Special Community Property Classifications

Question 1

Personal Injury during marriage

Answer 1

Any money received as a result of the injury is community property when received during the marriage.

Question 2

Personal injury after marriage or separation

Answer 2

The money received for personal injury are assigned to the injured spouse, unless the interests of justice require otherwise.

Question 3

Personal injury after legal separation, dissolution, or while the injured spouse was living separate from the other spouse

Answer 3

Any money received is the separate property of the injured spouse.

Question 4

Person injury reimbursement is allowed

Answer 4

The community or separate property of the non-injured spouse is entitled to reimbursement from the separate money received by the injured spouse for any expenses on behalf of the injured spouse.

Question 5

Personal injury liability for injury to other spouse

Answer 5

The separate property of the tortfeasor spouse must be exhausted before community property may be used to discharge the liability for an injury to one spouse caused by the other spouse.

Question 6

Community Property treatment for Pension Plans

Answer 6

Pension plans (and other forms of retirement) earned during marriage are CP regardless of when the pension is fully vested.

Question 7

Reservation of jurisdiction approach for Pension Plans

Answer 7

Approach is used where the court reserves jurisdiction over the case until the employed spouse retires and then apportions the retirement between each spouse

Question 8

Election for the “Reservation of Jurisdiction” approach to Pension Plans

Answer 8

Election: The nonemployed spouse can elect to receive their share of the pension at the earliest time that the employed spouse could retire.

Question 9

Time rule for the “Reservation of Jurisdiction” approach to Pension Plans

Answer 9

Time Rule: The CP percentage of the pension is calculated by dividing the number of years when the spouses were married, but before separation, while the pension was earned by the total number of years that the employed spouse earned the pension.

Question 10

“Cash Out” Approach for Pensions in Community Property Jurisdiction

Answer 10

Is where the court assigns the entire pension to the employed spouse and awards other community assets, equal in value to the community interest in the retirement benefits, to the nonemployed spouse.

Question 11

Disability and Worker’s compensation in Community Property State

Answer 11

The classification of disability pay as SP or CP depends on what it was intended to replace, regardless of when it is actually paid.
SP: If disability pay is intended to replace the spouse’s retirement income after separation or dissolution
CP: If the disability pay was purchased with CP funds and intended at the time the premium was paid to provide retirement income to the community

Question 12

Severance Pay in Community Property State

Answer 12

is treated similarly to disability pay and a court will look at when the severance pay accrued and what it replaces.
SP: if it is intended to compensate lost future earnings after separation or dissolution
CP: if it replaces earned retirement benefits from when the couple was married or enhances the retirement during marriage.

Question 13

Bonuses in Community Property State

Answer 13

are classified based on when they are earned rather than when they are paid.
SP: If a bonus is earned after separation or dissolution
CP: If a bonus is earned during marriage

Question 14

Education/training in a Community Property State

Answer 14

is not a community asset/debt unless there was a written agreement to the contrary.
Reimbursement: The community is entitled to reimbursement for community contributions that substantially enhanced the earning capacity of the party, with interest, accruing from the end of the calendar year in which the contributions were made.

Question 15

Reduction/Modification of Education/training Reimbursement

Answer 15

1. The community already substantially benefitted from the education which is presumed after ten years
2. The education is offset by the education received by the other spouse; or
3. The education reduced the need for spousal support

Question 16

Whole Life Insurance in Community Property State

Answer 16

Each estate (CP & SP) has an interest to the extent that they paid the premiums
CP interest = amount CP contributed/ total contributed
SP interest = amount SP contributed/ total contributed
Multiply the SP and CP percentage interest by total amount of insurance to determine their respective amounts.

Question 17

Term Life Insurance in Community Property State

Answer 17

Estate paying premium on last term controls: The term policy is CP or SP depending on which estate paid the premium for the latest term.

Question 18

Devise of CP life insurance

Answer 18

To the extent the life insurance policy is CP, the decedent can only devise one-half to a beneficiary other than their spouse, without written consent from spouse

Question 19

Business Goodwill

Answer 19

is the expectation of continued public patronage that stems from the built up value of one’s business beyond the value of capital stock, funds, or property

Question 20

Professional Practice Business Goodwill in CP State

Answer 20

When a professional practice benefits from goodwill during the marriage, a court will account to the community share of the goodwill possessed during the marriage

Question 21

Excess Earnings for Business Goodwill

Answer 21

The excess earnings method can be used to determine the value of the goodwill by deducting a fair return for business, determining the professional’s annual net earnings and deducting the earnings of a similarly situated professional and then capitalizing the excess earnings over the period of the marriage.

Question 22

Preemption for Community Property Issues

Answer 22

Federal Law preempts state law when specific types of income or liabilities are designated as the sole property of one spouse under federal law, but they otherwise would be community property under state law.