Community Property--Impact of Parties' Actions on Characterization

Question 1

Spouse uses CP to improve own SP?

Answer 1

Improvements become SP, but community can seek reimbursement for the greater of the cost of the improvements or the enhanced value of the SP attributable to the CP.

Question 2

Spouse uses CP to improve other spouse’s SP?

Answer 2

Generally considered a gift, absent an agreement to reimburse

Question 3

Property acquired with both SP and CP funds?

Answer 3

Common example is a house bought with SP funds B4 marriage but the mortgage is payed off with CP funds. Pro rata rule. Or one spouse inherits property (SP), but CP used to pay off mortgage. CP takes a pro rata portion of the property measured by the percentage of principal debt reduction attributable to the expenditure of community funds and improvements and down payments but not interest or taxes. (DIP)

Question 4

SP used to improve CP?

Answer 4

Pro rata rule. Same as for property acquired with CP and SP funds.

Question 5

Property purchased from co-mingled accounts?

Answer 5

Fact that SP funds are commingled with CP funds does not transform or transmute the SP funds into CP funds. However, co-mingled funds presumed to be CP. Burden is on the holder of the SP funds to show that each asset was acquired. Methods are tracing or exhaustion.

Question 6

What is direct tracing?

Answer 6

Show direct link between SP funds and the purchase. Must demonstrate that sufficient SP funds were available at time of purchase, intent was to use the SP funds to make the purchase.

Question 7

What is exhaustion?

Answer 7

Presumed that when funds are commingled, the community funds will be used for family expenses. With this method, must show that when a particular asset was purchased, CP funds in the account had already been exhausted for CP expenses, such that only funds left could be SP.

Question 8

CP used to pay obligations from prior relationship?

Answer 8

Like spousal or child support. CP has right to reimbursement to extent the SP was available to pay support instead.

Question 9

SP to other spouse’s SP?

Answer 9

Reimbursed without interest for DIP (down payment, improvements, principal), absent agreement.

Question 10

What happens if SP cannot be traced?

Answer 10

Presumed to be CP

Question 11

What can’t tracing overcome?

Answer 11

Tracing cannot overcome title presumptions (e.g. joint tenants in a house). But can be used to over come jointly titled bank accounts.