Property Categorization

Question 1

Essay Starter

Answer 1

1. California is a community property state
2. there is a community property presumption that all assets acquired during marriage are presumptively CP
3. There are several areas of SP: BREG

Question 1

Separate Property

Answer 1

• Owned/earned before marriage/DP
• Rents, issues and profits of SP
• acquired during marriage in exchange for SP (source rule and involves tracing property).
• acquired during marriage by gift, will, inheritance

Question 2

Community Property

Answer 2

• Salary or wages earned during marriage
• Income from community assets
  Presumption that all assets acquired during marriage are presumptively CP (absent agreement or title taken in form that overcomes presumption burden of proof on party contending SP)

Question 3

General Exceptions to CP Presumption

Answer 3

• Statutory Facts (SP was fruit of SP or can be traced to SP source)
• Agreement between parties
• Spouses knowingly took title jointly in form other than CP (joint tenancy along with collateral written agreement that property was not CIP)
• Title is held by person at death and marriage was terminated more than 4 years earlier

Need knowledge and consent of both spouses or presumption is not overcome.

Question 4

Marital Economic Community Timing

Answer 4

Begins at marriage/DP
Ends at death or date of separation (minimum unilateral intent not to resume marital relation AND conduct consitent with that intent).

Question 5

CP in Divorce

Answer 5

Divorce court has power to divide all CP and at the requset of either party jointly titled SP

Each spouse entitled to 1/2 interest in every community asset (in kind division)
Exception is **Economic Circumstances Exception **- non- pro rata division of community estate- give asset to spouse and cash out other spouse (family home.

Question 6

Statutory exceptions to CP division in Divorce

Answer 6

• misappropriation - spouses have fiduciary duties to the other, if one spouse deliberately misappropriates other spouses interest result in court award or offset against wrongdoers share of remaining property.
• Educational Debts - treated as separate and excluded from division
• Tort Liability - no based on activity for the benefit of community assigned without offset to tortfeasor spouse
• Personal Injury award is CP but on divorce awarded to injured spouse unless intersts of justice require (economic hardship)
• Negative Community - liabilities exceed assets - then ability to pay is considered (protect creditors)

Question 7

Setting Aside Community Property Distributions

Answer 7

• Court may relieve a party through mistake, inadvertence, surpise or excusable neglect if brought within 6 months After 6 months only external fraud or mistake)
• Family Code Relief - fraud and mistake
• actual fraud perjury or mistake - 1 year when it did or should have been discovered or 1 year of after entry of judgment
• duress based on mental incapacity - 2 yrs from entry of judgment
• failure to comply - 1 year of date from discovery and ct can impose money sanctions on non disclosure

Question 9

Unauthorized inter vivos gift of CP

Answer 9

• no inter vivos gifts of CP without written consent of Spouse
• if not voided during lifetime then treated as valid testamentary transfer of donor’s 1/2 of community property
  Exception for US savings bonds

Question 10

Testamentary Gifts of CP

Answer 10

can transfer 1/2 CP by will

“widow’s election” if in will then surviving spouse must elect either rights under will or CP rights. but if no clause then they can assert both CP rights and rights under the will if it would not upset the decedent’s testamentary plan.

Question 11

CP and Intestacy

Answer 11

CP and Quasi CP - suriving spouse gets their half and also decednt’s half.

Question 12

Acquisitions on Credit during marriage

Answer 12

Presumptively community credit but ultimately classified to primary intent of the lender (show that lender primarily relied on borrower’s SP in granting loand/extending credit).

Credit scores during a marriage are community property.

Question 13

Finduciary Duty to Spouse

Answer 13

If a spouse gains an advantage from transaction presumption of undue influence arises bc spouse has burden of proof to show they did not breach their fiduciary duty. Burden by preponderance of the evidence

Deliberate dissipation or destruction of property is actionably, grossly negligent and reckless investmetn of community funds is a breach of fiduciary duty.

Duty to account re CP reasonably necessary for exercise of spouses rights

Duty to secure consent for gifting, encumbering community personal property, selling/leasing/disposing of all personal property used in CP business or real property.

3 year SOL

Question 14

Premarital Agreements

Answer 14

• no consideration needed
• but must be in writing signed by both parties unless fully executed (actually performed promise) or by estoppel - promissee relied to their detriment. NOTE - parites cannot agree to limit child support.

Question 15

Premarital Agreements Unenforceable

Answer 15

**not voluntary **unless party was:
* rep’d by counsel or waived that in writing
* given at least 7 days to review and sign
* if unrepped- fully informed in writing of terms and basic effect of agreement and execute document declaring received this info.

**Unconscionable: **
* Spousal support - unenforcabe if - party not represented by independent legal counsel OR provision is unconscionable at time of enforcement
* Other Agreements - if unconscionable (matter of law for judge) when made and:
* full and fair disclosure of other party’s property or financial obligations was not made
* right to disclosure not waived in writing
* party challenging did not have adequate knowledge of other parties property/financial circumstances

Question 16

Marital Agreements

Answer 16

pre 1985 - oral okay
post 1985-
* in writing (exceptions do not apply and extrinsic evidence not admissible to interpret)
* expressly declare change in ownership of property being made
* have consent of spouse whose interest adversely affected.

Exception for personal gifts of insubstantial value

Question 17

Effect of how title is taken

Answer 17

Joint tenancy - 1/2 undivided interest with right of survivor ship but may partition
Tenancy in common - 1/2 undivided interest no right of survor ship
CP- 1/2 undivided interest no partition
Community property with right of Survivorship - at death vests in survivor.

Question 18

Taking Title in Joint and Equal Form

Answer 18

Lucas - presumptively CP, absent proof of an agreement that they were to have SP interest no separate ownership and no claim for reimbursement.

Death - Lucas is law.
Divorce -
Ownership: Presumptively CP but can be rebutted by express statement in deed or other instrument of title that property/portion thereof is SP OR written agreement that property/portion thereof is SP BUT
Reimbursment DIP- reimbursement without interest for contributions to Down Payment, Improvements or Princpal

Question 19

Installment Purchases

Answer 19

ex (Mortgage) if made before marriage and CP funds used to pay off the purchase during the marriage then proration rule applies then community establishes a proportional ownership interest to the extent that community payments reduce principal debt.

Appreciation is allocated to each estate’s ownership interest. (only to principal).

Question 20

Life Insurance

Answer 20

Term - no cash value only death during term - the estate that paid the most recent premium is owner of the policy.
Whole Life- proration rule applies to current cash value. if insured dies cash value before death apportioned to premiums paid and ownership determiend by final premium rule

Question 21

CP improving SP

Answer 21

Use CP to improve own SP –> reimbursement claim for greater of cost of improvement or enhanced value

Use CP to improve other’s SP –> spit of authority re whether an agreement is needed for reimbursement

Use SP to impove other’s SP –> contributing spouse entitled to reimbursement

Use SP to improve CP - anti Lucas in case of divorce and Lucas in case of Death.

Question 23

Commingled Bank Accounts

Answer 23

SP funds Mingled with CP funds do not transmute them to SP

Family Expense Presumption - expenditures for family expenses presumed to have been made with community funds to extent available

Gift to Community- absent reimbursment agreement, gift presumed when SP Funds used to pay for family expenses (no reimbursement)

To overcome presumptions use one of two accounting methods:
Exhaustion method - asset purchased community funds were alreaady exhausted by payment of family expenses
Direct Tracting - at purchase, separate funds available and spouse intended to use those to purchase SP asset (quick in quick out)

Must show each asset purchased with SP funds not just recapitulative accounting (fails to show CP funds exhausted).

Question 24

Business/investments owned before marriage greatly increases in value during marriage

Answer 24

**Pereria Accounting- **
* SP component consists of separate capital plus fair rate of return thereon (10%) x number of years of marriage. The remainder is CP
* (when spouses management was primary cause of growth or productivity of business - creative ideas, new techniques, long hours and modest salary)
* - PERSONAL SKILLS, Pay interest on SP and rest is CP.

Van Camp Accounting -
* Services of spouse who is working for business are valued using going market salary- family expenses paid from busines earning subtracted from that amount x number of years of marriage is CP, with the rest of the business SP
* Valuable Company, value of community labor and rest is CP

Question 25

Pension Benefits

Answer 25

vested and unvested are CP to extent that rights to benes are earned during marriage.

proration rule: numerator is years of employment while married and denominator is total years of employment before retirement.

Divorce: Can either get if and when recieved or cash out- awarding other assets of equal value.
Death: take or descendents take but if under ERISA no dead spouses take bc preemption

Question 26

Disability pay and Workers Comp

Answer 26

treated as wage replacement - classified when are received though not earned.

Question 27

Severance Pay

Answer 27

Split- some say SP bc replaces lots earnings, others say CP and earnedby employment during marriage

Question 28

Stock Options

Answer 28

if it vests during marriage then CP, if awarded during marriage but not exercisable until after marital community ended then portion considered CP is determined using proration rule based on primary intent of employeer in granting option - comp for past, future servicdes or both.

If Past –> Hug - numerator is years from date of employment to date economic community ends
denominator - years from date of employment until date options become exercisable. (multiplied by number of stock options.

If continued employement –> Nelson - numeragor is date options granted until economic community ends
denomonator years from date options are grante duntil they become exercisable.

Question 29

Goodwill

Answer 29

CP valued by market sales valuation or capitalization of past exess earnings
generally established via expert witness testimony

Question 30

Educational Expenses

Answer 30

Right of reimbursement when
* CP used to pay or to repay loan AND
* education or training substantially enhances earning capacity of party

Equitable defenses -
* community has already substantially benefitted from education (presumed if 10+ years elapsed_
* other spouse received community funded education
* need for spousal support reduced as result

Question 31

Tort Recovery/Liability

Answer 31

Tort feasor spouse then SP
3rd Party - cause of action arises when injury is inflicted and if cause of action arises during marriage recovery is CP
at divorce personal injury damages will be awarded entirely to injured spouse assuming it can be traced unless interest of jutice require otherwise
death treats it as CP

Not liable for spouses torts except if they woudl be liable regardless of marriage but CP is subject to tort liablity of either spouse.

if act for Community then CP first if solely for self then SP first

Question 32

Management Rules

Answer 32

quasi CP is SP for purspose of management and control

CP is equal management or control

Question 33

Quasi Community Property

Answer 33

non-CP state property acquisision while married then Quasi CP

At divorce - treated like CP
At death - non acquiring spouse survivor has 1/2 interest in D’s quasi CP
can restore illusory transfers if decedent reseverd right to income, right of survivorship, power to revoke etc.

creditors can reach quasi CP to satisfy debt incurred by other spouse.

Question 34

Quasi CP Foreign Real Property

Answer 34

Divorce - divided 50/50 - try to divide all CP and QCP in a way that avoids altering the nature of the ineterst if not possible then - requier parties to execute conveyances necessary to divide property or grant party who whould have beneiftied from the conveyance other CP that equals value of interst

Death- controlled by the law of the state in which it is located.

Question 35

Common law Marriage

Answer 35

not recognized by CA but does recognize cl marriage validly contracted in jurisdiction that continues to recognize them.

Question 36

Unmarried Cohabitants

Answer 36

treated under general contract priciples but cannot be based on sexual services

Putative spouse- subjective good faith belief that they are married.

if one spouse kne then look to estoppel