Community Property Rule Statements

Question 1

**Community Property **
Basic Rule

Answer 1

California is a community property state. All property acquired during marriage is presumptively community property (CP). All property acquired before marriage or after separation is presumed separate property (SP). Additionally, all property acquired via gift, devise, or bequest is presumed SP. At divorce, generally CP is divided equally unless some rule applies or the parties otherwise agreed.

Question 2

Quasi-Community Property

Answer 2

Quasi-Community Property (QCP) is property that would have been CP had the couple been domiciled in CA at the time of acquisition.

Question 3

End of Marital Estate

Answer 3

The marital estate ends at either spouse’s death or permanent separation, which occurs when there is 1) an intent not to resume marital relations and 2) conduct consistent with that intent.

Question 4

Management Rights of Spouse

Answer 4

Each spouse has equal management rights to CP. Therefore, each spouse can sell, encumber, or dispose of CP WITHOUT the other’s consent. However, there are a few exceptions.

Question 5

**Transfer of CP to Third Party **- Personal Property

Answer 5

WRITTEN CONSENT is required to transfer personal property of CP for less than FMV.

Question 6

Transfer of CP to Third Party - Real Property

Answer 6

REQUIRES BOTH spouses to join, otherwise it can be voided. If to BFP, then must move to void within 1 year. if not BFP, then no time limit.

Question 7

**Transfer of CP to Third Party **
Inter Vivos Gift of CP

Answer 7

WRITTEN CONSENT is required, otherwise, the non-gifting spouse may void the gift if during the donor’s lifetime. If after the donor’s death may void for half its value.

Question 8

Transfer of CP to Third Party
Business

Answer 8

A spouse is a primary manager of a business is obligated to provide PRIOR WRITTEN NOTICE before sale, lease, or disposition of the business.

Question 9

Jointly Titled Property
(at Divorce // at Death)

Answer 9

At divorce, anti-Lucas statute states that (since 1987) all jointly titled property acquired by married couple is presumptively CP, but SP contributions are entitled to reimbursement.

At death, SP contribution are presumed to be a gift, with no right to reimbursement.

Question 10

Transmutations

Answer 10

A transmutation is an agreement between spouses to change the character of an asset. No consideration is necessary. Since 1985, transmutations are only valid if: 1) in writing, 2) ownerhsip change expressly declared, 3) negatively-affected spouse consents and 4) signs.

transmutat(IONS) - In writing, Ownership change, Negatively-a Signs

Question 11

Transmutation
Insubstantial Value Exception

Answer 11

A gift using CP can be transmuted to SP by one spouse to the other if 1) tangible property of personal nature; 2) used solely by receiving spouse; 3) insubstantial in value, considering the lifestyle of the parties

Question 12

Prenuptial Agreement

Answer 12

A prenuptial agreement (prenup) serves to avoid CP laws, but must be in writing and signed by both parties. Additionally, a prenup will be deemed unenforceable it 1) encourages divorce, 2) involuntary, OR 3) unconscionable.

[e i o u] encourages divorce, involuntary, or unconscionable

Question 13

Prenuptial Agreement Presumed Involuntary

Answer 13

A prenup is presumed to be involuntary unless the following requirements are met: 1) represented by independent legal counsel, or 2) if choose to be unrepresented, signed express waiver, 3) no undue influence, fraud, duress, or capacity issues are found, 4) if unrepresented, totally informed as to the basic terms, rights, and obligations, AND 5) at least 7 days to review agreement.

ISNT7

Question 14

Prenuptial Agreement Unconscionable

Answer 14

A prenup will be deemed unconscionable if either (A) the terms are unfair or (B) spouse did not know the extent of the other spouse’s property when signing.

Question 15

Creditor Rights
When CP Can and Cannot be Reached

Answer 15

Generally, creditors may reach CP to satisfy debts incurred before or during marriage, including those for child support. However, a non-debtor spouse’s CP earnings may be protected if 1) debt inccurred before marriage, and 2) kept in an account where they had sole access and it was not commingled with other funds.

Question 16

Creditor Rights
When SP Can Generally be Reached

Answer 16

Generally, a spouse’s SP can only be reached to satisfy personal debts.

Question 17

Creditor Rights
Emergency Situation

Answer 17

Community is oblgiated to pay for a spouse’s necessities (food, shelter, and medical expenses) during marriage. When separate, a community is still oblgiated to pay for necessities in emergency situations.

Question 18

Creditor Rights
Access to SP for Tort Liability

Answer 18

If acting for community’s benefit, then must first satisfy using CP funds, and then tortfeasor’s SP.
If NOT acting for the community’s benefit, then must first use tortfeasor’s SP before reaching for CP.

Question 19

**Separate Property Business **

Answer 19

If a spouse’s SP business was enhanced by the community during the course of the marriage, a court will use one of the following methods to determine CP/SP interests at divorce: 1) Pereira method, if the owning-spouse’s personal efforts were the primary reason for the growth of the business; or 2) Van Camp method, if the inherently valuable nature of the business was the primary reason for the growth.

Question 20

Seperate Property Business - Pereira Method

Answer 20

A court will award the owner spouse the principal investment value + 10%/year as their SP. The remainder will be deemed CP.

Question 21

Seperate Property Business - Van Camp Method

Answer 21

The calculation is done by awarding the community an (estimated fmv salary of owning-spouse) x (# of years married) minus (paid community expenses). Community expenses includes any actual family expenses paid in previous years and/or any salary previously taken. The remainder is deemed the Owner-spouse’s SP.