Essay Basics

Question 1

Checklist of Issues Tested

Answer 1

1. General CP principles + QCP where applicable
2. Married/Unmarried couples, Putative Spouses
3. Premarital Agreements
4. Source and Tracing
5. Presumptions - SP, CP, Title
6. Actions - Transmutation, Fiduciary, Equal Rights
7. Specific Types - Divorce, Separation, Death
8. Distribution - Divorce, Separation, Death
9. Liability of Marital Property

Question 2

Approach to CP Essays

Answer 2

1. Introduce General Principles
2. Discuss status of parties
3. Discuss Premarital Agreements
4. Address EACH item of property/debt
   - Presumptions
   - Source/tracing
   - Actions on character
   - Specific Type Rules
   - Distribution @ divorce/death

Question 3

Intro Paragraph

Answer 3

“California is a community property state. In a community property state, the marital economic community begins upon marriage and ends at divorce, death of a spouse, or a permanent physical separation with an intent that it be permanent. Property, earnings, or debt acquired by either spouse during marriage are presumed to be CP. Property acquired before marriage; by gift/inheritance during marriage; after divorce/permanent separation is presumed SP. Finally, property acquired by a married couple while living in a non-CP state that would be CP if the couple had lived in CA at acquisition is QCP.”

Question 4

Marriage - Validity

Answer 4

A valid marriage requires
(i) Consent of 2 parties
(ii) Who have legal capacity to enter into the contract of marriage and formal legal procedures.

When a marriage is legal, the couple’s property will be distributed based on CP principles.

Question 5

Marriage - Ending the Marriage

Answer 5

While the marital community begins at marriage only, it can end at any of divorce, death of a spouse, or permanent separation with no intent to resume the relationship.

Physical separation is no longer required for permanent separation - instead it occurs when parties have a complete and final break n the relationship. Such breaks are proven by:
(i) a spouse’s expressed intent to end the marriage, and
(ii) conduct consistent with that intent

Question 6

Marriage - Unmarried Cohabitants

Answer 6

Unmarried couples’ property is distributed based on contract principles. Express terms describing distribution of property will be upheld unless they are based on prostitution. Where there is no express contract, courts will examine implied contracts or understandings. Courts can also distribute on fairness and unjust enrichment principles.

Question 7

Marriage - Putative Spouses

Answer 7

A putative marriage occurs when one/both spouses have a good faith belief there is a valid marriage, when there actually is not. Those with the good faith belief are putative spouses with certain rights:
(i) Entitled to accruing CP share, until they discover the invalidity of the marriage
(ii) QCP and CP during the putative marriage is QMP, and the putative spouse gets half of it.
(iii) Putative spouse retains the rights to their own SP
(iv) When a person has a legal spouse and a putative spouse, the two split the estate

Question 8

Premarital Agreements

Answer 8

Premarital agreements allow couples to avoid the CA CP system. A valid premarital agreement must be
(i) in writing, and
(ii) signed by both parties.

But, a premarital agreement can be invalidated if
(i) A party did not sign voluntarily, or
(ii) the agreement was unconscionable at execution.

Essays often test unclear/questionably valid prenups. Argue both sides

Question 9

Presumptions

Answer 9

Each item in a CP problem is classified on presumption:
CP: Any asset acquired or income earned by a married person during marriage is presumed CP, unless gift, devised, or bequeathed.
SP: Any property acquired before marriage, by gift or inheritance during marriage, or after divorce is presumed SP.

Property taken by joint tenancy/tenancy in common is presumed CP upon divorce. This can be rebutted by evidence that spouses did not intend to hold the property as CP. SP used by a spouse to obtain the CP is presumed a gift with no right to reimbursement. (Anti-Lucas)

Question 10

Source/Tracing

Question 11

Actions - General

Answer 11

Parties often take actions that may change the character of the property from CP to SP and vice versa. These actions include:
- Transmutation
- Title in one spouse’s name
- Equal Rights/management of CP
- Fiduciary duties

Question 12

Actions - Transmutation

Answer 12

Transmutation refers to the changing of SP to CP and vice versa. To be valid, a transmutation must be
(i) in writing, and
(ii) contain language explicitly stating ownership of property is being changed by the adversely affected spouse

Question 13

Actions - Transmutation, Gift Exception

Answer 13

Gifts between spouses may be valid transmutations without writings when limited to personal, tangible gifts like clothing and jewelry. More substantial gifts will require a writing like normal transmutations.

Question 14

Actions - Title in One Spouse’s Name

Answer 14

If a spouse takes title to an asset in their name alone, this will not change the nature of the property if the source was CP.

Naturally, this begets a source/tracing analysis.

Question 15

Actions - Equal Rights and Management of CP

Answer 15

Each spouse has equal management and control over CP. Both spouses must participate in decisions regarding CP. If a spouse gifts personal property that is CP or sells/leases real property that is CP, special rules apply:
(i) 3rd Party Gifts: When one spouse disposes of CP for less than fair value without the other spouse’s consent, the innocent spouse may ratify the gift, revoke the transaction, or sue the gifting spouse.
(ii) Sale/lease of CP real property: Both spouses must participate in the leasing of real property for more than a year. Where a spouse sells CP real property without the other spouse’s consent, the innocent party is a BFP if the innocent spouse does not act to recover within one year.

Question 16

Actions - Fiduciary Duties

Answer 16

Each spouse owes the other a duty to act in highest good faith with respect to the other spouse in management and control of CP.
Failure to obtain consent of the other spouse when making gifts or selling or leasing property gives rise to a breach of fiduciary duty.
The innocent spouse can seek a greater share of CP due to fiduciary duty breach.

*Usually tested in tandem with equal rights/management, make sure to use separate headlines.

Question 17

Specific Types - Separate Property Businesses

Answer 17

Generally, income from a SP business is SP. However, if a spouse contributes labor (CP by nature within the marriage), a court must determine how much of the business is CP upon divorce and how much is SP. Van Camp and Pereira theories dictate the calculation of community interest in an SP business.

Question 18

Separate Property Businesses - Pereira

Answer 18

P(ersonal effort)ereira is used when the increase in value of an SP business can be attributed to the personal skills and effort of the managing spouse. The formula for determining SP and SP is as follows:
SP = Value of SP biz at time of marriage + (value at time of marriage x .10 x years of marriage)
CP = FMV of business at divorce - calculated SP

Question 19

Separate Property Business - Van Camp

Answer 19

The V(alue through market)an Camp approach is used when the primary reason for the increase n value in the SP business is a character of the SP itself, rather than the spouse’s labor. The formula for calculating value is:
CP = Reasonable value of services - annual family expenses) x years of marriage
SP = FMV of business at divorce - CP value calculated

Question 20

Specific Types - Improvements

Answer 20

A spouse using their SP to improve the other spouse’s SP generally has a statutory right to reimbursement for the contribution.
A spouse using their own SP to improve CP is entitled to reimbursement for the funds expended
When a spouse uses CP to improve the other spouse’s SP, the community is entitled to either reimbursement or enhanced value of property, whichever is greater

Question 21

Specific Types - Credit and Loans

Answer 21

Acquired property or loans will be characterized as CP unless there is evidence that the seller relied “solely” on the purchaser’s SP in extending credit or a loan

Question 22

Specific Types - Commingled Bank Accounts

Answer 22

Commingled bank accounts are present where the SP of one spouse is mixed with the SP of the other spouse or CP. The burden is on the claiming spouse when trying to assert that an asset purchased from their separate account was done with SP funds (triggers tracing)

Question 23

Specific Types - Commingled Bank Accounts, Methods of Examination

Answer 23

Two methods exist for trying to prove SP purchase from a commingled bank account:

Under the direct tracing method, the claimant spouse proves there were sufficient SP funds available at the time the asset was purchased AND they intended to use their SP funds to purchase the asset

Under exhaustion, the claimant spouse proves CP funds in the account were already exhausted by payment of family expenses at the time the asset was purchased (leaving only SP in the account to pay for the purchased asset).

Question 24

Specific Types - Educational Degrees

Answer 24

Degrees acquired during marriage are not treated as CP BUT, the community is entitled to reimbursement if CP funds were used to pay for education costs, earning capacity was substantially improved, and the married couple did not contractually waive the reimbursement right.

Question 25

Specific Types - Educational Degrees, Educated Spouse’s Defenses to Reimbursement

Answer 25

The educated spouse has three possible defenses to reimbursement:
(i) The divorce occurred more than 10 years after the education was received (ergo the community received substantial benefit from the education)
(ii) The other spouse also received education paid for with CP funds during the marriage
(iii) The education reduced the need for spousal support upon divorce

Question 26

Specific Types - Personal Injury Recovery

Answer 26

Personal injury recovery from 3rd-party tortfeasor before marriage or after divorce is SP for the injured spouse.
Tort recovery during marriage or upon death is CP

Question 27

Specific Types - Stock Options

Answer 27

Stock options that are compensation for earnings ‘during the marriage’ are apportioned an interest in the value of the stocks. Courts apportion the CP interest as ‘earned from the time when the employed spouse started working for the company and accruing until separation or divorce.

If the options replace earnings after divorce/separation, they are SP

Similarly (though not exactly alike) to goodwill, retirement pensions, disability, severance, and inisurance

Question 28

Distribution - Divorce

Answer 28

CP is divided equally at divorce. Exceptions to this rule are:
- When an asset is closely associated with one spouse
- Equal division would reduce value of property/spouse’s earning capacity
- One spouse is better situated to bear an investment risk

Question 29

Distribution - Separation

Answer 29

Earnings and accumulations of a spouse after permanent separation are the SP of that spouse

Question 30

Division of Property at Death

Answer 30

At death, character of property is presumptively as expressed in the title - joint tenancy is presumed joint tenancy, CP presumed CP. A surviving spouse takes 1/2 of CP and QCP, and the decedent spouse has no interest in any QCP acquired by the surviving spouse

Question 31

Division of Property at Death - Intestate

Answer 31

When a spouse dies without a will, the surviving spouse is entitled to 100% of the CP. The surviving spouse is entitled to the decedent’s SP in proportion to the number of heirs - 1/2 if one heir, 1/3 if more than one heir, 100% of SP if no heirs.

Question 32

Liability of Marital Property - Debt

Answer 32

Relevant debts include contract, tort, child support, and spousal obligations arising previously and with different effects on CP and SP.
CP (or QCP) is liable for debts incurred by either spouse before or during the marriage. Liability cannot extend to post-separation debts. Non-debtor spouses can protect their CP earnings by depositing them in a separate bank account.
SP is liable for debts incurred before or during the marriage, but not for the other spouse’s debts

Question 33

Liability of Marital Property - Reimbursement

Answer 33

The non-debtor spouse has 3 years to bring an action for reimbursement if debts or liabilities are paid from the community.

Question 34

Liability of Marital Property - Divorce

Answer 34

At divorce, debts incurred before marriage will be assigned to the spouse who incurred them. When they were not ‘for the benefit of the community,’ they may be assigned to SP of the debtor spouse.

Question 35

Liability of Marital Property Special Rules - Necessaries of Life

Answer 35

Necessaries of life are living costs like food, clothing, shelter, and medical expenses.
While living together and married, a spouse’s CP and SP are liable for the other spouse’s debts relating to necessaries for life. At divorce, the non-debtor spouse is no longer liable.
While living apart, a spouse’s CP and SP are still liable for the other spouse’s debts relating to expenses required to sustain life.

Question 36

Liability of Marital Property Special Rules - Child and Spousal Support

Answer 36

A child or spousal support obligation from a previous relationship shall be treated as a debt incurred before marriage. CP will be liable for the debt unless the non-debtor spouse places her earnings in a separate bank account inaccessible to the debtor spouse.
When the debtor spouse had SP to pay the obligation but used CP, the non-debtor spouse can seek reimbursement to the CP.

Question 37

Liability of Marital Property Special Rules - Tort Obligations

Answer 37

When a spouse commits a tort while acting for the benefit of the community, the liability is first satisfied by the CP before reaching the tortfeasor’s SP if necessary
If the tortfeasor was not acting for the benefit of the community, the liability must first be satisfied from the tortfeasor’s SP.