Community Property (CP) Flashcards
Separate Property (SP)
- Property owned or claimed by the spouse before marriage
- Property acquired by the spouse during marriage by gift, devise, or descent
- Recovery for personal injuries sustained by spouse DURING marriage, EXCEPT recovery for medical expenses and loss of earning capacity during marriage = CP
Separate Property: Special Rules
- Spouses can by written agreement partition or exchange b/t themselves all/part of their CP, then existing or to be acquired (result = becomes that spouse’s SP)
PARTITION = current or future CP into SP
CONVERSION = SP into CP (immediately effect) - If 1 spouse makes a GIFT of property to the other spouse, presumption = it’s SP and includes all income that might arise from gift
- TRACING PRINCIPLE = Assets purchased with separate funds are themselves SP
- Character is determined under laws of state in which H and W are domiciled at time of asset’s acquisition; ownership is NOT altered when couple moves to another state
- Property acquired in another state that would’ve been CP if acquired in TX is treated as “QUASI-CP” for division upon DIVORCE
Community Property (CP)
- Everything that’s not SP
- Income from SP belongs to CE
- Property possessed by either spouse during or on dissolution of marriage is PRESUMED CP
- Burden of proof is on party arguing for SP, must establish by clear and convincing evidence
Classification: Inception of Title Rule
Asset’s character is determined at time of acquisition; no subsequent actions will alter the character
Installment purchases begun before marriage = SP (despite being completed after marriage)
Assets purchased during marriage = CP presumption
Assets acquired on credit during marriage = CD presumption
- Source of funds later used to pay off debt is irrelevant!
- Rebuttal in 2 situations: (1) lender agrees to look solely to separate estate of borrowing spouse; or (2) spouse purchases with borrowed funds with intent of immediately paying debt with proceeds from sale of SP
Adverse Possession begun before marriage but completed during marriage
- entered under “rightful” claim= SP
- naked trespasser = CP
Claims for Reimbursement
Remedy (upon termination of marriage) when 1 estate (CE, H’s/W’s separate estate) has been used to either contribute to or improve another marital estate
MAY be waived, released, assigned or partitioned in pre-martial or marital property agreement!
Unsecured debts or life ins. policies = $ for $
Secured debts = measured by reduction in principal
Benefits for use/enjoyment of property may be OFFSET (court has discretion) against a claim for reimbursement, EXCEPT that the separate estate of spouse may NOT claim offset for use/enjoyment of primary/secondary residence owned wholly or in part by the separate estate
Measure for CAPITAL IMPROVEMENTS = value of the enhancement to the benefited estate
Measure for TIME, TOIL, AND EFFORT (i.e., if 1 spouse owns a business, the non-owning spouse can be reimbursed for other spouse’s TTE expended on separate business if there is inadequate compensation during marriage) = value of TTE (beyond that reasonably necessary to preserve estate)
LIENS on Dissolution/Death: court may impose equitable lien on property of a benefited marital estate to secure a claim for reimbursement against that property by a contributing marital estate
Non-reimbursable Claims
- Payment of CS or spousal maintenance
- Living expenses of a spouse or child of a spouse
- Contributions of property of a nominal value
- Payment of a liability of a nominal amount
- Student loan of one spouse (womp womp)
- Spousal gifts
Effect of Title
CL states = how title is taken determines ownership
TX/CP states = deeds/title is NOT controlling! CP presumption applies!
Conveyance with CF is presumed CP, but intent to make a gift can be shown by a preponderance of the evidence
If consideration for conveyance is H’s SP, there is a presumption of a gift to W’s separate estate
SF used + title in both spouses’ names = presumed to be gift to other spouse (can be rebutted by extrinsic evidence, and then it’s considered SP of spouse who furnished consideration for its acquisition)
Title in spouse’s name “as sole and SP” will be presumed SP if both spouses participate in transaction but presumed CP if only 1 participates
Commingling of SP and CP: Tracing
CP presumption can be overcome by tracing!
Commingled bank accounts = CF out first presumption
- limited by the “lowest intermediate balance” principle
CP Survivorship Agreements
Spouses may agree IN SIGNED WRITING that all or part of CP becomes property of SS on the other’s death
May be revoked by written to other spouse
Effect = title passes by right of survivorship as a non-probate transfer
SS is laible to account to deceased spouse’s personal rep. for property received to extent necessary to discharge liabilities of the deceased spouse
- 2-year SOL for creditors to come after SS
Pre-marital Agreements
- Must be in writing and signed by both spouses
- NO consideration required
- During marriage, can be amended or revoked only be a writing signed by both parties
- MAY contract as to property rights (re: SP and CP including income, etc.)
- MAY modify or eliminate spousal support
- MAY contain choice of law provisions
- May NOT contract around CS rights
Unenforceable if
- Not executed voluntarily, or
- Unconscionable when made AND (i) no fair disclosure was given of property/obligations of other spouse, (ii) the right to disclosure was not waived in writing, and (iii) party had no adequate knowledge of that info
- Unconscionability = matter of law for the court
Special Rules: O&G interests, income interest in trust, corporate distributions, royalty income from patents and animals
- O&G interests: if land is SP, bonus is SP and royalty is SP… but delay rentals are CP
- Income interest in a trust: trust created by someone other than spouse is SP whether created before or during marriage (but if spouse has unrestricted right to the trust corpus, the income is CP)
- Corporate distributions: cash dividends received during marriage are CP; all other distributions (stock splits, stock dividends, stock options) are SP; capital gains are SP
- Royalty income from patents: 1 spouse holds patent at time of marriage, royalty payments is “revenue” of he SP and thus is CP
- Animals: increase in value from SP animals is CP
Tort Recovery from Personal Injury
$ for disfigurement and pain and suffering = SP
$ for medical expenses and loss of earning capacity CP
Loss of consortium = SP of other spouse
Life Insurance
Inception of Title rule applies!
Retirement Plans: Plans Begun During Marriage
If participation begins during marriage, the ENTIRE plan benefit is CP (valued as of date of divorce and subject to just and right division)
Defined contribution plan (e.g., 401k) = there is always a measurable value in the employee’s account that can be divided upon divorce
Defined benefit plan (e.g., monthly annuity payments) = in divorce, we freeze at that moment and ask how much CE would receive if he were eligible to retire at that time (post-divorce increases will be employee’s SP)
Retirement Plans: Plans Begun Before Marriage
Inception of title rule does NOT apply!!! Retirement benefit is part SP and part CP!!!
Defined contribution plan (e.g., 401k) = tracing rules apply!
- (i) contributions to plan during marriage = CP
- (ii) dividend and interest income = CP
- (iii) appreciation in value of assets that were in the plan on the date of marriage = SP
Defined Benefit Plan = longstanding CL!
- Divorce BEFORE retirement: CE share = (years married in plan / total years in plan at divorce) X (2% X years of service X average of 3 highest annual salaries)
- Divorce AFTER retirement: CE share = (years married in plan / years employed during plan)
