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CA Bar Exam > Community Property > Flashcards

Community Property Flashcards

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1
Q

CP: State the general rule you should add on any community property essay

A

California is a community property state. There is a presumption that all assets acquired during marriage belong to the community. However, there are also categories of separate property, including: (i) property acquired before marriage; (ii) property acquired during marriage by gift or inheritance; (iii) property acquired during marriage with separate property funds; and (iv) rents, issue and profits with respect to categories (i)-(iii).

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2
Q

CP: What are the two most common categories of community property?

A
  1. salary or wages earned during marriage

2. income from community assets

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3
Q

CP: When does the economic community end?

A

When there is (i) intent by ANY party to end the marital relation and (ii) conduct consistent with that intent.

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4
Q

CP: What is general rule for how community property is distributed upon divorce?

A

Each and every asset (and liability) must be divided equally between spouses.

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5
Q

CP: What are the three “economic circumstances” exceptions to equal division upon divorce?

A
  1. Family home
  2. Closely held corporation
  3. pension
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6
Q

CP: What are the five statutory exceptions to equal division upon divorce?

A
  1. educational debt
  2. spouse misappropriated CP
  3. tort liability from conduct not for the benefit of Comm
  4. personal injury award
  5. negative community (i.e., where debt exceeds assets)
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7
Q

CP: What is required in order for a spouse to make a gift of community property during his lifetime?

A

Consent of the other spouse

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8
Q

CP: What remedies are available if one spouse makes a lifetime or testamentary gift of CP without the consent of the other spouse?

A
  1. Set aside the entire gift
  2. Take offsetting CP upon divorce
  3. Set aside only her portion of the gift and recover from the donee or her spouse’s estate
    Exception for community savings bonds
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9
Q

CP: What is the widow’s will election?

A

If will violates the rules on gifts/devises of community property, the injured widow must elect to take under the will OR against the will. Can’t cherrypick.

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10
Q

CP: What is the community credit presumption?

A

Funds borrowed, and goods purchased on credit, during the marriage are presumed to be debts of the estate. However, borrowings are classified according to lender intent - and if lender is extending credit based on one spouse’s SP - debt will be considered SP.

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11
Q

CP: Is there a fiduciary duty in marriage? Does it give rise to any presumptions?

A

Yes, spouses owe one another a duty to act with the highest good faith and fair dealing towards one another. Presumption of undue influence arises where one spouse gains an advantage over the other through a transaction.

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12
Q

CP: What is called when CP changes form during the marriage?

A

Transmutation

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13
Q

CP: Can spouses elect out of the rules of community property?

A

Yes, and doing so “transmutes” the CP.

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14
Q

CP: What is required for a pre-marital agreement to be enforceable?

A
  1. In writing

2. signed by both party

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15
Q

CP: What can married couples agree to in a premarital agreement?

A

Anything, other than limits on child support

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16
Q

CP: What are the key defenses to show a premarital agreement should not be respected?

A
  1. Unconscionable.
  2. Not voluntary. Agmt DEEMED not voluntary unless proponent can show
    • –opposing spouse was repped by independent counsel
    • –had at least seven days to review and sign
    • –fully informed about basic effect of the agmt
  3. All else:
    - -unconscionable when made
    - -no full and fair disclosure about property/financial obligations - and right to disclosure wasn’t waived
    - -challenging party didn’t know extent of property
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17
Q

CP: Can spousal support be waived or modified by premarital agreement?

A

Yes, but it will be treated as unenforceable if the party challenging it:

  • –was not repped by independent counsel
  • –shows provision is unconscionable at time of enforcement
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18
Q

CP: What is required for a transmutation to be respected?

A
  1. writing
  2. signed by spouse whose interest is adversely affected
  3. expressly states that a change in ownership is occuring
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19
Q

CP: What is the only exception to the requirements for an effective transmutation?

A

Gift of tangible personal property that is personal in nature and not substantial in value taking into account the circumstances of the marriage
–usually jewelry

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20
Q

CP: How does a couple take property in joint and equal form?

A

Both spouses must be shown in the title.

21
Q

CP: What presumption follows when a couple takes property in joint and equal form, and one spouse dies?

A

Upon death, under Marriage of Lucas, such property will be treated as community property and thus divided equally. There will be no right to reimbursement with respect to such property, unless a spouse can establish that there was an agreement to treat it as separate property.

22
Q

CP: What is the result when a couple takes property in joint and equal form, and then the couple divorces?

A

Two Anti-Lucas statutes.

  1. While property is presumptively CP and subject to equal division, that can be rebutted by (i) express stmt in the deed, or other instrument of title, that it is SP or (ii) written agmt by the spouses that the property (or portion of it) is SP.
  2. Spouse is entitled to reimbursement, without interest, if she used SP to contribute to a down payment, improvement, or mortgage principal of CP.
23
Q

CP: What result when spouse makes an installment purchase of property that begins before marriage?

A

Community estate is entitled to a portion fo the property, measured by how much of the principal was paid with community property after the community began.

24
Q

CP: What result does community have on whole life insurance policy?

A

Community is entitled to pro rata share of the policy, based on the amount of the policy funded with CP.

25
Q

CP: Is community entitled to term life insurance proceeds?

A

Depends. Yes, if LAST premium payment was funded with CP. No, if not.

26
Q

CP: What result when a spouse uses CP to fund her OWN SP?

A

Other spouse can bring a claim for reimbursement, and the amount will be measured by the greater of (i) CP expense and (ii) increase in the value of the property.

27
Q

CP: What result when a spouse uses CP to fund the OTHER SPOUSE’s SP?

A

Two lines of authority:

  1. Presumed to be a gift
  2. Funding spouse is entitled to reimbursement
28
Q

CP: What result if spouse claims family expenses were funded with SP?

A

CA presumes that expenses are funded with CP. That can be overcome by the Exhaustion Method or the Direct Tracing Method. Exhaustion shows that all CP was gone. DTM requires actually tracing the source of funds to SP.

29
Q

CP: What result if divorce following growth of a business owned during marriage?

A

Courts will analyze the nature of the business and apply one of two tests in a manner that results in substantial justice between the parties. Pereira Test and Van Camp Test.

30
Q

CP: What is the Pereira Test?

A
  • Applied where the biz developed as a result of spouse’s time, skill, and effort.
  • SP = Beginning Value of Business at Start of Marriage + 10% interest / year
  • CP = Remaining Value of Business
31
Q

CP: What is Van Camp test?

A
  • Applied where capital is the major factor in biz growth
  • CP = Market Value of Spouse’s Services - Family Expenses Paid from Community Funds
  • SP = Balance
32
Q

CP: What is the general rule of how pension benefits are treated?

A

Retirement benefits accumulated during marriage are CP, whether or not vested at the time of divorce. California applies a pro ration rule, whereby community is entitled to a pro rata share of the pension.

33
Q

CP: What are the two possible results where a pension is not vested at the time of divorce?

A
  1. If and When Received Decree: divorced spouse takes 50% when the benefit is RECEIVED
  2. Cash Out: divorced spouse is cashed out with assets equal to the amount of her entitlement
34
Q

CP: What happens if one spouse dies before the other spouse’s pension benefit is vested and payable?

A

ERISA preempts California state law, and the decedent spouse is not entitled to any portion of the benefit.

35
Q

CP: How are disability benefits and workers comp classified?

A

They are classified based on when they are RECEIVED, not based on when they are earned. Thus, benefits received after marriage are treated as SP.

36
Q

CP: How is severance pay treated?

A

There are two lines of authority, and you must argue both.

  1. SP, on the theory that severance replaces lost earnings
  2. CP, on theory that it arose from collective bargaining agreement and was earned by employment during marriage
37
Q

CP: How do you divide stock options that vest after marriage ends? Need to argue both approaches.

A

Marriage of Hug: where options are for past services, they are deferred comp. CP = (total years of employment / years from date of employment to date right to exercise) x number of options

Marriage of Nelson: where options to encourage staying, the CP = (Years Since Grant / Years from Grant to Right to Exercise) x Number of Options

38
Q

CP: How do you treat goodwill of a professional practice

A

CP, if acquired during marriage.

39
Q

CP: Is degree earned during marriage CP? How treat educational expenses?

A

Professional degree earned during marriage is NOT CP. However, upon divorce, community is entitled to reimbursement for the enhancement of earning power.

40
Q

CP: What are defenses to rule on educational expenses?

A
  1. Other spouse ALSO has degree funded with CP

2. More than 10 years have elapsed since degree was awarded (theory being community has had time to benefit)

41
Q

CP: Where your own spouse is a tortfeasor, how do you classify tort recovery?

A

sp

42
Q

CP: Where tortfeasor is a third party, how do you classify tort recovery?

A

CP. But upon divorce or legal separation, recovery will be treated as SP if (i) it can be traced and (ii) has not been spent.

43
Q

CP: What funds can be used to satisfy a tort judgment against a spouse?

A

-First CP, and then SP if the activities giving rise to the tort were to benefit the community. If not, First SP and then CP.

44
Q

CP: What is general rule regarding management of community property?

A

Equal management and control.

45
Q

CP: What are six exceptions to general rule regarding management of community property?

A

Personal Belongings // Personal Business (can’t alone if you manage/control it) // Real Property (need mutual consent) // Pre-Marital Debts (can’t take from non-debtor spouse) // Contracts for Necessity (e.g., medical bills) // Following Divorce

46
Q

CP: what is quasi community property?

A

property acquired while the couple was domiciled in a non-community property state

47
Q

CP: how is quasi community property distributed?

A

follow CA’s community property rules, if non-acquiring spouse survives the acquiring spouse.

48
Q

CP: what is the putative spouse rule?

A

If one person has a subjective belief that they are lawfully married, property acquired during the relationship is treated as quasi-marital property and subject to 50/50 division upon a separation

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