Community Property Flashcards - Sheet1

Question 1

Community Property Definition

Answer 1

all things acquired between the date of marriage and the date of separation, except those things acquired by gift, devise, descent, or bequest

Question 2

Family Law Court SMJ

Answer 2

limited to awarding separate property back to owner and dividing CP 50/50

Question 3

California JX Over Dissolution

Answer 3

Only if one/both petitioners are CA residents

Question 4

Ways to End Marriage

Answer 4

1. dissolution (no fault) 2. Legal Separation (allows spouses to keep spousal benefits b/c not legally divorced; parties cannot remarry) 3. Nullity of Void Marriage (must prove marriage incestuous/bigamous; consequence is that marriage never existed, may have to re-file taxes, undo stuff, etc.) 4. Nullity of Voidable Marriage (based on age, prior existing marriage, unsound mind, fraud, force, physical incapacity; court has discretion to refuse to nullify) 5. Death

Question 5

Definition of Marriage

Answer 5

FLC 300: marriage is a personal civil contract between a man and a woman; parties must obtain a license and solemnize the marriage (delcaring each other as husband/wife) NO common law marriage

Question 6

Recognizing Marriage Outside CA

Answer 6

FLC 308: CA will recognize a marriage that is legal in the jurisdiction (foreign or domestic) in which it was contracted, even if that marriage would not meet CA’s requirements for a valid marriage

Question 7

Gay Marriage

Answer 7

FLC 308.5: CA does NOT recognize gay marriage; marriage is only recognized in CA, no matter where created, if it is between a man and a woman

Question 8

Domestic Partnership

Answer 8

FLC 297: (1) same-sex partners living together; OR (2) any couple living together in which one party is 62 years or older (allows for uncapped SS benefits based on “unmarried” status); Must file declaration with the state; DP’s granted al rights/privileges/responsibilities of marriage under state law; Federal Law does not recognize DP’s as married, which has tax consequences under DRTRA

Question 9

Quasi-Marital Property: Putative Spouse Definition

Answer 9

FLC 2251: putative spouse is a party to a marriage that is void or voidable, who believed in good faith that the marriage was valid; putative spouses have the same rights as legal spouses; nullity of marriage must be through no fault of the putative spouse (only protects good faith believer in validity of the marriage); Monty case says that even if marraige dissolved, if spouse was unaware of dissolution, can still get QMP as putative spouse for period after dissolution.

Question 10

Putative Spouse Knowledge of Nullity

Answer 10

Wagner case says subjective good faith that marriage is valid (here, it was nullity b/c no solemnization) is enough for plaintiff to be putative spouse; but courts are split whether you need an objective manifestation of that good faith belief: DePasse case in SD says you need at least a marriage license as an objective manifestation); SF says can prove subject good faith w/o objective manifestation

Question 11

Marvin Actions

Answer 11

Applies to long-term cohabitting unmarried couple splits up; FLA does not apply to these situations b/c there’s no marriage/DP; Express K: civil courts will enforce unless based on sex services; No Express K: court must inquire into conduct of parties to determine if there is any implied/tacit agreement that should be enforced; Marvin Action doesn’t get you into CP system, though Family Law Court do hear them anyway b/c civil courts don’t want to deal with them; often applies to period when couple lived together before marriage

Question 12

Date of Separation

Answer 12

Definition: Date of separation is the last date on which a reasonable person viewing the conduct of the parties, including a private agreement to dissolve (Manfer), would determine that the marriage is irretrievably broken; this date may or may not coincide with the date of filing for dissolution or the date cohabitting ceased, though each is strong evidence that marriage is irretrievably broken.

Question 13

Family Law Court’s Jurisdiction

Answer 13

Family Law Court jurisdiction is limited to award separate property to its owner and divide community property equally in kind and equally in time.

Question 14

Exceptions to Equal Division of CP

Answer 14

Marriage of Hebbring: To do equity, fam law court allowed to award funds from H’s CP share to W b/c H destroyed W’s SP (jewlery) One Asset Cases (FLC 2601): in rare cases where economic circumstances warrant, the court can award all the CP to one of the spouses subject to ongoing payments to cover the half owed to the other spouse. Marriage of Brigden: H’s desire to retain stock in company insufficient to create one asset case, so must split stock

Question 15

Quasi-Community Property At Divorce

Answer 15

FLC 125: All property acquired outside CA that would’ve been CP if acquired in CA or was purchased with what would’ve been CP funds in CA; FLC 2550: QCP treated as CP. Property treated as QCP if: both parties domiciled (unless other consents to jx and application of CA law) in CA AND one (or both) party moves to end marriage while domiciled in CA

Question 16

Quasi-Community Property at Death

Answer 16

Probate Code § 66: QCP is all Personal Property, and Real Property in CA; also, only the spouse who owned the property in the previous state can devise it (so if other spouse dies, surviving spouse who initially owned as personal property gets to keep it all)

Question 17

Date of Valuation

Answer 17

FLC 2552: all assets should be valued as closely to date of trial as possible, except where party can show good cause; Exception: Marriage of Green–closely held business in which only one spouse is a partner should be valued as close to the date of separation as possible to avoid rewarding other spouse for work done after marriage over

Question 18

Basic Presumptions

Answer 18

1. FLC 760: all property acquired during the marriage is presumed to be community 2. FLC 803: Property acquired before 1/1/75, property acquired before 1/1/75 in wife’s name (without husband) presumed to be SP 3. FLC 2581: Joint Form Property 4. Evid. Code 662: Title of Property is presumed to be correct (need Clear&Convincing ~75% to overcome) (Weaver+Valli say 662 presumption trumps 760 presumption where spouse not on title consented or quietly acquiesced in other spouse being solely named)

Question 19

Joint Form Property

Answer 19

Property acquired after 1/1/85, acquired in Joint Form (TiC, JT, CP) is presumed to be CP, even if acquired with SP funds; to rebut this presumption must have either: A clear statement in the deed or title documents that the property is separate property, OR proof that the parties made a written agreement that the property is separate property.

Question 20

Joint Bank Deposit

Answer 20

Lynam v. Vorwerk - If the copartners go jointly to a bank and deposit money in their joint names, in the absence of other evidence, the most reasonable inference is that the money was the joint money of such copartners, and that being in their possession as such copartners, it would be presumed to have been acquired by the copartnership o However, only a presumption – can be overcome by evidence as to the facts

Question 21

Purchase of Home in One Spouse’s Name

Answer 21

Holmes v. Holmes - Where property deeded to the wife is purchased with community funds, a presumption arises that the husband, knowing the effect of the transaction, intended to give it to the wife

Question 22

Foreign Acquired Funds

Answer 22

Louknitsky v. Louknitsky - Funds acquired in China were CP funds, and the home acquired with those funds belongs to the community

Question 23

Rebutting CP Presumption

Answer 23

Schindler v. Schindler - Presumption that property acquired after marriage except by gift, bequest, devise, or descent is CP is successfully rebutted by evidence that the property was taken in JT

Question 24

Assets not Subject to Equal Division Rule

Answer 24

1. Education Degrees 2. Personal Injury Damages

Question 25

Education Degrees

Answer 25

FLC 2641: one spouse’s advanced degree & increased earning potention not subject to division; debt for tuition/books is SP; debt for living expenses is CP

Question 26

Reimbursement for Educational Expenses

Answer 26

Community reimbursed (so 50/50 on dissolution) for community funds spent on eduction: 1) Must be type of education that substantially enhances your earning capacity 2) Community only reimbursed to extent funds spent on tuition/books, including post-grad loan repayment for tuition/book, but not on any other living expenses; AND 3) No reimbusement if community substantially benefited from education: rebuttable presumptions: less than 10 years after graduation, no subst. benefit; more than 10 years, subst. benefit

Question 27

Spousal Support

Answer 27

FLC 4320: spousal support (for after marriage): Spousal support strictly limited to standard of living during marraige (by the DOS); But, court should consider the extent to which the supported spouse contributed to the other spouse’s education, training, licensing in awarding spousal support, which includes support for living expenses during that time

Question 28

Personal Injury Damages

Answer 28

FLC 2603: Focus on time of injury: before marriage, award is SP; after marriage, 50% must go to injured spouse, other 50% can be divided using court’s discretion (can give to either, or pro rate); This include loss of consortium suits (injured party would be other spouse, I think)

Question 29

All Transmutation Before 1/1/85

Answer 29

A valid transmutation can be shown by any means that establish substantial evidence a transmutation occurred – no writing requirement

Question 30

All Transmutation After 1/1/85

Answer 30

(1) The parties must sign a writing with an express intent to transmute (must say it’s changing nature of porperty) (FLC 852) (2) The party who benefits from the transmutation must overcome the presumption (by preponderance) of a breach of fiduciary duty (good faith/fair dealing, no unfair advantage) under § 721 (supercedes EC 662 presumption). Does NOT include tangible gifts of a personal nature from one spouse to the other

Question 31

Transmutation vs. Initial Acquisition

Answer 31

Under EC 662, if use community funds to initially acquire property in one name only, clear/convincing presumption it’s SP based on title; no need to explain transmutation, because it’s not a transmutation

Question 32

Transmutation SP->CP Before 1/1/84

Answer 32

Marriage of Lucas: separate property that is used to purchase or improve community property is considered a gift to the community; the party who contributed separate property is not reimbursed for their contribution at dissolution

Question 33

Transmutation SP->CP After 1/1/84

Answer 33

FLC § 2640: a party who contributed separate property to the acquisition or improvement of community property (or transmutes SP->CP) is automatically entitled to dollar-for-dollar (exact amount of SP contributed, no interest/appreciation), off the top (first amount paid out of value of CP, but only out of CP contributed to) reimbursement of their separate property contribution (no credit for paying down interest) at dissolution, unless the parties signed a writing stating that the separate property contributor would not be reimbursed for their separate property at dissolution

Question 34

Valuation of SP Business: Good will

Answer 34

Generally, value good will by measuring present value based on some past result, excluding post-marital efforts, and assuming practice will continue into future. Excess Capitalization Method: Good Will = [Actual Pay - Person w/same skills/education/background Pay] x Capitalization Rate (from 2-10, depends on health/age/community/#years left to practice) x Discount for any part of Reputation Earned Before Marriage

Question 35

Valuation of SP Business: Labor-Intensive

Answer 35

E.g. Law Practice SP = Value at Date of Marriage (assets, liabilities, good will) + DOM*Reasonable Rate of Return*Length of Marriage CP = Value at DOS - SP

Question 36

Valuation of SP Business: Van Camp

Answer 36

E.g. Making Money Off Money (basically, if owner does little else but invests money) CP = Reasonable Value of Services - Actual Salary (benefits received by the community) -> usually this is zero or negative SP = Value of Business at DOS - CP If Salary > Value of Services Rendered, community gets nothing

Question 37

Valuation of Pensions: Defined Contribution Plans

Answer 37

Valued at Date of Trial; These are savings plans where ER matches EE contributions CP = DOS-DOM*(1+RoR*#yrs married) SP = DOT - CP

Question 38

Valuation of Pensions: Defined Benefit Plan

Answer 38

Pensions; two options for non-working spouse: (1) marriage of brown (contingent interest in non-vested pension) = CP% (months married while working toward pension/total months working towards pension) * Payout = CP (remember CP is split 50/50) (2) Marriage of Gillmore (nonemployee spuse can choose to receive immediate payments once pension matures (i.e., once working spouse entitled to receive benefits, even if elects not to yet) = CP% (months married while working toward pension/total months working toward pension before Gilmore election); No need to go to court to get Gilmore payments, just tell working spouse any time after maturity of the pension.

Question 39

ERISA: Unemployed Spouse Pre-deceases

Answer 39

o If unemployed spouse pre-deceases: • Leave their portion in their estate • If wife leaves you and gets remarried and then dies: • Still have to give that portion to her/her heirs until you die

Question 40

ERISA: Employed Spouse Pre-Deceases

Answer 40

o If employed spouse pre-deceases: • Have to offer a survivor benefit plan • Survivor benefit plan – when you retire, you and your spouse must both collectively in writing opt out of the SBP (notarized statement), and if you don’t you are automatically entered into it • You will pay monthly premium for it when you retire ($200 - $400) • That money comes off the top of what you would receive • Survivor benefit plan kicks in and lasts until unemployed spouse dies • Only required to cover the first spouse, but second spouse can sue fed gov • Probably don’t want this, so opt out • BUT, in divorce, will usually not opt out

Question 41

Valuing Pension at DOT

Answer 41

• Join pension plan into the action (3rd party is indispensible) • Then serve on ER → shifts burden on them to do all the work • Qualified Domestic Relations Order (QDRO) – judge gives order saying pension will be divided pursuant to Brown timeline formula • Will also order parties into SBP • ER will then bifurcate the retirement plan for H & W • Will send them separate checks directly • Have one year from date of judgment to serve on ER

Question 42

Valuation of Stock Options

Answer 42

CP Share = # of Options Vested * (Market Price – Strike Price) * % of time married while owning options (from grant to vesting) (using months)

Question 43

Valuation of Real Property: General Formula

Answer 43

CP gets percentage of FMV based on % of purchase price contributed in principal pay down. SP gets percentage of FMV based on the rest of the Purchase Price percentage, less any remain balance that’s owed (the debt is still SP debt; the CP just bought a % of the underlying asset, didn’t assume any of the debt)

Question 44

Valuation of Real Property: CP Component

Answer 44

CP gets: pro rata share of capital appreciation that happened during marriage + what it paid down on principal during marriage

Question 45

Valuation of Real Property: SP Component

Answer 45

SP Gets: Premarital capital appreciation, what it paid down on principal, pro rata share of capital appreciation from DOM on

Question 46

Valuation of Real Property: Moore/Mardsen w/Transmutation

Answer 46

a. First step: do Moore/Marsden analysis to figure out what portion of the property is separate property at the time of transmutation b. This is the amount the separate property will get back as a 2640 claim c. The rest of the value of the property is community property d. If after the separate property is reimbursed for its 2640 claim, the amount owed on the property > the remaining value, the entire property goes to the party who originally purchased it as separate property

Question 47

Valuation of Real Property: M/M w/ Business Used to Reduce Principal

Answer 47

Use Pereira/Van Camp to determine what portion of purchase was SP, then give that back, dollar for dollar to the SP per 2640. Also give SP % of capital appreciation from purchase to the Date of Trial. CP gets its contribution. SP Share = pre-marriage pay down + pre-marriage capital appreciation + Pereira share of business (business value at DOM+RoR) + marital capital appreciation [(1-CP% of Purchase Price)*capital appreciation] CP Share = share of business (value at disposition – SP share) + cash paid down + capital appreciation during marriage: (amount from business+amnt payed down)/purchase price * capital appreciation

Question 48

Valuation of Real Property: M/M w/ Stock Option Used to Reduce Principal Owed

Answer 48

a. First step: do Nelson stock option analysis to figure out what portion of the money received from stock options, paid towards reducing the principal, is separate and community b. Then do Moore/Marsden analysis using those numbers to determine what is separate and community at dissolution

Question 49

Disability and Severance Packages

Answer 49

1. Classified as the separate property of the employee who earned them by state and federal statute; 2. marriage of stenquist: choice btwn defined benefit or disabiity payments, chose disability, ct. said can’t deny community right to pension by electing disability, so ct. used Brown timeline share of what Husband would have gotten as pension) 3. Marriage of Wright: defined benefit plans cannot be disguised as severance packages to prevent an employee’s spouse from receiving their portion of the pension

Question 50

Fiduciary Duties, Generally

Answer 50

i. Family Law Code § 721: transactions between spouses are subject to the general rules governing fiduciary relationships, which impose the highest duty of good faith and fair dealing 1. Holds spouses to the same fiduciary duty as non-marital business partners 2. Bars intentional wrongful acts and reckless, wanton, or grossly negligent conduct, and one spouse taking unfair advantage of the other 3. Each spouse’s first obligation is to the community, not him or herself

Question 51

Fiduciary Duties During Marriage

Answer 51

1. 1100: Personal Property a. One spouse can sell or use community personal property without the permission of the other spouse as long as he or she gets a reasonable value for the property b. Can’t give personal property away or sell it for less than reasonable value without the other spouse’s written consent c. Can’t sell the other spouse or children’s furniture or clothing without written consent 2. 1102: Real Property a. One spouse can’t do anything that divests the community’s interest in the property, including leasing the property for longer than a year, without the other spouse’s consent

Question 52

Fiduciary Duties After DOS

Answer 52

1. Family Law Code § 2102: spouses have the same fiduciary duty to each other between the date of separation and date of judgment as they do during marriage a. Creates affirmative duty on spouses to accurately and completely disclose all assets and debts in which the community might have an interest, including income-producing opportunities that arise after the date of separation b. A claim arising out of the other spouse’s failure to disclose an asset under 2102 can be brought at any time, as long as it is brought within one year of the spouse discovering the existence of the undisclosed asset

Question 53

Remedies for Breach of Fiduciary Duty

Answer 53

Undisclosed/transferred in breach of fiduciary duty: Non-breacher gets 50% Fraud/Malice/Oppression: non-breacher gets 100% (e.g. W wins lotto for $1.3M, filed for dissolution, didn’t disclose winnings in proceedings; this was fraud)

Question 54

Prenupts before 1/1/85

Answer 54

Prenuptial agreements made before Jan. 1, 1985 are classified as contracts and enforced if they conform with the requirements of a valid contract under contract law

Question 55

Prenupt between 1/1/85 & 2001

Answer 55

Requirements for Valid Prenupt from this Time: a. Must be made in writing b. Includes a disclosure of all assets and liabilities, or a waiver of this disclosure c. Must be entered into knowingly and voluntarily d. cannot encourage divorce by supplying liquidated damages e. Marriage of Bonds: upheld a prenupt waiving right to CP earned by H during marriage even though W had no independent legal cousel and wasn’t legally sophisticated

Question 56

Prenupts after 1/1/2001

Answer 56

Original requirements are still valid, plus two below: (A) §1615 – Criteria for Voluntariness 1) Prenup must be in the language in which the person is proficient 2) Has to be given to the person 7 calendar days before signing 3) If waiving counsel, waiver must be in separate writing (Can’t bury waiver inside prenup) 4) If not represented by counsel, 3rd person must explain to you in writing the basic terms and effects of the prenuptial agreement and your rights and obligations (Person not represented must state in writing that they have been explained basic rights/effects/responsibilities by person who explained it to them; Doesn’t say who the third person is (not paralegal; not future spouse’s lawyer; just get your own lawyer) (A) §1612 – Waiver of Spousal Support • If you waive spousal support, MUST be represented by counsel • Conscionability of waiver is determined at time of enforcement of agreement, not at date of execution

Question 57

Taxes: DRTRA

Answer 57

1. Classifies transactions between spouses, including equalization events during dissolutions, non-taxable events. 2. Only applies to parties who are recognized as married under federal law, not domestic partners a. One domestic partner receiving a cash payment from another domestic partner in exchange for a community property asset will be taxed on that payment b. In contrast, a spouse receiving a cash payment from their spouse will not be taxed on that payment. c. Even though Calif. law says tax obligations incurred during marriage are community property, the IRS does not agree and will only go after the assets of the domestic partner that incurred the tax debt.

Question 58

Taxes: Ramifications for Equal Division

Answer 58

In re Marriage of Fonstein: the court only has to consider the tax ramifications of its division of assets if the property is sold at dissolution by court order. a. If the tax ramifications are immediate and specific, the court will adjust the sale to achieve an equal distribution of property after each party’s tax liability. b. Otherwise, the responsibility to ensure property is divided equally, taking tax liability into account, is on counsel.

Question 59

Federal Rights: Social Security

Answer 59

Mandatory social security payments that came out of a spouse’s salary, which is community property, become that spouse’s separate property as an eventual Social Security payout. a. Calif. court has no jurisdiction to equally divide Social Security benefits earned during marriage. b. All SS benefits are the earning spouse’s separate property.

Question 60

Federal Rights: Retirement Plans for Federal Workers

Answer 60

a. 1981 enabling statute allows states to divide the retirement pensions of federal civil service government workers b. 10 U.S.C. §1408 authorizes states to divide military pensions in some extremely limited, narrowly defined circumstances

Question 61

Debts Acquired Before Marriage

Answer 61

FLC 910 Community on the hook for all SP debts acquired by spouses before marriage. But the non-debtor spouse’s SP is out of reach. And, FLC 911 provides a safe harbor for the non-debtor spouse’s earnings during marriage that are put into a segregated account from which the debtor spouse has no right to withdraw. Prenupt can’t change these rules b/c creditor wouldn’t know about it.

Question 62

Previous Marriage Reimbursement

Answer 62

Debts created for spousal/child support • FC 915 – only right to reimbursement if can show debting spouse had sufficient SP income/earnings at time payment was made to cover it

Question 63

Debt Payment Reimbursement

Answer 63

All other debts • FC 920 – if community pays down on SP debt, entitled to reimbursement • BUT, 3 year SOL • Can only be reimbursed for payments made in the 3 years before DOS

Question 64

Debts Acquired During Marriage

Answer 64

From DOM->DOS, presumed debts are community. Overcome by preponderance by showing (1) debts created in anticipation of dssolution; (2) not for the benefit of the community (i.e., spouse is spending on a third person, e.g., buying flight to HI for gf); (3) debts created for intentional wrongful acts (Regardless of whether your spouse was aware of what you were doing it will be your SP debt; Doesn’t have to be criminal, just “wrongful”; Courts automatically apply this to DUI and drug related costs)

Question 65

Debts outweigh Assets

Answer 65

If community debts exceed community assets, excess is assigned as court deems equitable, taking into account the parties’ relative ability to pay o Ex: $120k debt, $100k assets • Divide $100k evenly • Don’t have to divide the extra $20k evenly

Question 66

Debts Acquired Between DOS and Date of Judgment

Answer 66

For debts created for the necessaries of life from DOS – DOJ, court has ability to assign debt to either spouse in its entirety o *Not subject to equal division rule - Necessaries – medical expenses, etc. o If your spouse develops cancer, until judgment is entered, you may be responsible

Question 67

Direct Tracing

Answer 67

o You can trace X dollars into purchase of property directly, no comingling o Ettefagh – can overcome 760 by a preponderance of the evidence • H could not trace dollar for dollar, but had witnesses testify that they had given him the money • Can fill in gaps with oral testimony, look at totality of the circumstances

Question 68

Family Expense/Exhaustion

Answer 68

o If can show an exhaustion of CP funds, the balance is SP o Community expenses are first presumed to be paid with community assets o See v. See - SP and CP funds were commingled in accounts; husband hadn’t been taking records of what was used for what • If can show that at the time of acquisition all community income was exhausted by family expenses, it is SP • No community funds were available for the purchase