Community Property

Question 1

What is community property?

Answer 1

It is property, other than separate property, that is acquired by either spouse during the marriage. It is presumed that all property owned at divorce is community property unless spouses provide clear and convincing evidence to the contrary.

Question 2

A buys a car the day after his wedding to B.

Is this community property or separate property?

Answer 2

It is presumed community property (bought during marriage), unless he shows clear and convincing evidence that this car was bought with separate property (his money)

Question 3

Using community property $, B buys A’s boots from a pawn shop and gives them to A for his birthday.

Is this community property or separate property?

Answer 3

Property acquired during the marriage by gift, devise, or descent is separate property - even if purchased with community property funds.

Question 4

A’s father gives a car to newlyweds A and M as a wedding gift. Is the car separate property or community property?

Answer 4

It is a gift, which is separate property (even if acquired during the marriage). A and M own the car as separate property and tenants in common.

Question 5

T/F: The name listed on the title to an asset (e.g. name on the deed) is relevant to the asset’s characterization.

Answer 5

False. It is irrelevant BUT it can be relevant to whether one party intended to make a gift of an asset.

Question 6

What is separate property?

Answer 6

(i) property owned or claimed by the spouse before marriage (inception of title);
(ii) property acquired by the spouse during marriage by gift, devise, or descent; and
(iii) recovery for personal injuries sustained by the spouse during marriage, except any recovery for medical expenses and loss of earning capacity during marriage.

Question 7

Ten days before marriage, Wife buys a car for $10,000 payable in monthly installments over the course of five years. She pays the $1,000 down. Five years later, the car is completely paid off using community assets. Which of the following statements is true regarding the car?

A - The car is community property.

B - The car is Wife’s separate property.

C - The car is mixed property, one-tenth the Wife’s separate property and nine-tenths community property.

D - The car is mixed property; one-half Wife’s separate property and one-half community property.

Answer 7

B. The car is the Wife’s separate property due to the inception of title rule (car was purchased before marriage).

Question 8

During marriage, Husband purchased a big screen TV for $5,000, using $1,000 of his separate funds as down payment and putting the remaining $4,000 on a credit card. One month later, Husband pays the credit card balance using his separate funds.

How is the TV’s ownership divided?

Answer 8

The TV is mixed property; it is 1/5 Husband’s separate property and 4/5 community property.

Question 9

The court cannot recognize a marital estate’s claim for reimbursement for what 5 things?

Answer 9

(i) the payment of child support, alimony, or maintenance;
(ii) the living expenses of a spouse or child of a spouse;
(iii) contributions of property of a nominal value;
(iv) the payment of a liability of a nominal amount; or
(v) a student loan owed by a spouse.

Question 10

Which of the following is true regarding commingled property?

A - Community property may become separate property, but separate property cannot become community property.

B - The party seeking to establish a particular asset is community property bears the burden of proof.

C - In the case of bank accounts, there is a presumption that separate funds were withdrawn first, before community funds.

D - The presumption that property is community property may be overcome by tracing so as to establish separate ownership.

Answer 10

D. It is true that the presumption that property is community property may be overcome by tracing so as to establish separate ownership.

Question 11

When can the court order maintenance?

Answer 11

The court may order maintenance if the seeking spouse will lack sufficient property after divorce to provide for their minimum reasonable needs and one of the following:

(i) obligor spouse was convicted of a criminal offense that also constitutes an act of family violence, committed during the marriage, against the other spouse or the spouse’s child, and the offense occurred within two years before the date the suit for dissolution was filed or while the suit is pending; or
(ii) the spouse seeking maintenance is unable to earn sufficient income because of an incapacitating physical or mental disability, has been married to the obligor spouse for 10 years or longer and lacks the ability to earn sufficient income, or is the custodian of a child of the marriage who requires substantial and personal care because of a physical or mental disability that prevents the spouse from earning sufficient income.

Question 12

T/F: Caring for a parent or a child from another marriage is an insufficient ground for awarding maintenance.

Answer 12

True.

Question 13

Spouse is required to pay spousal maintenance. Spouse has a monthly gross income of $10,000. Ignoring any mitigating circumstances, what is the maximum amount the court can order Spouse to pay?

Answer 13

$2000/month

The amount of spousal maintenance may not exceed the lesser of $5,000 per month or 20% of the obligor spouse’s monthly gross income. Here, 20% of Spouse’s monthly gross income is $2,000 which is less than $5,000. Thus, Spouse’s maintenance obligation is limited to $2,000 per month.

Question 14

Wife requested maintenance on the grounds that, after more than 10 years of marriage, she is unable to earn a sufficient income to meet her minimum reasonable needs. What fact, if proven, would be most helpful in rebutting the presumption against granting Wife’s requested maintenance?

A - Wife is moving in with her family because she cannot afford rent.

B - Husband makes $10,000 a month.

C - Wife has been working towards a law degree and will graduate next year.

D - Husband committed adultery during the marriage.

Answer 14

C. Wife has been working towards a law degree and will graduate next year.

The court presumes that a request for spousal maintenance is unwarranted if:

• based on spouse’s lack of ability to earn sufficient income after a marriage lasting longer than 10 years
• requesting spouse is developing skills to meet minimum needs or exercising due diligence to earn sufficient income

Question 15

The duration of a maintenance order is limited to 5 years depending on:

Answer 15

The order is limited to 5 years if

(i) the spouses were married for less than 10 years and maintenance is awarded based on family violence, or
(ii) the spouses were married for at least 10 years but not more than 20

Question 16

In a property settlement attendant to a divorce proceeding, each spouse is entitled to their separate property and community property is generally divided equally. But a court may make an unequal division of community property where it is “just and right.”

What factors does the court consider?

Answer 16

The court considers several factors, including:

(i) disparity of income and earning capacity + each spouse’s probable needs for future support;
(ii) each spouse’s business opportunities, financial conditions, and obligations;
(iii) each spouse’s education and abilities;
(iv) each spouse’s relative physical condition;
(v) any disparity of ages between spouses;
(vi) size of the separate property estates of the parties;
(vii) legal nature of said separate property;
(viii) benefits that the party not at fault would have derived from continuation of the marriage;
(ix) the length of the marriage; and
(x) whether one party has wasted or depleted community assets.

Question 17

T/F: Even where the division of property is greatly disproportionate, the appellant has the burden to show that there is no rational basis for the division made by the trial court. The appellant must show from the record the division was so disproportionate as to be manifestly unjust such that there is a clear abuse of discretion.

Answer 17

True.

Question 18

H buys a house with separate property funds, but lists himself and wife W on the deed.

Is the house separate property or community property?

Answer 18

This is separate property (thanks to tracing - was bought with SP funds) but there is a presumption that H and W are co-tenants and he is giving W a 1/2 interest.

Question 19

H buys a house with community property and the deed names as the grantee: “W, as her sole and separate property.”

Is the house separate property or community property?

Answer 19

This is separate property because it is a gift (to W).

Question 20

H buys a house with community property and the deed names as the grantee: “H, as his sole and separate property.” Wife W did not know that H used this language in the deed and did not participate in the transaction.

Is the house separate property or community property?

Answer 20

The house is community property because H cannot give a gift to himself. This would otherwise allow a spouse to take what would be normally community property and ensure they get 100% instead of the 50% interest they have.

Question 21

The week before the wedding, H signs a contract to buy a plot of land and takes out a mortgage to do so. H pays the entire mortgage during the marriage with money he earns during the marriage.

Is the plot of land community property or separate property?

Answer 21

The land is separate property because the title was acquired before the marriage.

Question 22

What are the two exceptions to the inception at title rule?

Answer 22

1. pensions

2. stock options

Question 23

T/F: When a spouse takes $ out of a co-mingled account, TX courts apply a presumption that the spouse took out community property, not separate property money.

Answer 23

True.

Question 24

H sells an item of his separate property for $102.50 and deposits this amount into an account that already contains $200 in community property. The next day he takes $101 out of this account and buys himself boots.

Are the boots community property or separate property?

Answer 24

This is separate property. The community property out first presumption can be overcome because the deposit and withdrawal were close in time and close in amount.

Question 25

T/F: If a separate property asset produces income during marriage, that income is community property.

Answer 25

True. See income from rental property.

Question 26

H has a bank account containing $100 of separate property. During the marriage, bank pays him $2 of interest on that account.

Is the $2 separate property or community property?

Answer 26

The interest is community property because it is income during the marriage.

Question 27

H grows crops on his separate property land.

Is the corn separate or community property?

Answer 27

It is community property because it is productive use that creates income.

Question 28

H owns two pure-bred dogs before his wedding. During the marriage, the dogs have puppies.

Separate or community property?

Answer 28

The dogs are community property. The separate property goods (dogs) were put into productive use that generated income.

Question 29

H’s father set up a trust for him. H will receive the income generated by interest on the principle of the trust until age 70 and then H will have unrestricted access to the principles of the trust.

Which payments are separate property and which are community property?

• income before 70
• principle of the trust (after 70)
• income after age 70

Answer 29

• income before 70: separate property (treated as periodic gifts)
• principle of the trust (after 70): unrestricted access is treated as a gift, so it is separate property
• income after age 70: community property because as principal of trust, this is now income earned

Question 30

T/F: When one spouse makes a gift of her separate property to the other spouse, courts will presume that this is a gift of both the underlying separate property asset and income produced by it in the future.

Answer 30

True.

Question 31

H gives W 100 shares of his separate property stock. The stock earns $10 in dividends.

Separate or community property?

Answer 31

This is a gift so it is separate property.

Question 32

H owns separate property land. During the marriage he gets $500 in royalties for oil and gas lease on the property.

Separate or community property?

Answer 32

It is separate property because H owned this property (surface and mineral estates) before marriage.

Question 33

H owns separate property land. During the marriage he gets $500 in delay rentals stemming from an oil and gas lease, which are payments for the privilege of denying exploration during the term of a lease.

Separate or community property?

Answer 33

This is community property because he is not selling the separate property oil - instead he’s receiving money for not selling. This is treated as income.

Question 34

T/F: When a separate property stock produces cash dividends, those dividends are income and thus community property.

Answer 34

True.

Question 35

T/F: Stock dividends is separate property always.

Answer 35

True, includes appreciation of value of stock, stock split, and a capital gains dividend (sale of separate property = separate property).

Question 36

H gets into a car accident one year before his marriage and gets $1M for lost earning capacity.

Separate or community property?

Answer 36

This is separate property because of the inception of title rule. He acquired the right in these damages when injured so it is his separate property.

Question 37

T/F: Separate property in tort recovery claims include pain and suffering, loss of consortium, and disfigurement.

Answer 37

True.

Question 38

T/F: Community property in tort recovery claims include recovery for loss of earning capacity and medical expenses.

Answer 38

True.

Question 39

Before marriage, H intends to enter a contract to buy a specific lot, but the deed mistakenly describes another lot. He accidentally moves onto the wrong lot.

He married W five years later. After the adverse possession period passes, is this separate or community property?

Answer 39

This is separate property. If the adverse possessor entered the land under a claim of right, then his eventual title relates back to the original entry (inception of title occurs at this date).

H’s title relates back to his first entry for sufficient time for adverse possession (10 years ago).

Question 40

Before marriage, H buys lot 3 and decides to plant crops on his lot and lot 2. He marries W five years later.

After the adverse possession period has passed, is lot 2 community property or separate property?

Answer 40

This is community property. He knew he was a trespasser and had no claim of right.

If the adverse possessor entered the land as a naked trespasser, then he obtains title only when he completes adverse possession. The inception of title occurs at this date (so 10 years after = during his marriage = community property).

Question 41

Divorce terminates named beneficiary (W) in a life insurance policy unless:

Answer 41

1. divorce decree still names that spouse
2. H renames W as the beneficiary after divorce
3. W was originally named beneficiary in trust for, on behalf of, a child of W or H
4. Life insurance policy is governed by ERISA - federal law preempts state law

Question 42

H obtains stock options in 2005 that will vest in 2015. H marries in 2008 and divorces in 2010.

What portion of the eventual value of the stock option is community property?

Answer 42

The inception of title rule does not apply to stock options. A spouse might acquire stock option that will invest later. Think about options as being “earned” over the entire time frame then split between the separate property and community property pro rata.

Here, the time for the stock vesting was 10 years and his marriage was 2 years. 2 of out of 10 is 20%, meaning that 20% is community property.

Question 43

H contributes $1000 to a defined contribution plan and his employer contributes $100. This pays for 11 shares of X stock. In his first year of marriage, H increases his contributions to $2000 and his employer to $200. This pays for 22 shares of X stock.

How much is community property?

Answer 43

The 22 additional stocks bought are during the marriage and are community property. The 11 stocks from before his marriage are his separate property, but the cash dividends from all are community property.

Question 44

H worked at the plant for two years before his wedding and 18 years after his wedding. He retired just before the divorce and the pension pays $1000/month.

What portion is community property?

Answer 44

If the employee is retired, use the Taggart rule: the community property portion of the defined benefit plan is given by: years employed during marriage / total years employed at time of retirement.

This would be 18 years during marriage / 20 total years of employment = 9 / 10 = 90% is community property. 90% of $1000 is $900/month.

Question 45

H marries W and then works 10 years before their divorce. What is the value of the benefit plan if H’s salary had always been $100,000?

Answer 45

Since the employee has not retire by time of divorce, use the Berry rule. The value of the plan is valued at time of divorce = 2% x
[years of work] x
[average of 3 highest annual salaries]

Here, 2% x 10 years = 20%, then 20% of 100,000 = $20,000/year

The community property portion is:
[years employed during marriage] /
[total years employed by time of divorce]
= 10 years / 10 years = 100% of value is community property