Community Property - Essay Rules Flashcards
Introduction
CA is a cp (CP) state. All prop acquired during marriage by earnings or labor of either spouse is presumed CP. All property acquired before marriage, during marriage by gift, devise, bequest, or descent, or after divorce, death, or perm physical sep is presumed sp (SP). At divorce, each spouse is entitled to one-half CP interest. Asset characterization as CP or SP depends on (1) item’s source, (2) parties’ actions that may alter an item’s character, and (3) statutory presumptions affecting an item.
Domiciled in CA; Legal Marriage
CA community property law applies when the parties (1) are domiciled in California, and (2) have a legal marriage. [If unmarried cohabitants later marry, and then divorce, CP law only applies to property acquired during marriage]
[Husband] and [Wife] Here, Thus
In conclusion, community property law [applied/did not apply] to [H] and [W].
Quasi-Community Property
QCP (QCP) is prop acquired by either spouse that wld hve been CP hd the spouse been dom in CA at the time of acquisition. QCP retains its SP nature whn the parties become dom in CA. Divorce or death of the titled spouse triggers QCP. H,T
Putative Spouse
A putative spouse has a GF belief that s/he is, but is not, lawfully married. H,T
Putative Spouse Property Rights
All prop that wld hve been CP or QCP had the marriage been valid is quasi-marital property (QMP) in a putative marriage. QMP is treated as CP or QCP. H,T
Unmarried Cohabitants
K principles govern prop distribution acquired by unmarried cohabitants: (1) an express K will be enforced, unless based on meretricious sexual services, (2) if no express K, a ct examines the parties’ acts to determine whether they had an implied K, and (3) equitable rememdies may be available. H, Thus, for prop acquired b/w 06-09, a ct would distribute the prop based on the couple’s express or implied K.
Marital Economic Community
The marital economic community (MEC) begins upon marriage, and ends at (1) divorce, (2) a spouse’s death, or (3) permanent separation (actual physical separation with no intent to resume marital relationship). H,T
Prenuptial Agreement
A PA avoids CA CP laws. An a/ment made after 1/1/02 mst be (1) in writing, (2) ~ by bth pties, (3) voluntary (pty against whom enforcement is sought (a) rep’d by indep counsel or advised to seek indep counsel and expressly waived in w, (b) had nt less thn 7days to review a/ment, (c) did nt execute under duress, fraud, UI, and hd capcity, and (d) informed of rights and obligations) and (4) not unconscionable (fair, reasonable, full property disclosure or parties’ financial obligations).
What are the 4 headings and rules to go under each asset?
SAPD
(only use for straightforward assets (or first asset); go straight into “Separate Property Business” “Debt”, etc. for the others)
Source: Tracing determines the source of a prop’s acquisition to est its character. [+ SP/CP rule or]. As of 1987, all jointly titled prop acquired during m is presumed CP upon divorce.
Actions: After determining the source, a ct looks at the pties’ actions to see if they changed the prop’s character. [After 1/1/75, each spse has equal mgt and control over CP (both spouses participate in major personal prop deicsions)].
Presumtion:
[When H and W agree to hold property jointly, the CP presump that arises can only be rebutted by another a/ment that the prop is not held jointly (eg. writing or clear statement in the deed or title). Beginning 1/1/85…]
[inset relevant, eg transmutation]
Disposition: At divce, each spse has a 1/2 intrst in each CP asset.
[As of 1984, there is a right of reimbursement of SP contributions to CP if a pty traces the contribution to a SP source. SP contirubtions incl. dp, improve, p/ments to reduce principal la, but not maintenance, tax, ins, interest.]
Source
- Commingled Funds
Source: Tracing determines source of a prop’s acquisition to est its character. [+ SP/CP rule or As of 1987, all jointly titled prop acquired during m is presumed CP upon divorce]. H,T
- Commngld Fnds: 2 tracing mthds whn CP funds are commngld w/ SP fnds: (1) exhaustion and (2) direct. U/ exhaustion mthd, th SP proponent proves th fnds are SP if th CP funds are exhausted. Avail CP fuds are prsmd to pay for family expenses. Absent a reimb a/ment, a gift is prsmd whn SP fnds are used to pay family expenses. U/ direct tracing, fnds cn be directly traced to SP if (1) there are SP fnds avail, & (2) SP proponent intnds to use th fnds for a SP asset.
<em>H, u/ exhaustion method: W’s pay from her work did nt cover expenses, and her mnthly pension installments paid rest of expenses. Since CP funds were exhausted, W cld prove funds used to purchase boat were her SP. U/ direct tracing: there were SP fnds available in account b/c W used fnds to pay household expenses when freelance work did not cover expenses. Facts did not state W intended to use funds for a SP asset, but cld be assumed since she kept account in her name only.</em>
Actions
After dtrmnng th sorce, a ct lks at th pties’ actns to see if thy chngd th prop’s chrctr. After 1/1/75, each spse hs equal mgt n cntrl ovr CP (both spses participate in major prsnl prop deicsions).
- Transmutation
Beginning 1/1/85, transmttns (chngng SP-CP, CP-SP, or SP-SP) mst be by a written express declrtion of the spse whse prop intrst is advrsly affected, unlss the trans invlvs (1) gifts b/w spses, or (2) tangible prsnl articles, (3) not substantial in value. H,T
Management and Control of CP
Either spouse…
Either spse acting alone may buy, sell, spend, or encumber all CP, except
- a spse may nt tfr prsnl CP for less thn reas value w/out other spse’s writ cnsnt. If spse does, non-cnsntng spse may: (1) ratify the gift, or (2) revoke gift & sue to recover all of the prop.
- bth spses mst join in executing any instrument by whch comm r.p. is sold, conveyed, or leased for >1yr. If Comm r.p. is in one spse’s nme alone, a tfr to a GF purchaser w/out knwldge of a m is presumed valid. A non-cnsnting spse hs 1 yr to void a tfr of comm r.p. if the spse conveying th prop misrepresents his or her marital status by demonstrating s/he did not consent to the tfr, and returning the tfee’s purchase price.
A non-consenting spse may entierly void any security interest in CP granted to a creditor by the other spse (except for a family law attorney’s real property lien). The debt underlying the secuty interest remains intact.
- If one spouse is managing a bus, they are given primary mgt and control of that bus.
Actions
After dtrmnng th source, a ct lks at th pties’ actions to see if they changed the prop’s character. <em>H, assming H took title to lot in his name alone, neither pty took any action to change the nature of H’s SP to CP. </em><em>T, lot remained H’s SP. </em>
- Character of Property Acquired on Credit
The prsnl credit of a spse belongs to the community during m, insofar as it is bsd on earning cap. Thus, a loan taken out is comm debt, and the prop acquired during m is CP, unless there is ev proving a lendr’s primary intnt for gvng th loan ws th spse’s SP usd as collateral. Credit is not apportioned, and is either CP or SP.
<em>H, H n W obtained loan from bank to build house. In mking loan bank relied on salaries earned by both H n W, so proceeds were CP, and house acquired during m was presumed CP. H/e, bank required W pledge her SP. If <strong>W demonstrated the bank </strong>primarily <strong>relied on her SP in </strong>granting the loan, <strong>house was </strong>W’s SP. T,</em><em> house was either CP or W’s SP. </em>
Community Business
Appreciation During Separation
Reverse Pereira
Reverse Van Camp
Community Business (CB) A CB is a business started during marriage or with CP funds. H,T
Appreciation During Separation: If a CB operates during separation, & appreciates in value, ct uses either Pereia or VC formula in reverse to apportion CP & SP interests. H,T
- Use Reverse Pereira whn th CB value increase cn be attributed to a spse’s personal time, skills, and effort. CP = Value of Business at Time of Separation + (VBToS x Fair Rate of Return x Yrs of Separation); SP = FMV of CB at Divorce - CP. H,T [EG: $50 + ($50 x 5% x 2) = $55 CP | $60 - $55 = $5 SP]
Use Reverse VC whn th CB value increase cn be attributed to a bus’ character, rather thn a spse’s labor. SP = Reas Value of Services Provided During Separation - Salary Paid; CP = FMV of CB at divorce - SP. H,T [EG: $10 - $5 = $5 SP | $60 - $5 = $55 CP]
CP Contributions to Acquisitions of SP Assets
Whn CP reduces th principal of a loan used to purchase SP of a spse, the comm establishes a proportional o/ship intrst to th extent the community mortgage payments reduce the principal debt. Appreciation is allocated based on each estate’s ownership interest.
H, for 4 yrs (12-16), H used funds from his account to pay the mtg. The source of th account ws H’s salary during m, CP. H took actions to change th source frm CP to SP by opening account in his name. No written a/ment frm W to change charac of funds frm CP to H’s SP. The account remained CP. Whn CP funds frm account reduced principal of the mtg, the community est a proportional o/ship interest in townhouse to extent community mtg payments reduced principal debt. Comm also received appreciation based on its ownership interst.
Presumptions
Improvements
- SP Used to Improve Other Spuse’s SP
- SP Used to Improve CP
- CP Used to Improve Spouse’s OWN SP
- CP Used to Improve OTHER Spouse’s SP
Improvements
- SP Usd to Imprve Othr Spse’s SP: A spse who uses SP to imprve th othr spse’s SP is enttld to reimbrsmnt, w/out intrst or appreciation of the SP contribution.<em> </em>
- SP Usd to Imprve CP: After 1984, whn a spse uses SP to imprve CP, the spse is entitled to reimbursement for the funds expended. H,T
- CP Usd to Imprve Spse’s OWN SP: Whn a spse uses CP to imprve his own SP, the comm is enttld to th greater of (1) reimbrsmnt of imprvmnt costs, or (2) th enhnced vlue of th prop.
- CP Usd to Imprve OTHER Spse’s SP: Whn a spse uses CP to imprve th othr spse’s SP, thre is a split of authority. In some cts: (1) a gift is presumed, bt may be ovrcme by ev of a/ment to reimbrse, (2) th comm is enttld to th greater of (a) reimbrsmnt of imprvmnt csts, or (b) th enhncd vlue of prop.
