Property Acquired on Credit, Capital Improvements and Debt Liability Flashcards
What happens when CP is used to improve SP?
Although the characterization of the SP does not change into CP, the CP estate has the right/interest to the greater of either:*
1) Complete reimbursement of contributions
2) A pro rata interest in the enhanced value of the SP
Does the CP estate have an interest in SP if its used to make mortgage payments?
Yes! Entitled to complete reimbursement or a pro rata interest in the increased value, whichever is bigger!
Debt Liability of Marital Property
The general rule is that the community estate (which includes CP and quasi-CP) is liable for debts incurred by either spouse before or during the marriage.
It does not matter which spouse controls the community property or whether one or both spouses incurred the debt
When is a spouses’ SP liable for debts?
1) Liable for debts incurred by said spouse before or during marriage
2) NOT liable for debts incurred by other spouse before or during the marriage.
What are some example’s of debt?
1) Contract
2) Tort
3) Mortgage
etc
When does a debt occur?
A debt is incurred at the time the contract is made, the tort occurs, or an obligation arises.
What are a spouses tort obligations?
The community estate is subject to the tort liability of either spouse depending on the nature of the tortfeasor’s actions at the time of the tort.
When is CP used for a spouse’s tort obligations when they were the tortfeasor?
1) If the tortfeasor was acting for the benefit of the community (e.g., taking the couple’s children to school), then liability is first satisfied from the community estate and then from the tortfeasor’s SP.
2) If the tortfeasor was not acting for the benefit of the community (e.g., driving to a mistress’s house), then liability is first satisfied from the tortfeasor’s SP and then from the community estate.
ESSAY TIP: Is a non-tortfeasor’s spouse SP ever liable for a tortfeasor’s spouse tort obligations?
NO!
What happens when SP is used to improve CP?
After 1984, a spouse is entitled to reimbursement for funds expended if they can trace the contribution to a SP source.
What is a Necessaries of Life in the context of debt, and how does it affect SP/CP property?
A married person is liable for debt incurred for common necessaries of life. This means that all spouse’s property, CP or SP, is liable for the debts.
This includes spouses that are permanently separated at the time of the debt.
Includes:
- Living costs
- Food
- Clothing
- Shelter
- Medical expenses
How do you determine the character of personal injury settlements?
Depends on when the cause of action arose!
During Marriage: CP!
Before or After Marriage: SP
NOT WHEN THE SETTLEMENT IS AWARDED!
How are personal injury settlements divided **at divorce?
Upon divorce, personal injury settlements are assigned entirely to the injured spouse so long as they have not been commingled with community funds and the interests of justice do not require otherwise
Does not apply if the parties are permanently separated!
