Master Deck Flashcards
Rationale of Community Property
Property acquired through the time, energy, and skill of a spouse is CP.
Example: salary or taking care of home.
Separation
- Spouse expressly informs that she intends to end marriage
- Spouse’s conduct is consistent w/ that intent
Note: Physical separation not required.
Community Property
- Generally property acquired during marriage.
- Rent, income, or profit earned from CP asset.
- Labor, earnings, salary, and wages of a spouse.
- Property acquired using CP funds.
Exception: property held by decedent whose marriage dissolved more than 4 years prior to decedent’s death (protects heirs from ex)
SOP to rebut general presumption of CP: preponderance of the evidence
Separate Property
Property acquired:
- Anything before marriage
- Gift or inheritance during marriage
- Anything acquired after divorce or permanent separation
- Rent, income, or profit earned from a SP asset
SOP to rebut general presumption of SP: preponderance of the evidence
If mortgage on SP real property is paid w/ CP, then CP gets a reimbursement via pro rata apportionment!
- CP estate acquires “a pro-rata interest in proportion to the amount the principal is reduced by CP payments.”
- Not reimbursable: interest, tax, or insurance payments.
Quasi Community Property
- Married couple acquired property in another state
- The property would have been classified as CP if they were married + domiciled in CA
QCP Rule only triggered upon divorce or death of spouse holding title.
If only one spouse holds title in divorce scenario, non-titled spouse’s rights determined by law of the other state.
Equal Division Rule
Upon divorce, the CP and QCP estate will be divided equally.
NOT 1/2 division of each asset.
Tracing
To rebut presumption of SP or CP, a party can trace the source of the funds used to acquire the asset.
Justification: a change in the form of asset doesn’t change the characterization of an asset.
Valid Marriage
- Consent
- Either 18 years old or court order + parental consent
- Formal legal procedures: license, solemnization, and authentication
Domestic Partnership
- Intimate + committed relationship of mutual caring
- Either same sex OR one partner is over 62 years old
- Registration under CA Domestic Partner Rights + Responsibilities Act
Death: same rights as a surviving spouse.
Divorce: CP divided equally.
Common Law Marriage
- Abolished in CA
- Valid common law marriages created in other jxns will be recognized under Full Faith + Credit
- CP applies
Void Marriages
Marriage never legally existed if:
- Incest
- Bigamy
- Not lawfully contracted
Voidable Marriages
Marriage can be annulled if:
- Underage
- Unsound mind
- Fraud sufficient to defeat consent (e.g., concealed sterilization)
- Force or duress
- Incurable physical incapacity
- Bigamy where the prior spouse is presumed dead
Putative Spouse Doctrine
Innocent spouse protected from losing CP benefits in void/voidable marriage if she believed in good faith the marriage was valid.
SOP: totality of the circumstances
If both knew marriage was invalid: use estoppel for period during cohabitation.
Legal Spouse and Putative Spouse? Each get 1/4 of CP
Quasi Marital Property
All property that would have been considered CP or QCP if marriage re putative spouse was valid.
QMP is divided equally, the same as CP or QCP
Unmarried Cohabitants
- Distribution of property governed by K principles (during cohabitation)
- Express K enforced unless consideration was sexual services
- If no express K, court will examine conduct of parties for implied K or understanding
Note: if they get married, then contract law applies to pre-marriage and CP applies to post-marriage
Prenuptial Agreements
Requirements:
- In writing
- Signed by both parties
- Enforceable without consideration
Scope
- May alter property + ownership rights as well as spousal support
- May not impact child support or promote divorce (incentivize dissolution)
- Oral agreement enforceable if promissory estoppel/detrimental reliance
- Creditors w/ notice may be bound
Involuntary Prenup
To be voluntary, must satisfy all:
- Opposing spouse was represented by independent legal counsel or waived her right to independent legal counsel in separate writing
- At least 7 days elapsed between receiving prenup and having to sign
- If spouse was unrepresented by counsel, she was fully informed of the terms + basic effect of the agreement
- The agreement was not a product of duress, fraud, undue influence, or incapacity
- Court may consider any other relevant facts
Unconscionable Prenup
At the time the K was executed:
- Spouse lacked a full, fair, and reasonable disclosure of the property + obligations of other spouse
- Spouse did not waive disclosure in writing
- Spouse did not have, nor reasonably could have had, adequate knowledge of other spouse’s property or obligations
Unenforceable Spousal Support Provisions
- If she wasn’t represented by counsel at time of signing; OR
- At the time of enforcement, the provision was unconscionable.
Transmutations
To make change status of CP/SP:
- Be in writing
- Contain an express declaration by the adversely affected spouse that the characterization or ownership of asset is being changed.
Exception: Gifts of personal property between spouses don’t need to be in writing if:
- Gift is between spouses
- Gift is a tangible item for principal use of the donee spouse
- Gift isn’t substantial in value when considering the relative wealth of the couple
Separation Agreements
May resolve:
- Property issues
- Child support
- Spousal support
May not:
- Limit statutory obligations re child support
- Divest the court of jxn
Unenforceable Separation Agreements
Unenforceable if:
- Fraud that prevents spouse from obtaining info/evidence that could be used to defend herself in a lawsuit
- Mistake
- Breach of fiduciary duty to spouse
- Failure to disclose all relevant financial info to the other spouse
Negligence standard applies if negligence attributable to attorney
Special Community Property Presumption
At divorce, all jointly-held property is presumed CP:
- Joint tenancy
- Tenancy in common
- Tenancy by the entirety
SOP to rebut special CP presumption: clear + convincing evidence
Right to Reimbursement for SP Contributions
Spouse who contributes SP to jointly-held property can seek reimbursement for:
- Principal payments
- Capital improvements
- Down payments
Cannot be reimbursed for:
a. Maintenance
b. Insurance
c. Taxes
d. Interest
If CP rebutted, SP remains intact and acquires a pro-rata interest in property in proportion to the payment and purchase price
Special Presumption of Title at Death
Form of ownership on the title is presumed to be the nature of ownership interests of the spouses
SP example: If property is titled in only one spouse’s name + was purchased with SP, then the property is considered SP.
CP example: If property was held in joint tenancy, the surviving spouse takes the entire property as joint tenant
Rebuttable w/ clear + convincing evidence that both spouses didn’t intend to hold the property as stated in the title.
Joint Tenancy
- CA requires the words “joint tenancy” to create a JT
During marriage:
- Each spouse holds an undivided 1/2 interest and can unilaterally convey her interest without consent of other spouse
Upon divorce:
- A joint tenancy is subject to the Special CP Presumption
- Thus, the joint tenancy at divorce is CP
At death:
- The Special Presumption of Title applies, so surviving spouse takes entire property
Community Property w/ Right of Survivorship
- Married couples may hold title to community property w/ ROS
- CP w/ ROS must be expressly declared in title or deed
During marriage/upon divorce:
- CP interest severable like JT
Upon death:
- Surviving Spouse takes it
Tenants in Common
During marriage:
- Spouse holds an SP interest proportionate to her share
Upon divorce:
- Interest of TIC is subject to Special CP Presumption
Upon death:
- Special Presumption of Title applies and deceased spouse’s interest passes by will or if none, by intestacy
Title in One Spouse’s Name
- Title in purchasing spouse’s name along doesn’t rebut CP presumption (if acquired during marriage).
- During marriage, a spouse cannot make a gift of CP to himself without the other spouse’s consent.
Tip: to rebut CP presumption, trace the purchase to a SP source, or provide proof of valid agreement, gift, or inconsistent title.
Commingled Bank Accounts
Presumption: Bank accounts w/ SP + CP assets are presumed CP.
BOP: Spouse claiming SP may rebut the presumption of CP using “Direct Tracing” or “Indirect Tracing”
Direct Tracing
SP proponent must show that the source of the funds used to purchase the asset came from SP deposits in the account, not the CP deposits.
Elements:
- Sufficient SP funds were available at the time of the purchase; and
- Proponent intended to use SP funds to purchase the asset
Indirect Tracing (Exhaustion Method)
SP proponent must prove that CP funds were exhausted at the time due to paying for family expenses (food, clothing, housing, recreation).
Two presumptions apply:
- Family expenses are presumed to be paid w/ CP FUNDS FIRST, and then SP funds as needed
- SP funds used to pay family expenses are PRESUMED TO BE A GIFT to the community.
Educational Degrees + Licenses
Degrees + licenses acquired during marriage are NOT CP.
Right of Reimbursement to Community:
- If CP or QCP funds were used to pay for education or training; and
- Earning capacity was significantly improved
Reimbursable expenses:
- Books paid by CP
- Tuition paid by CP
Not reimbursable:
- Living expenses paid by CP
- If parties waived right of reimbursement in writing
Defenses of Educated Spouse
No need to reimburse community if:
- More than 10 years has elapsed since education was received and the community substantially benefited from the education
- CP was used to pay for other spouse’s education; or
- Education reduces the need for spousal support
Educational Loans
Community entitled to reimbursement if CP funds were used during marriage to repay loans for a degree or license obtained before marriage.
Upon divorce, any outstanding educational loans are assigned to the incurring spouse.
Tort Proceeds for Injury Before Marriage
- Personal injury proceeds are the SP of the victim spouse
- Tort proceeds may be used to reimburse CP or SP of non-victim spouse if such funds were used to pay for injury-related expenses
Tort Proceeds for Injury During Marriage
- Personal injury proceeds for a claim arising during marriage are CP
- Upon divorce, all proceeds are assigned to victim spouse unless:
a. Proceeds commingled w/ CP and are untraceable;
b. Proceeds have been spent; or
c. Justice requires awarding a portion to the non-victim spouse, but at least 1/2 of the proceeds must be assigned to injured spouse
Division of Tort Proceeds Upon Death
Tort proceeds for personal injury are characterized as CP at the death of either spouse.
Retirement Benefits
- Retirement benefits accrue during marriage
- Both vested + unvested pensions are CP
Time Rule:
If retirement benefits are based on # of years employed + partly earned before marriage:
CP takes a fractional share of retirement pension:
- Numerator= # of years employed while married
- Denominator= # of years under retirement plan
Federal Preemption for Government Pension Plans
- Community doesn’t have an interest in a pension plan governed by ERISA.
- Once federal benefit is paid out, CP applies
Retirement Benefits Where Spouse Not Yet Eligible
Court will apply one of two methods to determine CP share of retirement benefits at divorce:
- Division in kind. Court reserves jurisdiction to supervise payment upon retirement. The “time rule” will be applied to the known benefit in order to calculate the percentage paid to CP.
- Cash out: if present value can be ascertained, the non-participant is awarded cash or assets equal to the value of his CP share of the benefits.
Refusal to Retire:
- Spouse may assert right to receive retirement benefits if employee spouse is eligible to retire but chooses not to.
Stock Options
Considered CP if:
- Awarded by employer in lieu of compensation;
- Accrue during marriage (even if they aren’t exercisable until after divorce).
Time Rule:
CP takes a fractional share of stock:
- Numerator= # of years b/w when stock option was awarded + date of divorce
- Denominator= # of years b/w when stock option was awarded + time when it was available to be exercised
Considered SP if:
- Replacing earnings after divorce/separation
Disability Benefits
CP: If intended to replace martial earnings/retirement benefits.
SP: If intended to replace earnings after dissolution.
“The Goodwill” of CP Business
Treated like CP if creating during marriage
- Based on future biz expectation, name, and reputation of entity
- Generates income beyond labor of spouse and reasonable return on capital + physical assets
Valuation techniques:
- Expert testimony providing market sales valuation of goodwill
- Comparing biz in question to peer businesses to determine what excess earnings are attributable to goodwill
Severance Pay
CP: If structured like retirement benefits
SP: If meant to replace lost earnings after divorce/separation.
Whole Life Insurance
Divorce:
- CP in proportion to # of premium payments made w/ community funds
Death:
- Mixed Funds– CP in proportion to # of premium payments made w/ community funds
- Community Funds– 1/2 of proceeds to surviving spouse; 1/2 proceeds to 3P beneficiary (if someone other than surviving spouse).
Term Life Insurance (only covers risk of death)
Divorce
- Policy holds no value to CP because no investment component
Death
- Apportion community interest; or
- Look @ final premium payment to determine whether proceeds are SP or CP. If final payment paid w/ SP, then proceeds are SP. Vice-vera.
SP Business (Pereira Approach)
Logic: Community should get a favorable share of the SP business because its increase in value can be attributed to a spouse’s labor (CP).
Factors: spouse’s personal time, effort, character, energy, capacity, and salary paid.
Formula:
SP= value of SP biz @ marriage + (value @ marriage * fair rate of return [assume 10%] * years of marriage)
CP= FMV of SP biz @ divorce - SP
SP Business (Van Camp Approach)
Logic: Community should get a less favorable share of the SP biz because the primary reason for its increase in value is the character of the biz rather than spouse’s labor.
Factors: adequacy of compensation paid to SP spouse (high salary or large bonuses) implies that community has already been fairly compensated.
Formula:
CP= reasonable value of services provided during marriage - family expenses traceable to biz assets
SP= FMV of biz @ divorce - CP
Reverse Pereira (CP share of biz appreciation during separation)
CP= value of CP biz @ separation + (value @ separation * fair rate of return [assume 10%] * years separated) SP= FMV of biz @ divorce - CP
Reverse Van Camp (CP share of biz appreciation during separation)
SP= reasonable value of services during separation - salary already paid CP= FMV of biz @ divorce - CP
Credit Purchases + Loan Proceeds
When one or both spouses borrow money before/during marriage
During Marriage:
- Debt and property acquired are presumed to be CP when lender doesn’t rely primarily rely [or solely] on purchaser’s SP in extending credit.
Before Marriage:
- Debt and property acquired are SP.
- Pro rata apportionment: If CP funds are used to pay down an installment purchase made before marriage, the CP estate acquires “a pro-rata interest in proportion to the amount the principal is reduced by CP payments.”
- Not reimbursable: interest, tax, or insurance payments.
Capital Improvements (Real Property)
SP used to improve other’s spouse’s SP
- Spouse is entitled to reimbursement for contribution unless transmutation in writing or written waiver of right to reimbursement.
SP used to improve CP:
- SP spouse may claim reimbursement from community
CP used to improve SP:
- Community is entitled to reimbursement or enhanced value (whichever is greater)
Liabilities Generally
CP Liability
- Liable for any debt incurred by either spouse before or during marriage
- CP Liability ends upon separation
- Divorced/widowed spouse can request reimbursement for other spouse’s liabilities paid w/ CP (unless waived)– must exercise right within 3 years of date she has knowledge of debt satisfaction (or date of spouse’s death).
SP of a married spouse not liable for debt incurred by spouse.
Debts Before Marriage (Child Support + Spousal Support)
- SP of debtor spouse + CP are liable for debts incurred before marriage, including child + spousal support
- SP of non-debtor spouse isn’t liable for other spouse’s premarital debt
Exception
- Non-debtor spouse may shield her wages (CP) from recovery on these debts by placing her wages in a strictly SP bank account that blocks access to debtor spouse.
CP right of reimbursement for child + spousal support payments if:
- No waiver
- SP of debtor spouse was available to pay debt at the time payment from CP was made.
Debts During Marriage
Generally
- SP of debtor spouse and CP are liable for debts incurred during marriage
- SP of non-debtor spouse is not liable for debts of other spouse
Necessaries of Life Exception:
- Each spouse is personally liable (CP + SP) if:
1. Debt was incurred before separation
2. Debt was to pay for the necessaries of life– food, housing, clothing, and med care
Common Necessaries of Life Exception:
- Each spouse is personally liable (CP + SP) if:
1. Debt was incurred before divorce (not separation)
2. Debt was to pay for common necessaries of life– expenses required to sustain human life
SP Reimbursement:
- Non debtor spouse’s SP reimbursable if either CP or SP of debtor spouse was available @ time of payment
Allocating Debts @ Divorce
- Court assigns debts and liabilities
- Goal to ensure property is available to meet obligations of spouses
- Equal division rule–> CP debts divided equally.
Exceptions:
- If CP debts> CP assets, court may assign excess debt in its discretion, taking into account each party’s relative ability to pay
- Student loans are assigned to spouse who took out the loan
- Debts during marriage that were not for the benefit of the community are assigned to debtor spouse.
Tort Liability
If spouse commits tort during marriage, SP of tortfeasor spouse and CP are liable (see below for order of access)
CP Liable for SP
- If tort occurred during activity taken for benefit of community, then claim paid from CP and then SP of tortfeasor spouse.
- Ex: Car accident while buying groceries.
SP Liable Before CP
- If tort occurred during an activity not for the benefit of the community, then claim paid from SP of tortfeasor spouse and then CP.
Ex: Car accident while driving to mistress’s house.
Bank Accounts
If in one spouse’s name, access limited to that spouse
Gifts to Third Parties
Cannot gift CP dwelling, furniture, furnishings, or family clothing w/o written consent (note: can sell for reasonable value).
Remedy during marriage:
- Non-consenting spouse can ratify gift or revoke gift and sue to recover property
Remedy upon divorce/donor’s death:
- May ratify or void gift, but recovery against gift recipient will be limited to 1/2 CP share
CP Business Assets
- Managing spouse has primary management and control over biz
- Prior written notice to other spouse required before sale, lease, exchange, or encumbrance of all or substantially all of personal property used in biz
Remedy
- Sue for breach of fiduciary duty if managing spouse detrimentally impacted CP
Real Property
Requirements:
- Both spouses must sign any instrument where community real property is sold, conveyed, encumbered, or lease for a period of more than 1 year
Attorney Lien Exception:
- One spouse may encumber her interest in CP real property for payment of attorney’s fees for annulment, divorce, or separation proceedings
Titled Only in One Spouse’s Name?
- Transfer to BFP is presumed valid, but is subject to recovery of non consenting spouse (must refund BFP)
Remedies:
- During marriage, non consenting spouse has 1 year to void a transfer (and refund BFP) or may sue other spouse for breach of fid duty
- Upon divorce, recovery limited to renegade spouse’s 1/2 CP interest
Testate
- Each spouse has testamentary control over her SP + 1/2 of CP (QCP).
- Surviving spouse may receive non-probate xfers (JT/pension)
Surviving Spouse’s Election
If spouse’s will bequests a CP asset to 3rd party (passing 1/2 of surviving spouse’s CP interest in that asset), the
surviving spouse must choose between CP rights or rights under will.
CP w/ Right of Survivorship
- If asset so titled, then surviving spouse takes full title.
Intestate Succession
- CP: Surviving spouse inherits deceased spouse’s 1/2 interest in CP and QCP
- SP (see intestacy rules under Wills and Trusts)
