Divorce Flashcards
Community Labor Used to Increase SP Business (started BEFORE marriage)
Spouse may use community labor to manage SP business. Community is then entitled to share of appreciation in value of business because the spouse’s labor during the marriage was used to increase that value.
* Must apportion SP portion and CP value based on the extent of community labor
Court uses the method that achieves substantial justice between parties
* Van Camp method
* Pereira method
WRITE WHICH METHOD SHOULD BE USED!!!
Van Camp Accounting Method
Used when appreciation in value is passive and primarily from the unique nature of the SP asset/market or economic circumstances
* Determine a fair salary for the community labor (usually going market rate)
* Multiply by the years of marriage
* Subtract any salary already received and family expenses over the years of marriage
* = CP
* Rest of business = SP of managing spouse
More for SP
Pereira Method
Used when appreciation in value is primarily due to spouse’s community labor/management (long hours, creativity, effort)
SP: Gets the initial value of SP + reasonable rate of return during the years married
* Determine value of SP at beginning of business (“principal”)
* Add reasonable rate of return per year (usually the legal interest rate of 10%)
* Multiply rate by number of years married
Remainder is CP
More for CP
Premarital Agreements
Parties can avoid CP presumption by entering into premarital agreement that designates what remains SP.
Valid premarital agreement = voluntary + not unconscionable
Premarital Agreements - Voluntary
Not voluntary unless court finds that party against whom agreement is being enforced:
* had independent legal counsel or waived right in writing
* had at least 7 days to review and sign agreement
* if no counsel, was fully informed of basic effects of agreement in separate writing
Premarital Agreements - Unconscionable
Spousal Support
* challenging party didn’t have independent legal counsel at signing, or
* had counsel but provision is unconscionable at time of enforcement
Everything Else
* challenging party not given full and fair disclosure of property/financial obligations of other party
* didn’t waive such disclosure in writing
* couldn’t have reasonably obtained info/ended up with inadequate knowledge of those obligations
Debt During Marriage
General rule of creditors?
Encumbers all CP and debtor’s SP but not SP of other spouse
Defense: If debtor breached fiduciary duty, non-debtor spouse might have claim to recover half of CP.
General Rule of Creditors: Creditors can reach any property over which debtor has legal right of management and control.
Tort Liability of Spouse
Encumbers all CP and tortfeasor’s SP
Order: If tort arose from activity done for benefit of the community, take from CP first then tortfeasor’s SP
* If not for benefit of community, SP then CP
Right to Reimbursement: If CP used first even though tortfeasor spouse had SP, then non-debtor spouse can get reimbursed to extent of SP that could’ve been used
Personal Injury Recovery by Spouse
If cause of action arose during marriage: all CP
Divorce: goes entirely to injured spouse
* Injured spouse must reimburse CP or other spouse’s SP for any expenses paid for injury
Debt Before Marriage
Encumbers all CP and debtor’s SP
* Child support from prior relationship is considered debt before marriage
Exception: If nondebtor spouse keeps earnings (normally CP) in a separate account and doesn’t commingle with CP, then can’t be reached by debtors
Right to Reimbursement: If CP used even though debtor spouse had SP, then non-debtor spouse can get reimbursed to extent of SP that could’ve been used
CA - Allocation of Debts on Divorce
CA distinguishes debts allocated to community and debts allocated to each spouse as a separate obligation (only for allocating unpaid debt for divorce)
* If spouse didn’t incur a debt and wasn’t assigned the debt by court, their 1/2 of CP from divorce and SP are NOT subject to debt
Separate debt: Debt before marriage
When can creditors of one spouse reach SP of other spouse?
Doctrine of Necessities - each spouse has duty to support other spouse and minor children, so each spouse is personally liable for debts incurred by other spouse for necessaries of life (food, clothing, medical bills)
* Applies during separation; only ends upon divorce
Right to Reimbursement: If CP used even though debtor spouse had SP, then non-debtor spouse can get reimbursed to extent of SP that could’ve been used
Gift of CP During Marriage
Requires written consent from other spouse (can also ratify it later)
While donor alive, nonconsenting spouse can revoke entire gift
When donor dead, nonconsenting spouse can recover their 1/2 CP interest from donor’s estate OR donee
Termination of Marital Economic Community
Marital Economic Community begins at marriage and ends either upon death of a spouse or the date of separation
Separation requires complete and final break in marriage, which means
* a spouse expresses intent to end marriage to other spouse
* there’s conduct consistent with that intent (ex. living separately)
Implication of funds being “wage replacement”
Funds intended to replace wages that would’ve been earned during marriage are CP (even if you get them after divorce)
Fiduciary duty of spouses - Undue influence
Each spouse owes the other the highest good faith and fair dealing in management and control of CP.
Undue Influence: Rebuttable presumption of undue influence created when one spouse gains advantage over the other in a property transaction
* Advantaged spouse must prove other spouse freely and voluntarily entered into transaction, with full knowledge and understanding of transaction’s effect
Management and Control
Each spouse has exclusive management and control over their SP.
* QCP is SP for management/control purposes.
Each spouse has equal management and control over CP.
* Either spouse can spend, sell, buy, or encumber ALL CP.
Exceptions
* Real property transfers: both spouses must join
* Personal belongings (clothing/furniture)
* Spouse managing business is given primary management and control
* If bank account is in name of one spouse alone
Exceptions for CP:
* Can’t sell or encumber personal property in family dwelling without written consent
* Can’t gift CP without written consent
* Can’t dispose of substantially all/all personal property in CP business without prior written consent
* Can’t convey, encumber, or lease real property without consent [one spouse can’t encumber/transfer their 1/2 interest by themselves]
How does CA court have jx over out-of-state property upon death/divorce?
CA doesn’t have in rem jurisdiction to change title to land in another state BUT can basically do this by requiring parties to execute whatever conveyances are necessary to divide the property
Stock Option
- If option awarded during marriage but not exercisable until after separation (after marital community ends)
Courts apply “time rule” to determine community interest in stock options. It looks at the employer’s primary intent in granting the option.
Stock Option as Award for Past Service: (Marriage of Hug) - aka deferred compensation
* Numerator: Date of employment to date of separation (when economic community ends)
* Denominator: Date of employment to date when options can be exercised
Stock Option to Encourage Continued Employment (Marriage of Nelson)
* Numerator: Date options are granted to date of separation
* Denominator: Date options are granted to date when options can be exercise
Stock Option
* If option becomes exercisable (vests) during marriage
CP
Reimbursement for Education
Education/professional degree is not divisible property and is NOT CP. However, upon divorce, there is equitable right of reimbursement, with interest to community IF CP used to:
* Pay for education
* Repay loan incurred from education, and
* Education substantially enhances earning power of student
Reimbursement reduced when:
* both spouses funded education through CP
* recipient was able to get employment that substantially reduces need for spousal support, or
* community already substantially benefitted (rebuttable presumption of benefit if more than 10 years between contributions and divorce)
Business and Professional Goodwill
Goodwill: Difference between total value of business and value of physical assets; it’s an intangible value that includes reputation, clients, etc. of business
* Professional goodwill usually is inherent in particular practitioner-spouse and can’t be sold/transferred, but CA treats as CP.
* Usually spouse running business gets whole business and other spouse gets 1/2 its equivalent value in other CP.
Valuation Techniques
* Market sales valuation: what a willing buyer would pay for goodwill (usually smaller)
* Capitalization of past excess earnings: calculates present value of future income generated by goodwill
Partnership Agreement: Even if a partnership agreement may try and preemptively offer their own valuation of goodwill (essentially capping it), court usually won’t let them and will use one of the two valuation techniques instead.
If business started during marriage?
It’s CP and each spouse gets 1/2 of value of business
Pereira and Van Camp do NOT apply
Property with title as joint tenants but paid partly with or improved with SP: what happens upon divorce?
Title presumption applies
Ownership: Presumption of CP, subject to equal division on divorce, unless
* Express statement in deed/title that states property/part of it is SP
* Written agreement that property/part of it is SP
Reimbursement: Spouse that contributed SP can get reimbursed without interest for DIP:
* Down payment
* Improvements
* Principal payments made on mortgage (but not mortgage interest)
Anti-Lucas Statutes
