Contributions & Improvements

Question 1

Define

The Lucas Presumption

Answer 1

Under the Lucas presumption, property puchased with SP and CP funds before 1/1/2987 is presumptivly CP if the spouse took title in joint & equal form.

SP contribution is considreed a gift and the SP contributor has no separate ownership or reimbursement claims.

Question 2

Define

The Anti-Lucas Presumption

Answer 2

1. As of 1987, all jointly held property acquired during marriage is considered CP upon divorce.
2. The presumption can be reubtted by an express writting evidencing spousal intent to hold the property as SP.
3. If a spouse contributes SP to the purchase of CP property, they have a right to reimbursement fro the amount of contribution, but cannot collect on an increase in value.

You will use Anti-Lucas in all essays!

Question 3

Define

Comingled Bank Account

Answer 3

A comingled bank account is an account that has both SP and CP property combined.

Question 4

What happens to property purchased with funds from a comingled account?

Answer 4

Property purchased from a comingled bank account is not presumptivly CP, but the burden of proof is on the SP proponent to show that SP funds were used to purchase the asset.

The SP proponent can either use the exhaustion method or the direct tracing method to porve that SP funds were used to purchase the property.

Question 5

Define

The Exhaustion Method

Answer 5

At the time of purchase, the CP funds in the account must have been exhausted through payment of family expenses

Question 6

Define

The Direct Tracing Method

Answer 6

At the time of purchase, there were sufficent SP funds in the account available, and the SP proponent intended to use those funds.

Question 7

Family Expenses

Answer 7

Family expenses are paid with CP funds. They are paid with SP only if CP funds have run out.

The SP funds used are then a gift to the community and have no reimbursement.

Question 8

What happens when CP funds or labor enhances the value of an SP business?

Answer 8

When CP funds or CP labor enhance the value of a SP business, courts will apply Van Camp or Pereira to calculate the CP portion of the business.

Van Camp is used when the character of the business is the primary reason for its growth or productvity.

Pereira is used when the personal skill and effort of the managing spouse increased the business’s value.

Question 9

What is the Van Camp Formula?

Answer 9

[Market Salary for Managing Spouse] minus Family expenses paid from business earnings = CP; The remainder is SP.

MS is (average salary x years)

Question 10

What is the Pereira Formula

Answer 10

[Value of managing spouse’s SP business at time of marraige] + fair rate of return = SP; The remainder is CP.

Fair rate of return is 10% x years.

Question 11

Explain

Pro-Rata Approtionment

Answer 11

When CP funds are used to pay the principal on SP properyt, the community establishes a pro-rata ownership interest to the extnt that the CP mortgage payments reduced the principal debt.

If one spouse uses CP funds to improve a SP property, the funds are not presumed to be a gift and the community is entitled to reimbursement.

Question 12

Property purchased with Credit

Answer 12

Purchases made with borrowed funds (credit) are treated like cash purchases in terms of ownership interest.

When credit or loans are used to purchase property, the property is presumed CP, but presumption can be overcome with the intent of the lender test.

Question 13

Define

Intent of the Lender Test

Answer 13

The spouse must prove that the lender relied primarily on the borrowing spoues’s SP when granting the loan.

But the personal credit of either spouse during marriage is CP if based on earning capacity or personal creditworthiness.