

  • if JT, all to survivor
  • if TIC, to whomever inherits

SP contributions to acquisition of property are reimbursed to the SP contributor without interest or appreciation

30
Q

Credit Acquisitions

A
  • Loans/credit obtained during marriage
  • Presumption that it is a community debt
  • Presumption can only be overcome by evidence that lender primarily relied on borrower’s SP in extending credit
31
Q

Presumptions of Tracing Funds

A
  1. Family expenses are presumed to be paid first from community funds
  2. When SP funds are used to pay family expenses, presume a gift of SP to the community
32
Q

Methods of Tracing Funds

A
  1. Exhaustion - community funds exhausted by payment of family expenses, so only SP left
  2. Sufficient funds - always sufficient SP funds so no need to commingle - if balance never fell below SP amount, presume all family expenses paid from CP, and enough SP left to purchase asset
33
Q

Community Payments on Purchase Price of Separate Property

A

When a spouse brings separate property into the marriage, and continues to make payments on the purchase price of the property from earnings, those earnings are CP and payments thus are from CP

Apply Moore Formula to determine character of the property

34
Q

Moore Formula

A

CP interest is proportional to use of CP to reduce principal amount of loan

35
Q

Sale of Community Property Without Spouse’s Consent

A

Both spouses must execute any instrument transferring any real property.

Transfer to a good faith purchaser without knowledge of marital relationship is presumed valid.

Non-Consenting spouse can overcome the presumption only if she:

  1. brings an action to void the transaction within one year of the recording of the transfer; and
  2. demonstrates she did not in any way consent to or participate in the transfer
36
Q

Community Payments to Improve Separate Property

A

When a spouse makes improvements to SP, in many cases this gives rise to community’s right to reimbursement

37
Q

When a spouse makes community payments to improve their own SP

A

Community is entitled to the greater of:

  1. reimbursement amount; or
  2. amount by which the improvement increases the value of the separate asset.
38
Q

When a spouse makes community payments to improve the other spouse’s separate property

A

Traditional rule - presumption that community made a gift to the other spouse’s SP and thus neither right to reimbursement nor community interest in improved, SP

Modern rule - reimburse community in the absence of any contrary agreement

39
Q

Acquisition

A

Property is presumptively CP for purposes of dissolution

No proportional interest involved

Where any SP contribution to the acquisition is simply reimbursed without interest or appreciation

40
Q

Sale of Personal Property Without Spouse’s Consent

A

If spouse sells household furnishings, clothing, and the like without the other spouse’s consent, community is entitled to reimbursement

41
Q

Breach of Fiduciary Duty

A

Sale of property without consent breaches fiduciary duty between spouses in the management and control of community assets

Deliberate dissipation of CP, recklessness, and grossly negligent conduct that results in the loss of CP are actionable, and can result in the requirement that the culpable spouse reimburse community for any loss.

Not as strict as prudent investor standard

Negligent investments will not result in reimbursement

42
Q

Debts and Obligations

A
  • Creditors’ rights follow management rights.

- Creditor may reach any property over which debtor has legal right of management and control.

43
Q

Debt Issues

A
  1. Which property (community, debtor spouses SP, and/or non-debtor spouse’s property) is liable for the debts;
  2. For tort and criminal debts, in what order of those types of property is the debt satisfied from.
44
Q

Types of Debts and when they are incurred

A
  1. Contract debts - at time the contract is made
  2. Tort debts - when tort is committed, but non-tortious spouse not personally liable for tortious spouse’s tort unless they would be liable if they were not married
  3. Criminal liability (restitution/fines) - same as tort liability
  4. Child/spousal support from previous marriage treated as debt incurred before marriage
45
Q

Debts Before Marriage

A

All CP and debtor’s SP is liable for contractual debt incurred by debtor spouse before marriage but SP of non-debtor spouse is never liable

46
Q

Debts During Marriage

A

All CP and debtor’s SP is liable for a debt incurred by debtor spouse during marriage

SP of non-debtor spouse is only liable if debt is contractual and is for necessaries such as living expenses (food, shelter, medicine, etc.)

47
Q

Order of Satisfaction

A

If tort that gives rise to debt is for the benefit of the community, then debt will first be satisfied from CP, then, if necessary, debtor spouse’s SP

If tort is not for the benefit of the community, debt will first be satisfied from debtor spouse’s SP, then from CP

48
Q

Bad Faith Exception

A

In management and control of community assets, each spouse must act in accordance with general rules governing fiduciary relationships which govern the actions of persons in confidential relationships.

Thus, deliberate dissipation of CP, recklessness, and grossly negligent conduct that results in a the loss of CP are actionable and can result in the requirement that the culpable spouse reimburse community for any loss.

If spouse expended funds in bad faith, community is entitled to offset or reimbursement

Not as strict as prudent investor standard

49
Q

Child Support Exception

A

Spousal and child support from prior marriage is considered prior debt, payable from CP.

Prior marriage spousal support and child support payments, if paid from CP when debtor spouse’s SP was available to make payments, must be reimbursed to the community on divorce

If non-indebted spouse put earnings into a separate bank account in the spouse’s sole name to which debtor spouse has no access, those funds cannot be reached to pay past child support

50
Q

Survivor’s (Widow’s) Election

A

Decedent’s will attempts to leave the survivor’s CP interest to a third party

Surviving spouse must elect whether to take distribution under the will or to assert their CP rights

51
Q

Federal Preemption

A

When state CP law is inconsistent with Federal law, federal law prevails.

CP does NOT apply to:

  • Federal Homestead law
  • Armed forces life insurance benefits
  • US Savings Bonds
  • Social Security law,
  • Railroad retirement benefits, and
  • VA disability benefits

CP DOES apply to:

  • Federal Civil Service and Foreign Service Retirement Benefits
  • ERISA pension benefits in a divorce are divisible under CP law
52
Q

Federal Preemption Analysis

A
  1. Does property right conflict with the express terms of federal law?
  2. If yes, does the state law cause sufficient injury to federal objectives to require preemption

Select Topics Part 2 (7 decks)

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