Essay Basics Flashcards
Checklist of Issues Tested
- General CP principles + QCP where applicable
- Married/Unmarried couples, Putative Spouses
- Premarital Agreements
- Source and Tracing
- Presumptions - SP, CP, Title
- Actions - Transmutation, Fiduciary, Equal Rights
- Specific Types - Divorce, Separation, Death
- Distribution - Divorce, Separation, Death
- Liability of Marital Property
Approach to CP Essays
- Introduce General Principles
- Discuss status of parties
- Discuss Premarital Agreements
- Address EACH item of property/debt
- Presumptions
- Source/tracing
- Actions on character
- Specific Type Rules
- Distribution @ divorce/death
Intro Paragraph
“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.”
Marriage - Validity
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.
Marriage - Ending the Marriage
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
Marriage - Unmarried Cohabitants
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.
Marriage - Putative Spouses
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
Premarital Agreements
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
Presumptions
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)
Source/Tracing
Actions - General
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
Actions - Transmutation
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
Actions - Transmutation, Gift Exception
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.
Actions - Title in One Spouse’s Name
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.
Actions - Equal Rights and Management of CP
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.
Actions - Fiduciary Duties
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.
Specific Types - Separate Property Businesses
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.
Separate Property Businesses - Pereira
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
Separate Property Business - Van Camp
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
Specific Types - Improvements
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
Specific Types - Credit and Loans
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
Specific Types - Commingled Bank Accounts
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)
Specific Types - Commingled Bank Accounts, Methods of Examination
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).
Specific Types - Educational Degrees
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.
