Community Property - CA (Main Deck)* Flashcards

Question

SOURCE OF FUNDS: HOW CAN FUNDS BE TRACED?

Answer 1

**Rule:** Tracing can be accomplished by either the Direct Method or the Exhaustion Method. **Direct Method:** The tracing party must show that at the time the contested asset was purchased: 1) Separate funds sufficient to purchase the asset were available in a commingled account, AND 2) The tracing party intended to use separate funds to purchase the asset as SP. **Exhaustion Method:** The tracing party must show that, at the time the contested asset was purchased, all community funds in a commingled account had been exhausted by payment of family expenses.

Answer 2

**Rule:** When a spouse uses both community and separate funds to purchase an untitled asset, a presumption arises that the asset is CP. **Note:** The spouse claiming an SP interest may rebut the presumption by tracing the funds used to purchase the untitled asset. If she can demonstrate that the asset was partially purchased with SP, the community's interest is proportional to the percentage of CP funds used to purchase the asset (i.e., a pro rata share). Appreciation of the asset is allocated between CP and SP according to the proportional interest of each.

Answer 3

**Rule:** If SP is used to make a down payment on an asset, and CP is used to make payments during marriage, the community estate takes a pro rata share of the property, determined by the reduction in debt principal from CP payments. **Equation:** Amount Debt Principal Reduced with CP Funds / Purchase Price = Pro Rata Share of CP.

Answer 4

**Rule:** If mortgage payments on SP are made with CP funds, the community estate takes a pro rata share of the property, determined by the amount the debt's principal was reduced with community funds. **Equation:** Amount Debt Principal Reduced with CP Funds / Purchase Price = Pro Rata Share of CP

Answer 5

**Rule:** If one spouse uses community funds to enhance her own SP, the community is entitled to the greater of: 1) A reimbursement for the community funds spent, OR 2) The amount the property's value was enhanced.

Answer 6

**Rule:** In California, there is a split of authority as to whether the community estate is entitled to a reimbursement for community funds spent by one spouse to improve the other spouse's SP: 1) In some jurisdictions, a gift of the CP is presumed. a) **Note:** A presumption of gift can be rebutted by agreement. 2) In other jurisdictions, the gift presumption is rejected, and the community estate is reimbursed.

Answer 7

1) Joint Tenancy 2) Tenancy in Common 3) Community Property 4) Community Property with Right of Survivorship

Answer 8

**Definition:** A property in which both spouses own an undivided one-half interest, and the surviving spouse automatically becomes the owner of the entirety upon death of the other. **Language: "**To H and W, as joint tenants."

Answer 9

**Definition:** A property in which both spouses possess a one- half interest in the property, but with no right of survivorship. **Language:" **To H and W, as tenants in common."

Answer 10

**Definition:** Property in which both spouses possess an undivided one-half interest, which neither may partition, and in which there is no right of survivorship. **Language:**"To H and W, as community property," or "To H and W, as husband and wife."

Answer 11

**Definition:** Property in which both spouses possess an undivided one-half interest, which neither may partition, and in which there is a right of survivorship. **Language:**"To H and W, as community property with right of survivorship."

Answer 12

1) Lucas Rule 2) Anti-Lucas Rule

Answer 13

**Rule:** The taking of title in joint and equal form is inconsistent with an intent to preserve an SP interest. The spouse who contributed SP funds is presumed to have made a gift to the community. **Note:** This presumption may be rebutted by a written or oral agreement between the spouses that the contributing spouse would retain an SP interest. **Right to Reimbursement:** There is no right to reimbursement for SP contributions made to CP (presumption of gift).

Answer 14

**Rule:** If title is taken in joint and equal form, the asset is presumptively CP. **Note:** This presumption may be rebutted by a written agreement or an express statement in the deed that the contributing spouse will retain an SP interest. **Right to Reimbursement:** There is a right to reimbursement (without interest) for SP contributions made to: 1) The purchase of the property, 2) Improvements made to the property, AND/OR 3) Payments of the mortgage principal (not interest).

Answer 15

1) For all purchases of property taken in joint and equal form before 1/1/1984. apply Lucas for all properties. 2) For purchases of property taken in joint and equal form from 1/1/1984 through 12/31/1986. apply Lucas for all properties other than joint tenancies. 3) For all purchases of property taken in joint and equal form on or after 1/1/1987. apply Lucas if the marriage ended in the death of a spouse.

Answer 16

1) For all purchases of property taken in joint and equal form before 1/1/1984, do not apply Anti-Lucas. 2) For purchases of property taken in joint and equal form from 1/1/1984 through 12/31/1986. apply Anti- Lucas for joint tenancies only. 3) For all purchases of property taken in joint and equal form on or after 1/1/1987. apply Anti-Lucas if the marriage ended in divorce.

Answer 17

**Rule:** Property purchased prior to 1975 with CP funds and title taken in a form other than CP or joint tenancy is presumptively the SP of the married woman. **Note:** The presumption can be rebutted by the husband showing that a gift was not intended, or that he was unaware of the form in which title was taken. **Example:** Under the Married Woman's Special Presumption, if land was purchased by H and W with title as H and W as tenants in common or "to H and W," then W would hold 50% of the property as SP, and H would hold 50% of the property as CP. At divorce, W would receive 75% of the property.

Answer 18

**Definition:** An agreement between spouses concerning the division and ownership of marital property made before or during marriage. **Rule:** A couple may opt out of or alter the protections provided by community property law through a contractual agreement before or during marriage. Marital agreements may apply to specific or all assets. **Note:** 1) Marital agreements made before marriage are prenuptial agreements. 2) Marital agreements made during marriage are transmutations.

Answer 19

**Definition**: An agreement made by a couple before marriage to determine property division (and often spousal support) in the case of divorce or death. **Rule:** A prenuptial agreement must be: 1) In writing, and 2) Signed by both parties.

Answer 20

**Rule:** Oral agreements are valid if: 1) Both parties acted upon the agreement. AND 2) One party is estopped from denying the validity of the agreement due to detrimental reliance by the other. **Note:** This is an exception to the general rule that prenuptial agreements must be in writing to be valid.

Answer 21

**Rule 1:** Prenuptial agreements may: 1) Limit property rights, AND/OR 2) Waive property rights. **Rule 2**: Prenuptial agreements may not: 1) Promote divorce, 2) Limit or waive child support.

Answer 22

**Rule:** To validly waive rights through a prenuptial marital agreement: 1) The waiving party must: a) Be represented by independent legal counsel when the agreement is signed, OR b) Have expressly waived independent counsel, in writing, after having been advised to seek independent counsel, AND 2) At least 7 days must have passed from the time the waiving spouse was presented with the agreement to the time he or she signed it. **Exception:** If the waiving party is waiving the right to spousal support, he or she may not waive the right to counsel and must be represented by independent counsel at the time of signing.

Answer 23

**Rule:** Prenuptial agreements will be held unenforceable in the case of: 1) Fraud, 2) Coercion, AND/OR 3) Unconscionable terms.

Answer 24

**Definition:** Transmutations are agreements made during marriage that affect the status of property. **Note:** The validity of a transmutation depends on when the agreement was executed. Transmutations are divided according to date for analysis of validity: 1) Marital agreements executed before January 1,1985. 2) Marital agreements executed on or after January 1,1985.

Answer 25

**Rule:** Transmutations made before January 1, 1985 are valid if made in any of three ways: 1) Oral agreement, 2) Written agreement, OR 3) An agreement inferred from the parties' behavior.

Answer 26

**Rule**: Transmutations made on or after January 1,1985 must be: 1) In writing, 2) Signed by the spouse whose interest is adversely affected, AND 3) Expressly state that a change in ownership is being made. **Exception:** The writing requirement does not apply to personal gifts of minimal value. **Note:** 1) An express statement in a will changing the status of property cannot be used to prove a transmutation in a divorce proceeding. 2) A deed may satisfy the express writing requirement, if the party making the transmutation had the power to change the character of the asset.

Answer 27

1) Personal Injury Settlements 2) Insurance (Property, Whole Life, Term & Heath Insurance) 3) Education Expenses 4) Employment-Related Interests a) Retirement Pensions b) Replacement Benefits (Disability Pay & Severance Pay) c) Stock Options d) Professional Goodwill e) Business Ownership 5) Assets Affected by Federal Preemption

Answer 28

**Rule**: Whether personal injury settlements are classified as CP or SP depends upon the timing of the injury: 1) If the injury occurred during marriage, the settlement is CP: a) At divorce, however, the entirety of the recovery is awarded to the injured spouse if recovery funds were not commingled with community assets to a degree that tracing is no longer possible. 2) If the injury occurred before marriage or after permanent separation, the settlement is SP. 3) If the injury resulted from other spouse's tortious conduct, the settlement is SP regardless of when the injury occurred.

Answer 29

**Rule**: Whether proceeds of property insurance are classified as CP or SP depends upon the status of the property insured: 1) Property insurance proceeds paid on CP assets are CP. 2) Property insurance proceeds paid on SP assets are SP. **Note:** If CP funds were used to pay insurance premiums on an SP policy, the community estate is entitled to reimbursement for the funds used to pay the insurance premiums.

Answer 30

**Rule:** The classification of whole life insurance policies depends upon the source of funds used to pay the policy premiums: 1) If premiums are paid with SP, the policy is SP. 2) If premiums are paid with CP and the named beneficiary is someone other than the surviving spouse, then: a) The surviving spouse will receive one-half interest, AND b) The named beneficiary will receive the deceased spouse's one-half interest. 3) At divorce, the percentage of the policy's cash value that is deemed CP will be determined by the percentage of the policy premiums paid with community funds.

Answer 31

**Rule:** The classification of term life insurance policies depends upon the source of funds used to pay the policy premiums: 1) If premiums are paid with SP, the insurance policy is SP. 2) If premiums are paid with CP and the named beneficiary is someone other than the surviving spouse, then: a) The surviving spouse will receive one-half interest, AND b) The named beneficiary will receive the deceased spouse's one-half interest. **Note:** Because term life insurance has no current cash value, it holds no value to be distributed at divorce.

Answer 32

**Rule:** At divorce, health insurance coverage is treated as SP, leaving no interest to divide. **Note:** Health insurance coverage is controlled by the terms of the policy agreement, and most policies cancel coverage of the insured's spouse upon divorce.

Answer 33

**Rule:** Education and training generally are the SP of the educated/trained spouse. However, the community will be entitled to a reimbursement for one spouse's education/training expenses if: 1) The education was paid for with community funds. AND 2) The education increased the earning capacity of the trained spouse.

Answer 34

**Rule:** Reimbursement for educational expenses may be reduced if: 1) More than 10 years have passed since the education was completed, 2) Community funds were also used to pay for other spouse's education/training, OR 3) The education received reduces the educated spouse's need for spousal support.

Answer 35

**Rule:** Retirement pensions are CP to the extent pension benefits were earned during marriage. **Note:** At divorce, courts apply the Time Rule to determine what percentage of the pension to apportion to the community.

Answer 36

**Rule:** Pension rights earned both during and outside of the economic community are mixed CP/SP assets. The amount apportioned to the community estate is determined by the amount of time the pension was earned while the pensioner was part of the economic community. **Note**: To calculate the amount of a pension that will be apportioned to the community estate under the Time Rule, courts use the following equation: Years of marriage during which pension was earned / Total years employed while pension was earned = Amount of pension classified as CP.

Answer 37

**Rule**: The classification of disability and worker's compensation depends upon the earnings the compensation is intended to replace: 1) Disability and worker's compensation are CP if they are intended to replace marital earnings 2) Disability and worker's compensation are SP if they are intended to replace pre- or post- marital earnings

Answer 38

**Rule:** The classification of severance pay depends upon the earnings the compensation is intended to replace: 1) Severance pay is CP if it is intended to replace marital earnings. 2) Severance pay is SP if it is intended to replace pre- or post- marital earnings.

Answer 39

**Rule:** Stock options awarded during the economic community as compensation for a spouse's personal efforts are CP. **Note:** Courts apply the Time Rule to determine the percentage to be apportioned to the community estate.

Answer 40

**Rule**: Professional goodwill is a community asset to the extent it was earned during marriage. **Note:** Professional goodwill can be valued in two ways: 1) Market Valuation - The market value at which the goodwill could be sold. OR 2) Capitalization Method - The value of future earnings as a result of goodwill, discounted to present value.

Answer 41

**Rule:** The apportionment of a business owned by one spouse depends upon when the business was founded and the accounting method used: 1) If the business was started during the economic community, the entire business is CP. 2) If the business was started before the economic community, the business will be classified as part CP and part SP, with apportionment dependent upon the accounting method used (Van Camp or Pereira).

Answer 42

**Rule:** The Pereira method should be used when the skills of the business-owning spouse were the primary force driving the growth of the business. **Calculation**: 1) SP = Original Value of the Business + Reasonable Rate of Return 2) CP = Business Value - SP

Answer 43

**Rule:** The Van Camp method should be used when capital investment or qualities inherent to the business itself are responsible for the growth of the business. **Calculation:** 1) CP = Value of Spouse's Services (market rate) - Family Expenses Paid from Business Earnings 2) SP = Business Value - CP

Answer 44

**Rule**: Because federal law preempts state law, California community property law does not apply to certain assets governed by federal law.

Answer 45

**Rule:** The following remain the SP of the spouse who earned or purchased them: 1) Social Security Benefits, 2) United States Savings Bonds, AND 3) Military Disability and Insurance Benefits. **Note:** Under federal law, holding title to a U.S. Savings Bond in two names provides both parties with a right of survivorship in the whole, regardless of whether the parties are married. **Example:** 1) If H and W hold U.S. Savings Bonds in both names and H dies, W becomes owner of the whole. 2) If H and X hold U.S. Savings Bonds in both names and H dies, X becomes owner of the whole. W receives nothing.

Answer 46

**Rule**: Each spouse owes a fiduciary duty to the other spouse. The marital relationship imposes a duty of the highest good faith and fair dealing on each spouse, and neither may take unfair advantage of the other.

Answer 47

**Rule**: Each spouse has the exclusive right to manage and control his or her own SP.

Answer 48

**Rule:** Each spouse has the exclusive right to manage and control his or her own Quasi- CP, as if it were SP, until divorce or death.

Answer 49

**Rule:** Each spouse has an equal right to management and control of CP. In general, a spouse may act unilaterally in his or her control over CP assets and funds while alive and married. However, a spouse has testamentary control (power to bequeath) only over his or her one-half interest in CP.

Answer 50

**Rule**: When community realty is sold, borrowed upon, transferred or leased for more than one year, both spouses must consent to the transaction in writing.

Answer 51

**Rule:** The sale of community realty by one spouse without the written consent of the other spouse may be voided. 1) If the purchasing party was on notice of the marital relationship at the time of the sale, the non-consenting spouse may void the sale. 2) If the purchasing party was not on notice of the marital relationship at the time of the sale, the sale is presumed valid. However, if the non-consenting spouse evinced no consent to the sale (i.e., through words or actions), the non-consenting spouse may bring an action to void the sale within one year of the date of conveyance. **Note:** The non-consenting spouse must bring an action to void a sale within one year of the date of the conveyance.

Answer 52

**Rule:** Both spouses must consent to the encumbrance of community realty. **Note:** If one spouse single- handedly uses community realty as collateral for a loan, the non-consenting spouse may void the encumbrance.

Answer 53

**Rule:** Household personal property of a spouse or minor children may not be sold without the written consent of the other spouse. **Note:** The non-consenting spouse may void such actions at any time during or after marriage without returning the purchase price to the purchasing party.

Answer 54

**Rule:** A spouse who runs a business that is wholly or substantially CP need not confer with the other spouse and may act alone in all transactions. **Note:** 1) Written notice is required for transactions that involve the disposition of all or substantially all of the personal property used in the operation of the business. 2) If the action results in a substantial impairment of the value of the non- consenting spouse's one-half interest, the non-consenting spouse may seek damages against the other spouse for breach of fiduciary duty.

Answer 55

**Rule:** The consequence of a spouse's mismanagement of CP depends upon the timing of the occurrence: 1) Only deliberate mishandling of community assets by a managing spouse is actionable conduct if the transaction occurred before 2003. 2) Gross recklessness or negligent mishandling of community assets by a managing spouse is also actionable conduct if the transaction occurred in or after 2003.

Answer 56

**Rule:** The non-managing spouse may sue for damages if the managing spouse's breach of fiduciary duty resulted in a substantial impairment of the non-managing spouse's interest. **Note:** An action for a managing spouse's mismanagement must be brought within three years of the date the non-managing spouse had actual knowledge of the mismanagement.

Answer 57

**Rule:** Neither spouse may make a gift of CP without the other spouse's written consent. **Note:** If one spouse gives a gift from CP assets to a third party without the consent or knowledge of the other spouse: 1) The non-consenting spouse may revoke the gift in its entirety if the gift is discovered during marriage. 2) The non-consenting spouse may revoke her one-half interest in the gift if the gift is discovered at divorce or death.

Answer 58

**Rule**: Each spouse has the right to dispose of his or her one-half interest in the community estate through testament.

Answer 59

**Definition:** Support obligations are child support and spousal support. **Rule:** Support obligations are treated as debts incurred before marriage. Thus, support obligations are the SP debt of the responsible spouse. **Note:** The non-debtor spouse will have a claim for reimbursement if support payments were paid out of CP funds when the debtor's SP funds were available.

Answer 60

**Definition**: A tort debt is a financial debt or obligation that arises out of an action in tort.

Answer 61

**Rule:** A spouse may not be held personally liable for the tortious conduct of the other spouse solely on the basis of her status as a spouse. Thus, a tort creditor cannot reach the SP of the non- tortfeasor spouse. **Note:** A spouse may be held liable for the tortious conduct of the other spouse where there is a basis for liability other than the marital relationship. **Example:** If one spouse negligently strikes another person with the family car (a CP asset), the non-tortfeasor spouse would be liable as a joint owner of the vehicle, but not as a spouse.

Answer 62

**Rule:** The order of satisfaction a creditor must follow for a tort liability depends upon when the debt was incurred: 1) If the tort was committed before or during marriage, the creditor may attach both the CP and the tortfeasor's SP are liable. a) If the tort was committed while engaged in activity for the benefit of the community: The creditor must first seek satisfaction from the community, then from the SP of the tortfeasor. b) If the tort was committed while engaged in an activity for the benefit of the tortfeasor spouse: The creditor must first seek satisfaction from the SP of the tortfeasor, then from the community. 2) If the tort was committed after marriage, only the SP of the tortfeasor is liable. **Note:** If the order of satisfaction is not followed, then the non-tortfeasor spouse will have a right of reimbursement.

Answer 63

**Definition**: A contractual debt is a financial debt or obligation created by contract (e.g., a car loan).

Answer 64

**Rule:** Generally, a non-debtor spouse is not personally liable for contractual debts incurred by the debtor spouse. Thus, a creditor cannot attach a non-debtor's spouse's SP in satisfaction of a debtor spouse's liability. **Exception:** A non-debtor spouse will be liable for debts incurred for a debtor spouse's necessaries of life.

Answer 65

**Rule**: A non-debtor spouse is personally liable for debts incurred during marriage for necessaries of life by the other spouse. **Note:** 1) This liability exists even after permanent separation and only expires on divorce. 2) The SP of the non-debtor spouse is only liable for the common necessaries of life, not for maintaining the debtor spouse's station in life.

Answer 66

**Rule**: The order of satisfaction a creditor must follow to collect on a contractual debt depends upon when the debt was incurred: 1) If the debt was incurred before or during marriage, then the creditor must first seek satisfaction from the debtor's SP, then CP. 2) If the debt was incurred after marriage, then the creditor may only seek satisfaction from the debtor's SP.

Answer 67

**Rule**: Generally, if a creditor has the right to attach CP to satisfy a debtor spouse's obligations, the creditor can attach all CP property regardless of whether the debtor spouse has management or control.

Answer 68

**Rule:** A non-debtor spouse can avoid having her wage earnings attached in satisfaction of debts incurred before marriage by the debtor spouse by depositing her earnings into a separate bank account in which the debtor spouse has no right of withdrawal. **Note:** This rule does not apply to debts incurred during marriage.

Answer 69

**Rule:** Funds borrowed during marriage to purchase property are presumptively borrowed on community credit. **Note:** This presumption may be rebutted by showing that the lender relied primarily upon the borrowing spouse's SP as collateral when making the loan.

Answer 70

**Rule**: Creditors' rights after the death of a debtor spouse depend upon whether the decedent's estate enters probate: 1) If the estate is in probate, the probate court will characterize the debts as either CP or SP. a) The court will satisfy the debts according to their classification. 2) If the estate is not in probate, then the surviving spouse becomes personally liable for the debts of the deceased spouse. a) Debts will be satisfied through thesurviving spouse's share of CP, Quasi-CP, and SP of the deceased spouse.

Answer 71

**Rule**: Generally, community liabilities are divided evenly between the spouses by the court upon divorce. **Note:** 1) Each spouse remains personally liable for his or her own personal debts. 2) Each spouse is personally liable for the debts assigned to him/her by the court. 3) A right of reimbursement exists if the SP of one spouse is used to satisfy a debt assigned by the court to the other spouse.

Answer 72

**Rule:** If community liabilities exceed the community's assets at the time of divorce, the court will consider each spouse's ability to pay when allocating community liabilities. Thus, liabilities may be distributed unevenly. **Note:** This is an exception to the general rule that assets and liabilities of the community are divided evenly.

Answer 73

**Rule:** A non-debtor spouse may seek reimbursement for payment of the debtor spouse's debts if: 1) Child or spousal support payments were paid out of CP funds when the debtor's SP funds were available, 2) The order of satisfaction for tort liabilities was not followed, OR 3) A non-debtor spouse's SP was used to pay for the necessaries of a debtor spouse, and the debtor spouse had sufficient SP or CP interest to pay the debt.

Answer 74

**Rule:** A spouse may seek reimbursement for payment of the other spouse's debts with SP funds: 1) Within three years of learning about the payments (if still married), 2) In divorce proceedings, OR 3) At the death of the debtor spouse. **Note:** If the non-debtor spouse learned of the payment of the debtor spouse's debts more than three years before divorce or death of the debtor spouse and took no action, the non-debtor spouse loses his right to reimbursement.

Answer 75

**Rule:** A married person may distribute by testament: 1) All of his SP, AND 2) His one-half interest in CP.

Answer 76

**Rule:** Assets of a married person who dies intestate will be distributed as follows: 1) All CP and Quasi-CP passes to the surviving spouse. 2) If decedent dies without issue, parents, sibling or issue of siblings, then decedent's SP passes entirely to the surviving spouse. 3) If decedent dies with only one child or issue of that child, then one-half of decedent's SP passes to the surviving spouse, and the remainder passes to decedent's issue. 4) If decedent dies with two or more issue, then one-third of decedent's SP passes to the surviving spouse, and the remainder passes to the surviving issue.

Answer 77

**Rule:** When a spouse dies leaving a valid will, the surviving spouse must choose to take either: 1) The share provided in the deceased spouse's will, OR 2) The share of the estate as would pass to the surviving spouse under intestacy rules.

Answer 78

**Rule**: Quasi-CP is distributed at death and at divorce as if it were CP.

Answer 79

**Rule**: Should a decedent transfer Quasi-CP without consideration and without the surviving spouse's consent, the surviving spouse may compel the recipient of the property to restore the surviving spouse's one-half interest in the property if the decedent spouse retained a right to income or survivorship (i.e., the transfer was illusory).

Answer 80

**Rule**: In the absence of a settlement agreement, all CP (both assets and liabilities) will generally be split evenly between the spouses upon divorce, unless special circumstances warrant that particular assets/liabilities be wholly awarded to a single spouse.

Answer 81

**Rule:** The Equal Division Rule will not apply in the event of: 1) Misappropriation of CP by one spouse, 2) Educational debts that were accrued by one spouse, 3) Tort debts accrued by a spouse in an activity not carried out for the benefit of the community, OR 4) Personal injury awards or settlements that are awarded as the injured spouse's SP.

Answer 82

**Rule:** California courts retain jurisdiction to divide the community estate during divorce proceedings and apply the Equal Division Rule. The Court may: 1) Divide the community evenly, awarding all out-of-state property to one spouse and compensating the other spouse with property of equal value in California, OR 2) Require the spouses to make the necessary conveyances to ensure compliance with the Equal Division Rule.