EFFECT OF HOW TITLE IS TAKEN & EFFECT OF PARTIES’ ACTIONS ON CHARACTERIZATION OF ASSETS

Question 1

“Joint and equal form”

Answer 1

Presumptions that arise from taking title in “joint and equal form”

“Joint and equal form” means the title lists both spouses names

Question 2

Marriage of Lucas

Answer 2

Absent proof of an agreement that W was to have a SP interest, by taking title in CP form W must have intended gift to community. Unless such an agreement is established, W has no separate ownership interest and has no claim for reimbursement.

Question 3

In case involving death of one party, Lucas is still law. So W has no SP ownership interest and no claim for reimbrsmnt, unless…

Answer 3

she can establish that there was agreement that W was to have SP interest or W was to be reimbursed.

Question 4

The California legislature has passed two anti-Lucas statutes on the ownership and reimbursement issue when the issue arises on divorce or separation:

Answer 4

Ownership:

• For purposes of division of property on
  divorce or separation, property acquired during marriage in joint and equal form is presumptively CP, and is subject to equal division on divorce.

Reimbursment:

• For purposes of division on divorce or legal separation, spouse who made contributions of SP to the acquisition or improvement of CP is entitled to reimbursement without interest for contributions to Down payment, Improvements, or Principal payments on mortgage (acronym is “DIP.”).

Question 5

CP Ownership presumption
can be rebutted by:

Answer 5

1. Express statement in the deed or other instrument of title that the property (or portion thereof) is SP; or
2. Written agreement by the parties that the property (or portion thereof) is SP

Question 6

But no reimbursement for SP used to….

Answer 6

pay interest on mortgage, taxes, insurance or maintenance.

Question 7

If the deed names “Harry and Wanda Smith, husband and wife,” as grantees, the anti- Lucas statutes apply. On divorce, the property is…

Answer 7

CP and subject to equal division

Question 8

But if deed names “Harry Smith,” as grantee, the anti-Lucas statutes do not apply because property was not taken in joint and equal form. Under the source rule and
tracing, the property is…

Answer 8

1/2 CP 1/2 Husbands SP

Question 9

Proration Rule

Answer 9

installment purchase before marriage, payment with CP
funds after marriage (or during marriage W inherits land subject to mortgage and pays off note with CP funds), the community estate takes a pro rata portion of the property,
measured by the amount (percentage) of principal debt reduction attributable to the expenditure of community funds.

Question 10

CP component measured by amount of principal debt reduction attributable to community funds, not….

Answer 10

mortgage interest, property taxes, or insurance.

Question 11

In classifying ownership of whole life insurance policies, what rule applies?

Answer 11

Proration rule

Question 12

Rule for term insurance is that…

Answer 12

the last premium determines the character.

Question 13

Suppose, instead that Winkie owned the house as her SP. Thereafter, Hobie spent $50,000 out of his salary (CP) to add the family room, swimming pool, and redwood deck. Those improvements increased the value of the house and land from $200,000 to $280,000. In a divorce proceeding, is Hobie entitled to assert a community reimbursement claim for the
expenditure of community funds on Winkie’s separate property?

There is a split of authority! You need to argue both ways!

Answer 13

• No reimbursement –These facts (CP expended other spouse’s SP) give rise to presumption of gift to W’s separate estate; presumption of gift can be overcome only by evidence of an agreement to reimburse community estate.
• Reimbursement – Other cases rejected presumption of gift and granted reimbursement.

Question 14

To recap the reimbursement rules triggered by improvements:

Answer 14

1. If H expends CP to improve own SP (feathering his nest), community has reimbursement claim for the greater of the cost of improvements or the enhanced value.
2. If H expends CP to improve other spouse’s SP, there is a split of authority on whether there is reimbursement or not.
3. If H expends SP to improve community we are governed by anti-Lucas statutes (divorce) or Lucas (death).

Question 15

Commingled Bank Accounts

Answer 15

The mere fact that SP funds are commingled with CP funds does not transform or transmute the SP into CP. But the burden of proof is on H to show that each asset was purchased with SP funds.

Question 16

Problem with recapitulation theory is that …

Answer 16

it does not show that CP funds were unavailable when each asset was purchased.

Question 17

family expense presumption

Answer 17

It is presumed that expenditures for family expenses (food, housing, clothing, recreation, etc.) were made with
community funds (to the extent they were available), even though separate funds were available.

Question 18

But because of commingling and inadequate records, some family expenses may have been paid with SP funds, in which case the presumption is….

Answer 18

gift to the community with no reimbursement intended

To defeat this presumption, H would need an agreement to reimburse