Pg 7

Question 1

When real property enhances in value during the course of the marriage, what are the two different ways that this can happen?

Answer 1

Either in relation to mortgage payments or improvements to the property

Question 2

What happens with mortgage payments when the value of real property increased during the marriage?

Answer 2

The actual character of the mortgage payments must be determined
– if CP was used to make payments on an SP loan
– if SP was used to make payments on an SP loan
– if SP was used to make payments on an SP loan of the other spouse

Question 3

What happens when CP was used to make payments on an SP mortgage and the property increased in value during the marriage?

Answer 3

The Moore Rule: CP acquires a pro rata ownership interest in the property.

Interest, taxes, and insurance are not included in the apportionment because they do not increase the equity value. This only applies when the loan is secured by a purchase money mortgage

Question 4

How do you calculate the CP interest in property when CP was used to make payments on an SP loan?

Answer 4

Divide the CP contribution by the purchase price. That percentage is the share that is attributable to the community. To calculate appreciation, subtract the purchase price of the property from the fair market value at divorce and multiply the percentage of ownership interest by the amount of appreciation.

Ie:

1. buy property for $100,000. $20,000 of CP is used to reduce the principal. On divorce, the property is worth $140,000. Divide the CP contribution by the purchase price at acquisition to get the percent that is attributable to the community. $20,000 divided by $100,000 = 20%.
2. Next, to calculate appreciation of the property, subtract the purchase price at acquisition from the market value at divorce. $140,000 -$100,000 = $40,000 appreciation
3. Multiply the percentage of ownership interest by the amount of appreciation. $40,000 times .2 = $8000
4. Add together the CP principal payments and the share of appreciation = total CP interest in the property. $20,000 plus $8000 = $28,000
5. Divide the CP interest in half for each spouse’s share. $28,000/2 = $14,000 each.
6. The rest, including the part of the loan that isn’t yet paid, is considered to be SP. $140,000 -$20,000 = $120,000 SP

Question 5

How do you discuss on an essay the calculation of the CP interest when CP was used to make payments on an SP loan?

Answer 5

“Subsequent actions may alter the character of the property based on source. Under California law, any earnings that are acquired during the marriage are CP. When one spouse pays off a mortgage with funds from her salary during the marriage, that is using CP on an SP loan, and it creates a CP interest in the property.“

Question 6

What happens when the SP of one spouse is used to make payments on a CP mortgage?

Answer 6

No ownership interest is given to the SP contributor spouse. There’s no possibility of reimbursement of any interest payments on the mortgage, taxes, or insurance, but the SP spouse can get reimbursement of the principal payments made from his funds.

Ie: H uses $20,000 of his SP inheritance money to pay down a CP mortgage on the family home. On divorce, if he can trace the $20,000 to his SP, he can get reimbursement for anything that was used to pay the principal. He cannot be reimbursed for interest, taxes, or insurance

Question 7

What happens when the SP of one spouse is used to make payments on an SP mortgage of another spouse?

Answer 7

The Lucas gift presumption says that it is presumed to be a gift. If there was a contrary agreement, then it is not presumed to be a gift, and the paying spouse can get reimbursement of the SP funds that were used to reduce the principal. The reimbursement can only be for principal, not for interest, taxes, or insurance

Question 8

What happens when money is spent to improve an existing piece of real property and the value of the property goes up during the marriage?

Answer 8

It depends on where the money came from. Ie: was it CP money improving an SP property, SP money improving a CP property, or one spouse’s SP improving another spouse’s SP?

Question 9

What happens when CP is used to improve an SP property?

Answer 9

The community is entitled to reimbursement for the amount of CP funds that were used for the improvement, 0R the increased value of the property because of the improvement, whichever is biggest

The reasoning is that the law of fixtures says when real property is improved, the improvement takes on the same character as the underlying property, so the community does not acquire an ownership interest in the SP.

Question 10

What was the old rule that applied to using CP funds to improve an SP property?

Answer 10

That it was a gift presumption unless there was an agreement to the contrary

Question 11

If during a marriage a wife inherits real property that is worth $100,000 undeveloped, that is SP. If the wife uses $10,000 from her earnings to put a cabin on the land, that is CP. on divorce, if the land is worth $125,000, what does the community get?

Answer 11

Reimbursement either for the $10,000 of CP funds that were used for the improvement, or the $25,000 increase in value. Likely the $25,000, so each spouse will get 12.5K, but the land continues to be the wife’s SP

Question 12

What happens if SP is used to improve a CP property?

Answer 12

SP spouse can get reimbursement of his funds

Question 13

What happens when one spouse’s SP is used to improve another spouse’s SP real property?

Answer 13

The Lucas gift presumption applies unless there’s an agreement to the contrary, 0R straight reimbursement is given for the money that was spent, but not appreciated value

Question 14

What is a transmutation?

Answer 14

An agreement between prospective spouses or spouses during the marriage that changes the characterization of the property owned by one or both spouses.

Ie: CP to SP, SP to CP, H’s SP to wife’s SP, etc.

Question 15

Can a statement in a will be admissible on divorce as evidence of a transmutation?

Answer 15

No. A will does not satisfy the writing requirement for transmutation because for divorce both parties are alive and a will only speaks on death.

Question 16

If an agreement regarding transmutation is oral, can you use extrinsic evidence to show it was a transmutation agreement?

Answer 16

No

Question 17

What is a transmutation that happens before marriage?

Answer 17

A premarital agreement.

Question 18

What is a premarital agreement or a transmutation that happens before marriage?

Answer 18

This is between prospective spouses that are contemplating marriage before they actually enter the marriage. It must be executed by the signing of both parties, it is effective upon marriage, but it is not enforced until dissolution of the marriage by divorce or death.

Question 19

What are the elements that are required for a premarital agreement?

Answer 19

• counsel: the party that enforcement is sought against must have been represented by counsel at the time that the agreement was signed, or the party must have expressly waived representation in a separate writing after being advised to get counsel.
• seven days: the party that enforcement is sought against must have had at least seven days between the time the agreement was first presented and the time it was signed.

Question 20

What happens if the elements are not met for a premarital agreement?

Answer 20

Then it is held that the premarital agreement was not voluntarily entered into

Question 21

People that marry in California can choose to opt out of California’s community property rules by doing what?

Answer 21

Agree to alter their marital property rights through a premarital agreement that creates its own property system

Question 22

What are the two issues that come up with premarital agreements?

Answer 22

– SOF

– unenforceable contracts because of public policy or unconscionability

Question 23

What is required under the SOF for a premarital agreement?

Answer 23

Premarital agreements that are made on or after January 1 of 1986 must be in writing and signed by both parties to be enforceable.

Question 24

What are the exceptions that allow oral premarital agreements to be enforceable?

Answer 24

– fully executed agreements or full performance: if the promise was oral, but one party fully performed his side, the courts will look at the conduct as evidence that the oral promise was made to prove the existence of the promise
- doctrine of estoppel: the promisor will be estopped from using SOF because the promisee detrimentally relied on the oral promise

Question 25

When would a premarital agreement be unenforceable because it is against public policy?

Answer 25

It is OK to limit or waive spousal support, or even to contemplate dissolution at the time that the marital agreement is made, but if the agreement by its terms encourages or promotes divorce by creating an incentive for the parties to divorce, then it is unenforceable or void as against public policy.

Ie: agreement that gives the wife money only on divorce encourages divorce. Also you can contract not to have children, but you cannot contract not to pay child support if you do have children