Community Property Flashcards
Separate Property: What does it include?
- Property acquired before marriage (Inception of Title Rule)
- Property acquired during marriage by gift (even if gift is bought with CP funds), devise, or descent
- Property acquired during marriage but purchased with separate property funds (i.e. concept of tracing)
Community Property: What does it include?
Any property–except SP–acquired by either spouse during the marriage
CP Presumption
All property owned at divorce is presumed to be CP. Spouses must provide clear and convincing evidence that an asset is SP
What is the relevance of the name listed on the title of an asset?
It is not relevant unless one party intended to make a gift of the asset (cannot gift CP to self)
Two exceptions to Inception of Title Rule
- Pensions
2. Stock Options
Community Out First Presumption
SP remains SP when commingled with CP (e.g. SP funds deposited into bank account containing CP funds). TX courts apply a presumption that the spouses withdraw CP money before SP.
Lowest Intermediate Balance Principle
Check account balances between day one and final accounting. If total balance ever falls below original SP balance, you know spouse has dipped into SP.
Identical Sum Inference Method
When deposit of SP is close in time and amount to withdrawal, CP Out First Presumption can be overcome
If an SP asset produces income during the marriage, is that income SP or CP?
CP
Exceptions to rule that income earned from an SP asset is CP
- Interspousal gifts
- Partition and Exchange Agreement (only if stipulated in agreement)
- Minerals
Appreciation in underlying value of SP; SP or CP?
Remains SP
Stock split of SP
Remains SP
Stock Dividend from SP
Remains SP
Cash Dividends from SP
CP
Capital Gains Dividends from SP
SP (this is just the sale of SP stock)
What kinds of tort awards are considered SP?
- Pain and suffering
- Loss of consortium
- Disfigurement
What kinds of tort awards are considered CP?
- Recovery for loss of earning capacity
- Medical expenses
- Unspecified settlement amounts (CP Presumption)
Are rights acquired by adverse possession CP or SP?
If adverse possessor entered land under claim of right, his title relates back to original entry and inception of title occurs at this date
If adverse possessor entered land as a naked trespasser, he obtains title only once the AP period has passed (10 years)
Stock Options: What is unique?
Inception of Title Rule does not apply. If the option vests after marriage, earnings are divided pro rata between SP and CP
Employee Retirement Benefits: How are they treated?
Akin to wages. Benefits earned partly before and partly during marriage are part SP and part CP, regardless of whether they have vested at the time of divorce.
Taggart Rule
If the employee is retired at time of divorce, the CP portion of a defined benefit plan (including military pensions) is given by the fraction:
(Years employed during the marriage/Total years employed at the time of retirement)
Barry Rule
If employee is not yet retired at the time of divorce use this rule.
Step 1: Determine the value of the plan
Step 2: Determine the CP portion of the plan
(years employed during marriage) / (years employed at time of divorce)
How can court divide a retirement plan that is not yet paying out?
- If/as/when decree
- Qualified Domestic Relations Order (for plans governed by ERISA)
- Cash out present value of pension
Under ERISA, do predeceasing spouses have a devisable interest in benefits?
No
How are disability and workers comp. benefits characterized?
The same as the wages they are intended to replace
Military Disability Benefits: How characterized?
As SP
Quasi-Community Property
Property acquired out of state that would have been CP if acquired in Texas
Quasi Community Property: How divided?
In a just and right manner
Quasi-Separate Property
Property that would have been SP if spouses had acquired it while domiciled in Texas. Divorce courts don’t divide QSP.
Three main principles that control analysis of property acquired in another state when a spouse dies:
- In non-CP states, a spouse’s salary is her SP
- In non-CP states, title determines ownership
- The spouses’ property rights do not change when they move to TX
When will a trial court’s determination of the “just and right” division be overturned?
Only if it is manifestly unjust and constitutes an abuse of discretion. Very unequal divisions are often upheld.
List of factors to determine whether division of CP is manifestly unjust and should be overturned:
- Spouses’ education, capacities, and abilities
- Disparity of incomes
- Disparity of earning capacities
- Relative physical conditions
- Relative financial condition and obligations
- Disparity of ages
- Size of separate estates
- Size of community estate
- Length of the marriage
- Whether one party has wasted community property
Can court consider fault when determining the just and right division of CP?
Unresolved.
View 1: Yes
View 2: Only if Marge uses a fault-based ground for the divorce
4 cases in which a spouse can receive maintenance:
- 10+ year marriage
- Family violence
- Spousal disability
- Child disability
In each case, the spouse seeking maintenance must lack sufficient property to provide for her own minimum reasonable needs (including SP and CP retained from marriage)
Spousal Maintenance
Provides for periodic payments from one ex-sposue to the other post-divorce
Does obligee have to spend down long-term assets or incur new debts?
No
Are circumstances that occur after divorce grounds to institute a spousal maintenance award?
No
Statutory limits on duration for all types of spousal maintenance:
Limited to the shortest reasonable period that allows the spouse seeking maintenance to earn sufficient income to provide for minimum reasonable needs UNLESS the spouse’s ability to do so is substantially or totally diminished because of:
- Disability
- Duty as custodian of a young child of the marriage
- Another compellling impediment to earning sufficient income
When does spousal maintenance terminate?
- Death of either spouse
- Remarriage of obligee
- Obligee’s cohabitation with a romantic partner
Statutory limit on amount of spousal maintenance payments:
Lesser of $5,000 or 20% of obligor’s gross income
Factors courts can look to to set the amount of spousal maintenance payments:
- Ability to provide for individual needs
- Each spouse’s employment skills, including time necessary to acquire additional education or training
- Duration of the marriage
- Age, employment history, earining ability, physical and emotional condition of the spouse seeking maintenance
- Effect of child support obligations
- Excessive or abnormal expenditures or destruction of CP
- Contributions by one spouse to other’s education, training, or earning capacity
- Property brought into marriage
- Contributions of spouse as a homemaker
- Marital misconduct
- History or pattern of family violence
10+ year marriage additional requirements for spousal maintenance
- Married to other spouse for 10+ years
2. Lacks ability to earn sufficient income to provide for minimum reasonable needs
Presumption re. 10+ marriage spousal maintenance:
There is a rebuttable presumption that maintenance for a 10+ year marriage is not warranted, unless the spouse has exercised diligence in earning sufficient income or developing skills to provide for her minimum reasonable needs
Statutory limitations on duration of payments for 10+ year marriage spousal maintenance:
10-20 years, up to 5 years SM
20-30 years, up to 7 years SM
30+ years, up to 10 years SM
Additional requirements for spousal maintenance in the event of family violence:
- Convicted of or received deferred adjudication for a criminal offense that also constitutes an act of family violence, committed during the marriage, against a spouse or a spouse’s child, AND
- The offense occured within 2 years before the date on which a suit for dissolution of the marriage is filed; or while the suit was pending
Statutory limits on duration of payments for spousal maintenance based on family violence:
For marriages less than 10 years, 5 years of SM
Otherwise, see limits for 10+ year marriage
Additional requirement for spousal maintenance payments for spousal disability:
A physical or mental disability preventing the spouse from earning sufficient income to provide for her minimum reasonable needs
Statutory limits on duration of spousal maintenance payments based on spousal disability:
As long as disability persists
Additional requirements for spousal maintenance payments based on a child’s disability:
- Marital child suffers from a physical or mental disability
- Requiring substantial care and personal supervision
- Preventing the caretaking spouse from earning enough to provide for his or her minimum reasonable needs
Applies as long as eligibility persists
What is the difference between spousal maintenance and alimony?
Texas does not award alimony. Alimony is court-ordered, while spousal maintenance is statutorily created
TX courts will not award “alimony.” But…
- Will enforce contractual alimony
- Can give temporary payments during divorce proceedings
- Can award periodic future payments if they are referable to property that cannot be easily divided
Can spousal maintenance awards be modified?
Yes, downward, but not upward.
Requires showing that there has been a material change in circumstances.
Cohabitants
No spousal maintenance
Spousal Maintenance for Putative Spouses?
May be awarded maintenance if putative spouse acted in good faith, without knowledge of the impediment, and otherwise qualified to receive maintenance
Reimbursement
Equitable doctrine to compensate spouse when other spouse uses SP money to benefit CP property or vice versa
Use when one estate is used to benefit another
Reimbursement for Secured Debt
Measured by reductions in the principal
Reimbursement for Unsecured Debt
Dollar for dollar reimbursement (including interest payments)
Reimbursement for Improvements
Measured by enhanced value
Reimbursement for Life Insurance Premiums
Measured dollar for dollar
Reimbursement for Time, Toil, & Effort
Value of Claim = (Value of the T, T, & E beyond what is reasonably necessary to maintain the SP) - (Any salary or other payments already received for the efforts)
Reimbursement: Offsets
Reimbursement is an equitable remedy that gives trial courts discretion to find that the contributing estate has received offsetting benefits that justify denying or reducing the reimbursment claim
Statutory exception to “use and benefit” offset:
Primary or secondary residence
A spouse has no reimbursement claim for:
- Payment of child support, alimony, or spousal maintenance
- Living expenses of a spouse or the child of a spouse
- Nominal contributions to property
- Nominal payments toward a liability
- Payments toward a student loan owed by a spouse
- Spousal gifts
What might constitute a fraud on the spouse?
Excessive or capricious gifts
What factors are relevant to determine whether a fraud on the spouse has beencommitted?
- Who receives the gift
- Size of the gift in relation to community estate
- Whether spouse can be made whole out of the remaining community estate
When does a presumption of fraud on the spouse arise?
When one spouse disposes of CP unfairly or without the other spouse’s knowledge or consent.
Burden then shifts to donor to show the use of CP funds was fair.
Some cases have also held that a gift to an unrelated person is presumptively fraudulent.
Actual Fraud (on the spouse)
When the donor spouse intended to deceive the wronged spouse and intended to deprive her of her community share
More culpable, therefore could result in a more skewed just and right division
Constructive Fraud (on the spouse)
When the donor spouse makes gifts of the CP but does not intend to deceive and deprive that spouse of her community share
Remedies for Fraud on the Spouse
- Challenge the gift during donor’s life and it can be set aside in its entirety
- Challenge gift after donor dies and gift will be set aside only as to the wronged spouse’s 1/2 interest in the property
- In cases of divorce or death, the court will calculate a reconstituted estate, which consists of all the property that would have been in the community estate absent the fraud
How will the court split a reconstituted estate?
Upon divorce: In a just and right manner. This could include disparate shares, money judgments, or both.
Upon death: The court will split the reconstituted estate 50/50
Temporary Orders Pending Appeal
Within 60 days after any eligible party files a notice of appeal, after notice and hearing, a court can make temporary orders pending appeal. For example, to prohibit one party from dissipating property awarded in the divorce.
No bond or finding of irreparable injury is required.
Court can suspend the operation of the property division, but must take reasonable steps to ensure that the party awarded the property is protected.
A court can modify its temporary orders if the circumstances of a party have materially and substantially changed, and the modification is equitable and necessary to protect property or persons.
Acceptance of Benefits Doctrine
A litigant is estopped from appealing or otherwise attacking a judgment after voluntarily accepting its benefits.
Fact-based doctrine focused on preventing unfair prejudice and irremediable disadvantages to a party
Before denying a merits-based resolution to a dispute under the Acceptance of Benefits Doctrine, courts must evaluate:
- Whether, by asserting dominion over assets awarded in the judgment under review, the appealing party clearly intended to acquiesce to the judgment.
Mere use or accepting due to financial distress does not constitute clear intent to acquire
- Whether the opposing party will be unfairly prejudiced
Later-Discovered CP
Owned by both parties as tenants in common. To obtain his share of the asset, one party can bring a suit for partition and the court will divide the asset in a just and right manner.
Statute of Limitations re. later-discovered CP
2 years from the time one spouse unequivocally repudiates the other’s ownership interest and communicates that to the other spouse
Statute of Limitation for Enforcing Judgments
10 years
Exceptions:
2 years when enforcing division of tangible personal property in existence at the time of the divorce or future property, not in existence at the time of the original decree
The terms of a settlement can be enforced, even if not incorporated into the judgment under a breach of contract theory (4 year SoL)
Prenups: Parties may contract with respect to:
- Disposition of property upon separation, divorce, death, occurrence or non-occurrence of any event
- Making of a will or trust
- Modification or elimination of spousal support
- Determining the management rights of property
- Defining what property will be SP and what will be CP (but can’t convert existing SP into CP until married)
- Choice of law to govern the construction of the agreement
- Any other matter not in violation of public policy
Prenups: Parties cannot contract with respect to:
- Child custody
2. Limiting child support
Requirements for a prenup:
In writing, signed. Consideration is not required
To invalidate a prenup or partition and exchange agreement, the challenging spouse must prove:
- The party against whom enforcement did not execute it voluntarily (issues of duress and fraud are relevant here), OR
- The agreement was unconscionable when signed AND each of the following 3-point test is met:
a. No fair disclosure (re. the property and financial obligations of the other party)
b. Right to disclosure not waived
c. No adequate knowledge
Partition and Exchange Agreements
Convert current or future CP into SP.
Requires signed writing, no consideration required.
Limitations: Void with respect of rights of a creditor intended to be defrauded by it
Conversion Agreements
Convert SP into CP
Requirements:
- Signed writing, consideration not required
- Identifying property being converted and specifiying it is being converted into the spouses’ CP
Limitations:
- Must be made during the marriage with respect to existing separate property
- Must alter the characterization of the property immediately
- Does not affect the rights of a preexisting creditor
Requirements to Challenge a Conversion Agreement
- Challenging spouse did not sign the agreement voluntarily, OR
- Did not receive a fair and reasonable disclosure (unlike prenups, this cannot be waived)
CP Survivorship Agreements
State that CP will become property of the surviving spouse
Requirements:
- In writing, signed by both spouses.
- Containing a phrase like: “with the right of survivorship” or “will become the property of the surviving spouse
Can be revoked unilaterally by delivering a signed, written revocation to the other spouse.
Cohabitation Agreements
Outline the property rights of unmarried cohabitants
Requirements: In writing, signed by both parties.
Limitations: Standard contract limitations
Putative Marriage
When some impediment prevents a marriage from being legally valid.
Putative spouse entitled to 1/2 of “CP” if acting in good faith without knowledge of the impediment.
If impediment is removed, putative marriage becomes valid
Prenups enforceable only to the extent necessary to avoid an inequitable result
A spouse has sole management over
- Her SP
- What would have been her SP if she were single (e.g. wages and income from her SP)
- If title to a CP asset is only under one spouse’s name, there is a presumption that the asset is sole management property
Sole Management gives spouse the power to:
- Manage
- Control
- Transfer
- Encumber
- Dispose
Exception: Homestead
Spouses have Joint Management over:
- Property purchased with community property
- Comingled sole management CP
If title to an asset is in both spouses’ names, presumption the asset is JMCP
Creditors of debts incurred before marriage can collect from:
All property the debtor spouse has management rights over (SP, SMCP, and all JMCP)
Creditors of debts incurred during marriage can collect from:
- Property the debtor spouse has management rights over
Exceptions:
- If one spouse acted as an agent for the other
- Both spouses are personally liable for necessaries (e.g. rent, medical bills)
For TORTIOUS debts incurred during the marriage, creditors can collect from:
The tortfeasor’s SP AND all CP
How does divorce impact creditors’ rights?
Liability attaches to property, not persons. If joint management property is subject to a liability during the marriage, the property remains subject to the liability after the divorce, irrespective of who takes it in the divorce decree.
