from Essays Flashcards
Transmutation
During marriage spouses may change the status of (transmute) their property
to be valid:
1. a transmutation must be made in writing and expressly declare that a change in the ownership of property is being made and
2. it must be consented to or accepted by the spouse whose interest is adversely affected
SP Buisness value increased by Spouses labor during marriage
2 Accounting methods:
1. Van Camp - managing spouses services valued at ongoing market salary for such services less family expenses paid from business earnings the remainder of which is CP, the rest of the business is SP. Generally used when character of the separate business is responsible for growth/productivity.
- Pereira - start with separate capital and impute fair rate of return (10%), SP is capital plus fair rate of return times number of years business was in operation and managed by spouse during th emarriage, remainder is CP. Generally used when management by spouse was primary cause of growth or productivity of initially separate business.
Credit
- personal credit of each spouse is presumptively CP
- Overcome presumption look at what the lender primarily relied on a spouse’s SP in granting the loan.
CP funds used to improve Spouses SP
Community entitled to reimbursement of its contribution and a pro rata proportion of the property’s appreciation
Opener
- California is a community property state.
- Property acquired before marriage or after dissolution of marriage is SP
- There is a presumption that property acquired during marriage is presumed to be CP
- That presumption can be overcome by the following property types
- Property recieved by gift, bequest, device, or descent
- The rents issues and profits of SP
- and property aquired in exchange for SP
- Generally, increases to SP remain SP and increases to CP remain CP
Transmutation
Simply titling property in one person’s name is insufficient to determine if the property is CP or SP.
To validly change status of property during a marriage there must be:
* transmutation must be in writing and consented to or accepted by the spouse whose interest is adversely affected. Writing must state that a change in ownership of property is being made.
Tracing
When SP funds are comingled with CP, owner of SP can trace SP funds through either Exhaustion Method or Direct Tracing. Any available community funds are presumed to have been used first to pay for family expenses
Ex
Direct Tracing Method
- show at time asset was purchased there were sufficient separate as well as community funds available and they intended to use those separate funds to purchase an SP asset.
Exhaustian Method
SP proponent may show at the time they purchased the asset the community funds had already been exhausted by payment of family expenses.
Disability Pay/workers comp
classified by when received.
* To extent pay is intended to replace marital earnings it is CP
* to extent pay is intended to replace separate post-divorce earnings it is SP.
* It is immaterial that the right to receive the benefits may have been earned during marriage or purchased with community funds.
End of community
Marital exonomic community cannot be terminate dby living apart unless one spouse expresses an intent to end the marriage and demonstrates conduct consistent with that intent.
Breach of Fiduciary Duty
Both Spouses have fiduciary duty to eachother to act in good faith and fair dealing in the management and control fo CP
Deliberate misappropriateion of the other’s interest in property - ct can make an award or offset against wrongdoer’s 1/2 share of remaining property.
During a distribution, each party must disclose all assets and failure to do so could result in sanctions.
Debt Incurred
Debt incurred during a marriage all CP and debtor’s SP laible for debt.
SP of other spouse typically not liable
Tracing
- The owners of SP funds commingled with CP funds may trace the funds through either the exhaustian method or direct tracing
- Exhaustian Method: SP proponent must show that at the time the asset was purchased the community funds in the commingled account had already been exhausted by payment of family expenses. Payment of family expenses is presumed to be paid first by CP then SP.
- Direct Tracing - SP popronent must show that (1) there were sufficient separate funds available, and (2) they intended to use those SP to purchase the asset. Title helpful but not sufficient.
Pensions
Retirement pensions are CP only to the extent that the right to benefits was earned DURING marriage. immeterial if benefits received after divorce
Time rule for pensions earned both during and after marriage - years of employement while married/total years of employment.
can do if and when recieved or cahs out.
Personal Injury
Cause of action for personal injury arises at the time injury is inflicted
if during marriage then CP
At divorce PI damages awarded entirely to the injured spouse unless interest of justice (including economic need) prevail. Community state PI damages lose special character and are treated as ordinary CP only if commingled with other CP.
Community Contributions to SP: Mortgage
when CP is made to pay off morgage for SP the community establishes a proportional ownership interest in the property to the extent it reduces the principal debt.
Mortgage interest, insurance and taxes do not count.
Appreciateion of the property is allocated in proportion to each estate’s ownerhsip interest.
When court divides CP upon divorce each spouse is entitled to half.
Tricky types of Property: business goodwill
CP
Tricky Types of Property: Disability Pay
CP- to extent replacing marital earnings,
Marital Economic Community
Begins at marriage and ends at one spouse’s death or on the date of separation.
Date of separation shown by: Intent not to resume the marital relation (only one party
AND
Conduct consistent with that intent.
Permanent physical separation sufficies but is not a requirement.
Exceptions to splitting CP down the middle for divorce
Economic Circumstances Exception: give asset to one spouse and cash out the other (family house, closely held shares of courp, pension)
Statutory exceptions:
misappropriation -fiduciary duty to sspouse in management and control of CP
Educational Debts- separate debt.
Tort liability not based on activity for benefit of community
personal injury award, CP but on divorce awarded to injured spouse barring interests of justice
Negative community - ability of spouses to pay debt considered.
Joint Title Taken
**Death: **Lucas: Joint title taken: presumptively CP unless contrary agreement established no separate ownership interest and no claim for reimbursement.
Divorce: Anti lucas - Property aquired during marriage in joint and equal form is presumptively CP subject to equal devision but can be rebutted by : express statement in the deed or written agreement between parties that it is SP.
For purposes of division on divorce: Spouse who made contributions of SP to the acquisition or improvement of CP is entitled to reimbursement without interst for contributions to down payments, improvements or payments to principal on mortgage: DIP
Mortgages
If made before marriage and CP funds used to pay off purchase then proration rule applies
Commuity estate is entitled to a proportional ownership interst to the extent that community payments reduce the principal debt.
Appreciation is allocated in proportion to each estate’s ownership.
CP share mesaure by the amount the principal is reduced using community funds excluding mortgage interest, insurance and property taxes.
Life Insurance: Whole
CP in proportion tot he percentage of premiums paid by the community. in death apportioned according to the premiums paid by each estate and ownership of remainder of the proceeds should be determined by the final premium rule.
