Community Property

Basic statutory definitions apply unless character of an asset has been altered by…

parties' agreement (premarital or during marriage), or parties' conduct, or how title was taken

Separate property is

property owned by either spouse before marriage; acquired during marriage by gift, will, inheritance; acquired during marriage with the expenditure of separate funds; income and capital gains from separate property (aka rents, issues and profits thereof)

Community property -

Property, other than separate property, acquired by either spouse during marriage.

Salaries or wages earned by either spouse are

community property

Income from community estates is

community property

Bonus paid by H's employer is

community property

Prize money by W on quiz show is

community property

Does CA law recognize TIE?

No

Does CA have an elective share statute?

No

All assets acquired during marriage are presumptively

community property

Burden of proof that a particular asset is separate property is…

on the party so contending, unless there's a showing of agreement or title was taken in a form that overcomes the community presumption

Does the community property system apply to domestic partnerships?

Yes

What kind of domestic partners may claim community property?

same sex couples and elderly opposite-sex couples receiving social security benefits

When does the economic community end?

Permanent physical separation, and one party must have intent not to resume the marital relationship

Whether there was an intent to resume the marital relationship is a question of

fact

Maintaining _______________ will destroy a showing of intent of either party not to resume the marital relationship

the façade of marriage

If community is not divided on divorce, the court retains

continuing jurisdiction to award CP that was not previously adjudicated - 50/50 unless interests of justice require unequal division

Community/separate status of royalty payments on a book are determined based on

status of relationship when the book was written

Generally, in a divorce, all community property is divided

equally

On divorce, disparity in earning power, etc., can be considered only as to

spousal support or child support

Generally, in a divorce, each and every community asset (and liability) must be divided

equally, unless economic circumstances warrant awarding certain assets wholly to one spouse (and each spouse ends up with 50% of all CP in terms of total economic value)

Examples where the economic circumstances exception applies

Family residence, and loss of the family home would uproot couple's minor children; all shares of a closely held corp. are CP and H/W is CEO; awarding of all H's pension to H, other assets to W, so they can go their separate ways

Statutory exceptions to the 50-50 on divorce rule that allow one spouse to end up with > 50% total value

One spouse misappropriates CP before or during divorce; one spouse has student loans; one spouse incurred tort liability not for benefit of community; personal injury award is CP, but on divorce is awarded to injured spouse (unless interests of justice require); "negative community" - community liabilities exceed assets - relative ability of spouses to pay debt is considered

What is the point of the "negative community" exception to the 50-50 divorce rule?

To protect creditors

Neither spouse can make a gift of community property without the other spouse's

written consent

If H gives CP away, W can

set gift aside in its entirety; in divorce, can take gift into account in making 50-50 division of state; after H's death, W can set aside gift as to her 1/2 CP, recovering either from giftee or H's estate

What rule applies if H makes 3d party beneficiary?

Same as if H gave CP and W finds out after death

What rule applies if H makes gift including federal savings bonds bought with CP?

Federal preemption governs, and W can't recover at all.

Testamentary power - spouse can devise ___ separate property, but only ____ of CP

100% of separate property, 1/2 of community property

A widow can't read the will …

selectively

The widow's election means

W must either accept the will or reject it - it's treated as an offer and acceptance by will

Funds borrowed during marriage, and goods purchased on credit during marriage are

presumptively on community credit (this is true in all CP states)

Borrowed funds and credit purchases during marriage are classified according to

primary intent of the lender (this applies only in CA)

One spouse's general standing in a community, or personal creditworthiness and reputation are

community property

If a loan taken out during marriage that is secured by a mortgage on separate property, the loan would be

separate property (probably - but primary intent of lender CONTROLS)

A grossly negligent and reckless investment of community funds is…

a breach of the spouse's fiduciary duty

Spouses are subject to __________ that arise from their confidential relationships

fiduciary relationships imposing a duty of the highest good faith and fair dealing with each other

If one spouse takes an advantage from a transaction,

a presumption of undue influence arises, and that spouse has the burden to show he didn't breach his fiduciary duty

What consideration is required for premarital/marriage agreements?

None

Can parties opt out of CP?

Yes, either as to particular assets or as to all acquisitions

When can spouses make an agreement to opt out of CP/SP characterizations?

Either before or during marriage (during marriage = transmutation)

Generally, a premarital agreement must be

in writing and signed by both parties

Exceptions to premarital agreement requirements:

Oral agreements suffice when agreement is executed (fully performed); estoppel based on detrimental reliance

Is marriage alone sufficient performance to take case out of the Statute of Frauds?

No - that would eliminate the writing requirement tin every case

What can take an oral premarital agreement out of the Statute of Frauds?

Conduct consistent with underlying contract, so that the contract was executed

What is the one thing a premarital agreement cannot determine?

It can't limit either party's obligation to furnish child support

What are the two defenses to enforcement of premarital obligations?

Not signed voluntarily; unconscionable

A premarital agreement shall be deemed not signed voluntarily, and thus is unenforceable unless court finds that party against whom enforcement is sought…

was represented by independent legal counsel when the agreement was signed, or waived independent counsel in writing AND was given at least 7 days to sign between (1) being presented with agreement and advised to seek legal counsel and (2) the signing, AND, if not represented by independent counsel was fully informed in writing (in a language in which party's proficient), of what's involved and what giving up. Party must execute document (1) declaring that he/she has received this info and (2) identifying who provided it.

A premarital agreement shall be deemed unconscionable, and thus unenforceable, if…

unconscionable when made, AND no fair/full disclosure of other party's property/financial obligations, right to disclosure was not waived in writing and party seeking to avoid enforcement had no adequate knowledge of the other party's property/financial obligations

Agreement waiving spousal support unenforceable on one of two grounds

No independent legal counsel when agreement was signed; unconscionable at time of enforcement, even if party was represented by independent legal counsel

Who determines whether an agreement is unconscionable?

The court - not the jury

A premarital agreement is unenforceable if its terms…

tend to promote divorce (but an agreement to pay W $100K in the event of divorce didn't violate that)

Marital agreements are also known as

transmutations

Before 1985, oral transmutations were

permitted

Beginning in 1985, transudations

must be in writing, signed by the spouse is adversely affected and must expressly state that a change in ownership is being made

The rule that transmutations must be in writing applies to convert

SP to CP, CP to SP, one spouse's SP into the other spouses SP by gift, except gifts of tangible property of a personal nature, which are not substantial in value taking into account the circumstances of the marriage

A statement in a will or revocable trust before death of the person who made the will is ____________ as evidence of a transmutation

inadmissible

Married Woman's Special Presumption

Where CP was used to take written title in a married woman's name before 1975, and the total didn't indicate CP or a JT was intended, the property is presumptively the wife's separate property

Is the Married Woman's Special Presumption rebuttable as against a 3d party BFP?

No

Is the Married Woman's Special Presumption rebuttable as between H&W?

Yes

Before 1975, if title is taken in the name of "Hobbies Gates and Winkle Gates," does the special presumption arise, and how is the property owned, and what happens on divorce?

H&W are TIC, 1/2 each. H's 1/2 is CP; W's 1/2 is SP; on divorce, W takes 75%

Married Woman's Special Presumption arises in what 3 situations?

Title taken in W's name alone before 1975 (property is W's SP), title in name of W and H before 1975 (not in JT form, not as "Husband and wife" or "Mr. and Mrs.") (property is 1/2 W's SP, 1/2 CP), Title in name of W and some third party before 1975 (W would be a tenant in common with 3d party).

What do I write if H bought property in 1990 in name of W?

"Since title was acquired after 1/1/1975, the Married Woman's Special Presumption does not apply."

What case involves re taking title in both spouses' names "in joint and equal form"?

Marriage of Lucas

When title is taken in joint and equal form, absent proof of an agreement that W was to have a SP interest, by taking title in CP form

W must have intended a gift to the community; without agreement, W has no separate ownership interest and has no claim for reimbursement

Anti-Lucas statute

Property acquired during marriage in joint and equal form is presumptively community property and is subject to 50-50 division in divorce, UNLESS express statement in deed, or written agreement by parties that prop is SP

Spouse who made post-1984 contributions of SP to acquisition or improvement of CP is entitled to reimbursement without interest for…

DIP - down payment, improvements, principal payments on mortgage (not interest, taxes, insurance, etc

What language allows title to be taken in joint and equal form?

H&W as husband and wife, or H&W, as joint tenants, or H&W as grantees

When can't an anti-Lucas statute apply to a transaction

When no title document is involved

When does the proration rule apply

To installment purchase before marriage, payment with CP funds after marriage, or during marriage W inherits land subject to mortgage, pays off note with CP funds

What is the buy proration rule?

The community estate takes a pro-rata portion of the property measured by the % principal debt reduction attributable to the expenditure of community funds

In the proration rule, CP component is measured by the amount of

principal debt reduction (not dollars spent, or payments of property taxes, mortgage interest, insurance premiums)

How do we classify ownership of life insurance policies?

Proration rule

How do we classify ownership of term insurance policies?

Last premium determines the character

If CP is used to improvement SP, does that affect the character of the property?

No, because of the fixtures doctrine

What are the rights of the community when C$ used to improve SP?

Community has a reimbursement claim for greater of cost or enhanced value

Does anti-Lucas statute apply when CP$ spent on SP?

NO! Only expenditures of SP$ on CP trigger anti-Lucas statutes

H can't use community funds to …

feather his nest

What happens when W uses community funds to feather her nests?

Circuit split: Presumption that use of CP$ was a presumption of gift (treated different from case of H); other cases have granted reimbursement

The mere fact that H's SP funds are commingled with CP funds does not transform or transmute SP into CP, BUT…

Burden of proof is on H to show that each asset was purchased with SP funds - i.e., that CP funds were unavailable when each asset was purchased

Family expense presumptions

It is presumed that expenditures for family expenses (food, housing, clothing, recreation etc.) were made with community funds (if available) even thought it is known that separate funds were also available

How to satisfy burden of proof that assets were purchased with SP funds?

Exhaustion method (that Community estate was exhausted, or direct tracing method (separate funds were available, and H's intent was to use SP funds to buy the asset)

When do anti-Lucas statutes apply to joint bank accounts?

NEVER - that's why we allow tracing.

When separately owned property owned before marriage greatly increases in value during the marriage, use these two cases

Pereira (personal skills and effort), Van Camp (Valuable company or asset)

Use Pereira when…

personal skills and effort are the main reason for increase in property value

Pereira favors…

community estate

The Pereira formula:

Pay simple interest (at legal rate - 10%/year) on value of SP at time of marriage; rest is CP

Van Camp favors…

separate property

Use Van Camp when

capital investment was the major factor , and spouse's skills and efforts were less of a factor. If spouse was paid substantial salary and drew large bonuses (i.e., community was handsomely compensated) , court may lean toward applying Van Camp

The Van Camp formula:

Value of spouse's services at market rates, subtract family expenses paid by community funds = community component; balance is SP

How to decide between Pereira and Van Camp (according to SCOTUS)?

Court may select whichever formula will achieve substantial justice between the parties. More important on the Bar to compare/contrast.

Marriage of Lucas held that

Taking title in a form that raised a presumption of community property was inconsistent with the idea that W intended to preserve a SP ownership interest; merely tracing a portion of the purchase price to W's SP did not by itself overcome the presumption of community property

Under Marriage of Lucas what will overcome the presumption of community property?

Proof of agreement only (not subjective intent)

Character of pension benefits earned before and during marriage is determined by what formula?

(Years service while married)/(total years employment to retirement)

What are options for award of pension benefits before eligibility for retirement, on divorce?

"When and if received" degree; cash out W by awarding other assets of equal value (if they exist); court can retain jx until pension kicks in (but courts won't want to do that - finality)

What are options for award of pension benefits on divorce, pre-retirement but post eligibility for retirement?

Wife is entitled to her share - husband's election not to retire can't defeat her right to the share of community property

Does nonparticipant spouse have devisable interest in a qualified (pension)plan if she predeceases the participant?

No - her interest terminated when she predeceases the participant. Why? Federal preemption.

Disability retirement payments and workers' compensation benefits are treated as…

wage replacement - so they are classified when received, not when earned

If disability retirement payments and workers' compensation benefits are received post-divorce they are treated as

post-divorce earnings

Severance pay is treated as either…

separate property (replacing lost earnings), or community property (from collective bargaining agreement, earned by employee during marriage)

If H can elect between regular retirement/disability, and H chooses disability, does W have CP interest?

Yes, because H cannot elect to defeat W's CP interest

Spouses have _____________ interest in a military retirement plan

a community property interest - unless it's a military disability, in which case federal preemption applies and it's separate property

With stock options, the proration formula depends on…

the primary intent of the employer in granting the option

If divorce court determines that options were rewarded to reward H for past services, as a form of deferred compensation, the formula for determining proration is:

(Years/months from date of employment to date economic community ends)/(Years from date of employment to date options become exercisable)

If divorce court determines that options were awarded primarily to encourage H to stay with the company, the formula for determining proration is:

(Years/months from date options are granted to date economic community ended)/(Years/months from date options are granted to date options become exercisable)

Is goodwill of a professional practice (to the extent acquired during marriage) community property subject to division on divorce?

Yes

What is goodwill ?

Qualities that generate income beyond that that deprived from professional's return on labor and reasonable return on capital and physical assets - it's the factor that raises the expectation of continued patronage

How is goodwill valued?

Hire an expert witness, or capitalization of excess earnings

An agreement that puts a cap on goodwill in a p/s for purposes of division on divorce…

is a factor, but nonconclusive

Is a professional degree property that is subject to division on divorce?

No, but spouse is entitled to reimbursement of cost of education of the cost of the education if the education enhanced other spouse's earnings capacity - reimbursement includes payments on GSL loan

Defenses to reimbursement of community estate for education al expenses

Community has already substantially benefited from the earnings of the educated spouse. If more than 10 years have elapsed since the decree was awarded, presumption is that the community has substantially benefited, meaning that unless presumption is rebutted no reimbursement; or, if other spouse also received a CP funded education

Is there reimbursement for GSL /other educational loans?

These are assigned solely to H

When other spouse was tortfeasor, entire recovery is

SP - otherwise tortfeasor would benefit from wrongful act

When 3d party was tortfeasor, entire recovery is

CP, but In property division on divorce or legal separation, it will be awarded entirely to injured spouse as long as it can be traced and has not been expended - unless interest of justice require otherwise (eg., only community asset); on death, it's treated as CP

When spouse is tortfeasor against 3d party…

community estate is subject to tort liability of either spouse. If sopuse was performing an act for the benefit of the community, first CP, then SP; otherwise, liability satisfied first out of SP, then out of CP; judgment creditor cannot reach non-tortfeasor spouse's SP

Equal management powers - exceptions

Business exception spouse who operates a business interest that is all/substantially all community personal property has primary managmenet and control of the business), personal belongings exception (one spouse cannot sell/encumber personal property used in family dwelling (furniture, furnishings, etc.) or clothing without written consent of the other sopuse. Transaction is voidable by the other spouse at any time (no statute of limitations)

In any conveyance of CP real property…

joinder of both spouses.

If one spouse conveys CP real property wihtout permission of the other spouse…

Other spouse can waive; 1-year statute of limitations; if purchaser knew/should've known that spouse was married, NO statute of limitations

Can a spouse transfer/encumber her one-half interest in community property?

No, except for family law attorney's real property lien (lien to pay family lawyer in a divorce)

Can CP be reached in satisfaction of a community-obligation debt?

Yes

Can community property be reached if debt was incurred by H before marriage to W?

Yes, unless unearnings of nondebtor spouse are placed in a separate account in which the other spouse has no right of withdrawal) and not commingled with other CP funds

Are spousal/child support obligations from prior marriage treated as CP?

Yes, unless more general exceptions apply

Can W's SP be reached in satisfaction of H's $30K medical bill?

Yes, W is liable and SP available b ecause of W's \duty to support - but if CP is available, W can be reimbursed

Each spouse has the duty …

to support the other spouse an dminor children of the marriage) -

Can W's SP be reached in satisfaction of H's $30K medical bill if, when the hospitalization occurred, W&H had separated and the economic community had ended??

Yes - they are still spouses, still subject to duty to support

In a spousal debt situation, whether tort or contract, is quasi-community property treated the same as true?

Yes

After a divorce, a creditor cannot reach CP awarded to a spouse, unless that spouse…

the spouse incurred the debt and so is personally liable for it, or the spouse was assigned the debt by the court

Quasi-community property is…

property acquired while a couple was domiciled in a non-community property state, which would have been classified as community property had it been acquired under the same circumstances in CA

On divorce, quasi-CP is treated as…

true CP - divided 50-50.

On divorce, "foreign" real property is…

quasi-CP - subject to 50-50 division

On acquiring spouse's death, quasi-CP is treated as…

true CP - acquiring spouse can only devise 1/2

On acquiring spouse's death, "foreign" real property is…

controlled by "foreign" state law under situs rule, so it passes to decedent under will

On non-acquiring spouse's death, is quasi-community property devisable/descendable?

No. Quasi-community property doesn't give non-acquiring spouse an ownership interest - it just protects her fron disinheritance

Why doesn't the quasi-community property statute give the non-acquiring spouse an ownership interest?

That would be unconstitutional - you don't lose property rights by moving from one state to another

When spouses move from one CP state to another, property becomes?

No change - it remains CP

When does CA recognize common law marriage?

Only when validly contracted in another state (probably Texas)

Property rights for people living together outside marriage are governed by…

contract law (express or implied from conduct) - as long as the contract is not based 100% on sexual services

What is a putative spouse?

Someone with an objectively reasonable and good faith belief that she was married

What are the assets acquired by a mean guy and a putative spouse called?

Quasi-marital property

How is quasi-marital property divided?

50-50

Can a putative arrangement arise when one partner thinks he has a registered domestic partnership agreement?

Yes, he'd be a putative domestic partner

What is the status of people who live together knowing they're unmarried?

Absent a Marvin Agreement (contract express or implied), each takes what they brought in