Effect of Parties' Actions on Characterization of Assets

Question 1

Installment purchase pre-marriage; debt paid down with CP post-marriage formula: p. 17

Answer 1

Pro Ration Rule:
Principle debt reduction attributable to the CP (how much did the CP reduce the debt?) DIVIDED BY: The purchase price of the property
With this you have what % is the CP, the rest is SP

Question 2

Whole life insurance policies how to figure out the % of CP vs. SP?

Answer 2

Pro Ration Rule applies:

look at # of payments made during the marriage divided by the total number of payments made

Question 3

Term Life insurance policeshow to figure out the % of CP vs. SP?

Answer 3

Look at last payment made, if made with CP, it’s CP, if made with SP it’s SP

Question 4

Community funds used to improve SP: Ex: H has house before getting married, after marriage he uses CP HE EARNED to improve house, W files for divorce, is the house now CP?

Answer 4

Improvements become part of property. If the OWNER of the house uses the CP HE EARNED, community can claim reimbursement, but the community will get the greater of the increase in value or the expenditure (not the house)

Question 5

Community funds used to improve SP: Ex: W has house before getting married, after marriage she uses CP H EARNED to improve house, is H entitled to assert community reimbursement for his funds?

Answer 5

Split of Authority!
No reimbursement - When CP expended to improve SP it is presumed to be gift to the SP. Presumption overcome by evidence of agreement.
Reimbursement - Some courts grant reimbursement

Question 6

SP funds used to improve CP, then there’s a divorce

What if there’s a death?

Answer 6

Person using their SP can use anti-lucas statute: When asset is held in joint and equal form, and SP is expended to improve CP, upon divorce, the party who expended SP would get reimbursement (without interest) for DIP (down payment, improvements, principal payments)
If Death: Lucas applies, presumption of a gift, no reimbursement

Question 7

Comingled bank accounts rule:

What presumption is applied?

Answer 7

The mere fact that SP funds are commingled with CP funds does not transform or transmute the SP into CP. But the burden is on the one asserting it.
FAMILY EXPENSE PRESUMPTION: CP used to pay for family expenses

Question 8

How do you overcome the family expense presumption when there’s a comingling of funds?

Answer 8

Exhaustion method: Prove there was no way there was enough CP to make payments, and the SP was used to make the purchases that were not for the family
Direct Tracing (quick in quick out): Deposited an amount in, took same out soon thereafter. Direct tracing requires: Sufficient separate funds were available, and H intended to use SP funds to buy assets