Community Property Flashcards
Community presumption
All assets acquired during marriage are presumptively community property.
It is the burden of one party to prove that a property is separate property and not part of the community.
APPLIES TO: Registered domestic partners (RDPs)
(1) same-sex couples, and
(2) elderly opposite-sex couples receiving social security.
Bonus fact: Same-sex couples lawfully married after In re Marriage Cases (2008) but before Prop. 8 (Nov. 5, 2008) may claim community property rights as spouses, not as domestic partners.
Separate Property (SP)
Prop owned by either spouse before marriage.
Prop acquired during marriage by donation – gift, will, or inheritance.
Prop acquired during marriage w/ the expenditure of separate funds.
Income and capital gains from SP.
Common law marriage
(Not recognized in CA)
A couple lives together for a period of time and holds themselves out to friends, family and the community as “being married,” but never go through a formal ceremony or get a marriage license.
Marvin Rule: Relationship will be governed by k law. A k can either be express or implied from conduct. If a k is found, we treat it as a partnership or joint venture
Putative spouse
A party of a normally void or voidable marriage has objectively reasonable and good-faith belief that the marriage is valid.
The totality of the circumstances must be weighed to determine if the putative spouse did have a good faith belief in the validity of the marriage.
Assets will be generally deemed as “quasi marital property” and split 50/50.
Gifts of CP (Rule: Lifetime gifts)
Neither spouse can make a gift of CP w/out the other spouse’s written consent.
Courts see such an unauthorized gift as unjust because a spouse is conveying property he does not own.
Gifts of CP (Remedies)
Can set gift aside in its entirety so it will be restored to the community estate.
On divorce can take equal offsetting CP assets to recover her ½ CP.
If she didn’t learn about it until after spouse’s death then can set aside as to her ½ CP from either the donee or spouse’s estate. (Same result w/ insurance policy wrongfully naming someone else.)
Exception: Fed law trumps California CP law. Can’t recover for using CP to buy US Savings Bonds b/c of fed preemption.
Gifts of CP (Testamentary gifts)
Each spouse has power of testamentary disposition over all of their SP, but over only ½ of the CP
Widow’s election will
When decedent’s will attempts to pass the survivor’s ½ interest in CP then survivor must elect btwn the will and her CP rights
Acquisitions on credit during marriage
Look to Intent of Lender – CP or SP – If SP, does CP buy in?
Community Credit Presumption: Funds borrowed during marriage, and goods purchased on credit during marriage are presumptively on community credit.
Borrowed funds and credit are ultimately classified according to primary intent of the lender.
Applies at the time of its acquisition. Subsequent actions of the parties in paying off the credit may change the character of the asset.
Management and control of SP
Each spouse has the exclusive management and control of their own SP
Management and control of CP
Each spouse has equal management and control over all CP. Has full power to buy or sell CP and contract debts w/out the other spouse’s joinder or consent.
Exceptions to management and control of CP
Business exception
Personal belongings exception
Conveyance of CP real prop
Exceptions to management and control of CP: Business exception
Spouses who operate a bus interest that is all or substantially all CP has primary management and control of the bus.
Exceptions to management and control of CP: Personal belongings exception
One spouse can’t sell or encumber personal prop used in family dwelling (furniture) or clothing w/out written consent of other spouse.
Transaction voidable by other spouse at any time.
Exceptions to management and control of CP: Conveyance of CP real prop
Both spouses must join in executing any instrument where community real prop is sold, conveyed, or leased for more than 1 yr.
If CP titled in one spouse’s name and they misrep marital status to innocent transferee then nonconsenting spouse has 1 yr to bring action to void transfer.
**If buyer knew that seller was married then not a BFP so statute of limitations doesn’t apply.
Creditors: Rule
Either spouse can incur community debt.
All CP and debtor’s SP are liable for a debt incurred before or after marriage. The other spouse’s SP is not liable.
After divorce, a creditor cannot reach CP awarded to a spouse unless that spouse:
- *Incurred the debt, or
- *Was assigned the debt by the ct.
Creditors: Exception
Earnings of nondebtor spouse cannot be reached for premarital debts if held in a separate account (in which other spouse had not right of withdrawal) and not commingled w/ other CP funds.
Nondebtor spouse’s SP can be reached in satisfaction of debts for other spouse’s k for necessaries (hospital bills). If CP funds available to pay then she can be reimbursed
Confidential Relationship, Fiduciary Duty, Undue Influence
Fiduciary Duty to Other Spouse- Don’t be reckless w/CP
Spouses are fiduciaries and owe duty of highest good faith and dealing with each other.
If one spouse gains an advantage from a transaction, a presumption of undue influence arises so that spouse had burden of proof to show that he didn’t breach his fiduciary duty.
Under 2002 statute, grossly negligent and reckless investment of community funds is breach of fiduciary duty.
Divorce: Rule
To end the community, you must have permanent separation and intent not to resume the marital relationship
Each and every community asset must be divided equally 50-50.
Disparity in earning power can be considered only as to spousal support or child support.
Divorce: General Exceptions
Agreement between the parties.
Economic circs warrant awarding one spouse certain assets (i.e. wife gets house, husband gets equivalent stock value).
Divorce: Statutory Exceptions
One spouse gets more than 50% in total value:
- One spouse misappropriates CP, whether before or during pendency of divorce.
- Personal injury award is given to injured spouse.
- Community liabilities exceed assets.
- One spouse incurred edu debts, treated same as separately incurred debt.
- One spouse incurred tort liability not based on activity for benefit of community
Title in both spouses names: At death (Lucas rule)
Presumptively CP, and any SP contribution is presumptively a gift to community.
No SP ownership interest or claim for reimbursement unless written agreement to that effect.
Title in both spouses names: At divorce or legal separation (Anti-Lucas rule)
Pre-1984: Property taken in joint tenancy = SP of each spouse ½ interest each.
Post-1984: California family law applies. Property taken in joint title = CP unless contra written agreement or express statement in deed.
***Right to Reimbursement: spouse contributing SP entitled to reimbursement without interest for DIP:
Down payment,
Improvements,
Principal payments on mortgage.
Prop Acquired Before 1975 – Married Women’s Special Presumption
Just remember sexism :) lol
Courts recognize that, prior to 1975, a wife taking title in property was rare and deviated from the norm.
If CP was used to take written title in a married woman’s name before 1975, and the title didn’t indicate CP or a joint tenancy was intended, the prop is presumptively wife’s SP.
Premarital Agreement: Rule
Must be in writing signed by both parties, unless…
(1) oral agreement is fully performed, but marriage alone is not sufficient performance, or
(2) estoppel based on detrimental reliance
Premarital Agreement: Scope
Parties can agree to anything except to limit child support contributions
Defenses to Premarital Agreements
Not signed voluntarily or
Unconscionable
Defenses to Premarital Agreements: Not signed voluntarily
Deemed involuntary unless challenging party was given at least 7 days to sign and was either represented by independent legal counsel or was fully informed in writing of terms and basic effect, and executed acknowledgement
Defenses to Premarital Agreements: Unconscionable - Spousal Support Provision
Before 2002.
***Right to spousal support can be waived or modified in premarital agmt.
After 2002.
***A provision in a premarital agmt waiving spousal support is unenforceable on one of 2 grounds:
(1) Provision is unenforceable unless party against whom enforcement is sought was represented by independent legal counsel at the time agmt was signed, OR
(2) Provision re spousal support is unconscionable at time of enforcement – even if party was represented by independent legal counsel.
Defenses to Premarital Agreements: Unconscionable - Anything besides Spousal Support Provision
Not spousal support provision: Unenforceable if both unconscionable when made and
(1) no full and fair disclosure of other party’s property or financial obligations;
(2) right to disclosure not waived in writing, and
(3) party challenging had no adequate knowledge of other party’s property or financial circumstances
Unconscionability is a matter of law to be decided by the ct.
Intra-Marital Agreements (Transmutations) - Before 1985 Rule
Oral transmutations were permitted, whether based on express agmt or implied in fact
*Stmts in will not admissible to show character of prop.
Intra-Marital Agreements (Transmutations) - On or after 1/1/1985 Rule
(1) Must be in writing
(2) Signed by spouse whose interest is adversely affected, AND
(3) Must expressly state that a change in ownership is being made.
* Stmts in will not admissible to show character of prop.
Intra-Marital Agreements (Transmutations) - Exception
Gifts of tangible prop of a personal nature (ie, clothes, canon camera) which are not substantial in value taking into account the circs of the marriage.
Doesn’t apply to bday and anniversary presents.
Tort Liability – when someone injures a spouse
Where the other spouse was tortfeaser (spouse v. spouse), the tort recovery is SP. To discourage insurance fraud.
Where damages recovered from third party, the tort recovery is CP.
Additional notes
However, upon divorce the $ will be awarded entirely to injured spouse as long as the $ hasn’t been expended or commingled w/ other community funds so we can’t identify it.
Also will not award if interests of justice, including economic need require otherwise (ie, this is only community asset).
But on either spouse’s death, $ will be treated the same as any other CP.
Tort Liability – when a spouse injures someone
All CP is subject to the tort liability of either spouse
Order of tort liability when spouse injures someone
If performing an act for the benefit of the community –> liability 1st satisfied from CP, then from SP.
If not performing an act for the benefit of the community –> liability 1st satisfied from SP, then from CP. Non-breaching spouse’s SP can’t be reached.
Quasi-CP (QCP): Rule
Prop acquired while the couple was domiciled outside of California, which would have been classified as CP had it been acquired under the same circs in CA, is QCP.
At divorce, QCP is treated the same as true CP and is divided 50-50.
At death, the survivor has a ½ interest in decedent’s QCP (Then, they have 75% OF STUFF!).
Decedent has no rights in the survivor’s QCP. So protects non-acquiring spouse only if she survives.
Quasi-CP (QCP): Realty
At divorce: Out of state real prop is QCP so 50-50 division even though land is in another state.
- Can do non-pro rata division. Ex: Award land to H but give assets of equal value to W. or
- Require H to execute any conveyances that are nec to divide the out of state realty.
At death: Out of state real prop the other state’s law controls under situs rule (where located) for purposes of division on death. Ex: It’ll pass under the will.
*But surviving spouse could seek remedy of resulting trust or constructive trust b/c back when H bequeathed in will, ½ was CP.
Characterization: SP Business Increases in Value During Marriage - Tests
Pereira - CAP APP
(Capital Appreciation)
Personal skills and efforts - interest payment
Van Camp - Market & minus
(Market Salary)
Valuable company or asset
Characterization: SP Business Increases in Value During Marriage - Pereira
SP = Value of SP at time of marriage + (Value of SP at time of marriage * Fair rate of return)
Remaining value is CP or:
CP = FMV of business at divorce - SP
Characterization: SP Business Increases in Value During Marriage - Van Camp
Business character matters most
CP = Reasonable value of services during marriage - salary paid
Remaining value is SP or:
SP = FMV of SP at divorce - CP
Characterization: Pension benefits - Rule
Employee retirement benefits accumulated during marriage, whether or not vested at time of divorce are CP.
Characterization: Pension benefits - Disability retirement payments & workman’s comp
Disability retirement payments and workman’s comp benefits are treated as wage replacements. Thus, they are classified according to when received, not when earned.
Characterization: Pension benefits - Severance pay (split of authority)
Arg 1: H’s severance pay is SP b/c it replaced lost earnings which (after the divorce or permanent separation) would be H’s SP.
Arg 2: Severance pay is CP b/c it arose from a collective bargaining agmt and thus was earned by employment during marriage.
Characterization: Pension benefits - Electing disability retirement over retirement pension
Disability pay can be treated as CP to the extent it replaces a community interest in an old-age retirement pension the retired worker would’ve received had he not elected to receive disability pay instead. Can’t elect to defeat spouse’s CP rights.
Characterization: Pension benefits - Military retirement
Spouses of military personnel do have CP rights in a military retirement plan
Characterization: Stock options
Stock options awarded during marriage are CP.
Any form of incentive comp and all comp during marriage are CP.
CP = Yrs from date option awarded to the date the economic community ended
(÷)
Yrs from date option awarded to the date option becomes exercisable
Characterization: Goodwill of a professional practice
To the extent that goodwill is earned during marriage, goodwill of professional practice is CP.
Goodwill = those qualities that generate income beyond that derived from:
(1) professional’s labor and
(2) reasonable return on capital and physical assets.
The factor that raises the expectation of continued patronage.
Characterization: Educational Expenses
Education and training acquired during marriage are not treated as CP.
Educational debts are assigned solely to the one who incurred the debt. Exception to our 50-50 equal division rule.
*Exception: Community can get reimbursed for expenses if education enhanced his earning capacity
Characterization: Educational Expenses - Defenses to reimbursement
Community has already substantially benefited from the earnings of the educated spouse.
*If more than 10 yrs since degree was awarded, presumption is that the community has substantially benefited, meaning that unless presumption is rebutted, no reimbursement.
Other spouse also received a CP-funded education.
Characterization: CP used to improve SP - Rule
Spending CP on own SP (fixtures) Community gets CHOICE of reimbursement or enhanced value
Characterization: CP used to improve SP - Rights of other non-improving spouse
Community can get reimbursed for the greater of the cost of improvements or the enhanced value.
Can’t feather your own SP nest w/ CP funds.
Characterization: CP used to improve SP - Spending CP on other spouse’s SP
Here, a court will look to the intent of the parties.
Split of authority.
Arg 1: Presumption of gift to spouse’s SP. Presumption can only be overcome by evid of an agmt to reimburse the community estate.
Arg 2: Rejected presumption of gift and allow grant of reimbursement.
Characterization: Tracing Property Purchased From Commingled Funds - Rule
(EXHAUSTION V DIRECT TRACING)
The mere fact that SP funds are commingled w/ CP funds does not transform or transmute the SP into CP.
However, burden of proof is on H/W to show that each asset was acquired by separate funds.
Characterization: Tracing Property Purchased From Commingled Funds - How to satisfy burden
Exhaustion method: At the time asset was purchased, show that community funds in the account had already been exhausted by payment of family expenses, and therefore the asset must have been purchased w/ separate funds.
Direct tracing method: At the time asset was purchased, there were separate funds available, and the SP proponent intended to use those separate funds to purchase an SP asset.
(1) Sufficient separate funds were then available and
(2) H’s intent to use SP to buy the asset.
Characterization: Tracing Property Purchased From Commingled Funds - Family expense presumption
Expenditures for family expenses were made w/ community funds
Characterization: Installment purchase before marriage; debt paid down w/ CP after marriage
Where there is an installment purchase before marriage and payment w/ CP funds after marriage or during marriage W inherits land subject to mortgage and pays off note w/ CP funds, proration (or buy-in) rule applies
Proration/Buy-in Rule
The community estate takes a pro rata portion of the prop, measured by the amt (%) of principal debt reduction attributable to the expenditure of community funds.
Only principal payments that reduce the debt – not mortgage interest, prop taxes, insurance premiums
Proration/Buy-in Rule: Life insurance policies
Proration rule applies in classifying ownership of life insurance policies.
If term policy (pure insurance w/ no investment feature and no cash surrender value), then last premium payment will determine character of the asset.
