COMMUNITY PROPERTY Flashcards
Community Property Presumption: Guiding Principle
California is a community property state. All property acquired during the course of marriage is presumptively community property (CP), irrespective of which spouse’s name is on title. Earnings/wages are deemed CP when earned during the marriage.
Separate property (SP) includes: (1) property acquired prior to marriage or after separation; (2) a gift, devisee, or bequest; (3) property acquired with separate funds; and (4) profits from separate property.
The economic community begins at marriage and ends when: (a) either spouse dies; OR (b) there is permanent physical separation – when the spouses are permanently living apart and do not intend to continue the marriage.
Quasi-Community Property
- Quasi-Community Property (QCP) is property acquired in another state that would be considered community property if it were acquired in California.
- QCP retains its SP nature (and may be transferred) until: (a) dissolution/divorce of the marriage; OR (b) death of the acquiring spouse. At divorce, QCP is treated like CP. At death, the surviving spouse has a 1/2 interest in QCP titled in decedent’s name. However, the decedent DOES NOT have any rights in QCP titled in the surviving spouse’s name.
End of the Economic Community
The economic community ends when: (a) either spouse dies; OR (b) there is permanent physical separation – when the spouses are permanently living apart and do not intend to continue the marriage.
Equal Rights of Spouses to Manage/Transfer Property
Each spouse has equal rights to manage and control CP. Thus, a spouse MAY sell, encumber, or otherwise dispose of CP without the other’s consent.
Exceptions:
- Personal property transfers of CP
- one spouse is managing a business,
- Transfers of Community Real Property; AND
- Inter Vivos Gifts of CP
Equal Rights of Spouses to Manage/Transfer Property–personal property transfers of CP
Personal property transfers of CP for less than fair and reasonable value (written consent is required).
Equal Rights of Spouses to Manage/Transfer Property–One spouse is managing a business
If one spouse is managing a business, he/she is
given primary management and control over the business. But, that spouse is obligated to provide prior written notice to the other spouse of any sale, lease, exchange, encumbrance, or other disposition of all or substantially all of the property used in the operation of the business.
Equal Rights of Spouses to Manage/Transfer Property–Transfers of Community Real Property
Transfers of Community Real Property require both spouses to join the transaction – if one spouse sells or encumbers community real estate without consent, the non-consenting spouse may void the transaction (must be voided within one year if sold to a bona-fide purchaser, otherwise it is avoidable at any time).
Equal Rights of Spouses to Manage/Transfer Property—Inter Vivos Gifts of CP
Inter Vivos Gifts of CP require written consent. Where one spouse gifts CP to a third-party without consent, the other spouse may void the gift during the donor’s lifetime, or may void half of the gift after the death of the donor.
Fiduciary Duties of Spouses
Marriage is a confidential relationship which imposes a duty of the highest good faith and fair dealing on each spouse, and neither shall take any unfair advantage of the other.
The following are a breach of this duty:
(1) an intentional, grossly negligent, or reckless dissipation or destruction of property;
(2) a gain in financial advantage at the expense of the other spouse. In such instance, the responsible spouse’s SP can be used to reimburse the community.
The spouse who obtained the advantage will have the burden to prove that the transaction was entered into by the other spouse freely and voluntarily, with full knowledge of all the facts relevant to the transaction, and the basic effect of the transaction.
Jointly Titled Property & Anti-Lucas Statute–At Divorce
Under the Anti-Lucas Statute, jointly titled property acquired by a married couple (from 1987 to present) is presumptively CP at divorce, BUT any SP used for the purchase is entitled to reimbursement (the reimbursement is the fair market value at the time of purchase). The CP presumption may be rebutted by a writing.
Jointly Titled Property & Anti-Lucas Statute–At Death
At death, SP used to acquire jointly titled property is presumed to be a gift (no reimbursement is allowed), UNLESS otherwise agreed.
Personal Injury Awards & Settlements–Cause of Action Against Third-Parties
If the cause of action arose during marriage, personal injury awards and settlements are CP. At divorce, they are assigned entirely to the injured spouse, UNLESS (a) the funds were comingled, (b) or there is economic hardship to the other spouse. If the cause of action arose either before marriage, after marriage, or after permanent separation, then the award is SP of the injured spouse.
Personal Injury Awards & Settlements–Cause of Action Against Spouse
Personal injury awards/settlements against a tortfeasor spouse are always SP of the injured spouse.
Separate Property Business (Van Camp & Pereira Tests)–In General
If a SP business is enhanced by community labor during marriage, courts will determine CP and SP interests at divorce using either Pereira or Van Camp methods.
Separate Property Business (Van Camp & Pereira Tests)–Pereira Method
Courts apply the Pereira method when business growth is mostly due to the spouse’s labor and abilities. Here, the owning spouse receives the original principal value of the business, PLUS an annual rate of return calculated at 10%, and the remaining value of the business is CP.
