Community Property Outline PDF

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1) Overview a) Definitions: i) COMMUNITY PROPERTY: Assets owned in common by husband and wife as a result of its being acquired during the marriage by means other than an inheritance or a gift to one spouse, each spouse generally holding a one-half interest in the property. (1) Caveats: (a) CP is property obtained while domiciled in California (b) Title in one name does not negate CP (c) Both parties have equal right to management (except in testamentary) ii) SEPARATE PROPERTY: Property that a spouse owned before marriage, or acquired during marriage by inheritance by a gift from a third part. (1) Caveats: (a) Property purchased with SP remains SP. (b) Minority – separate propriety begins after separation agreement and beginning to live apart, or after divorce proceeding begin (c) Rebuttal is by a preponderance (51%) of the evidence iii) COMMINGLED PROPERTY: Property having one character mixed with property of a different character. Can involved any mixture of CP with SP, SP of one spouse with SP of another spouse, and standard CP with CP from a personal injury suit. (1) Caveats: (a) All comingled property is traced to inception of title. (b) When it is impossible to identify characters of property, transmuted to CP and corresponding presumption applies (c) Apportionment is required when commingling occurs, that is separating the property to proportional ownership shares that can be identified (pension) iv) QUASI-COMMUNITY PROPERTY: Property that is acquired by a spouse during a marriage while domiciled in another state b) Presumption of CP: i) PRESUMPTION RULE: Proof of acquisition during marriages gives rise to the presumption that the property is CP. (1) Applies to debts as well (2) EXCEPTION (a) Rebuttal to the presumptions include property traces to SP, person who cares must show by the preponderance of the evidence. ii) TITLE PRESUMPTION RULE: When an asset is acquired during marriage and titled in one spouse’s name only, the unnamed spouse obtains an equitable ownership in the acquisition. That is, it is a CP asset owned by both spouses (1) Presumption applies at dissolution (2) EXCEPTION (a) Rebuttal to the presumption is (1) a clear statement in the deed that it is SP, or (2) proof that the parties have made enforceable written agreement that the property is SP c) Altering Presumption of CP:

i)

PREMARITAL AGREEMENT: Prospective spouses may execute premarital agreements that include SP clauses. (1) Example SP Clauses (a) Assets or streams of assets remain SP (b) SP inventory that will not transmute (c) Provide that certain asset is SP upon dissolution (pet) ii) TRANSMUTATION: A change in character of property that takes place during marriage. Spouses may change property from SP to CP, CP to SP, or from SP of one to SP of another. 2) Acquiring Property: a) via Labor Rules i) ONEROUS ACQUISITION RULE: The result of labor, industry, or bargained for exchanged expended during the marriage is CP. Ex: earnings, salary, bonuses, adverse possession, etc. b) via Gift Rules i) LUCRATIVE ACQUISITION RULE: The result of gratuity or a windfall received during marriage is SP. Ex: things acquired from estate, NOT cash by presumption. ii) WEDDING GIFT RULE: Before marriage, an engagement or wedding gift is received as individuals SP, not as spouses CP. (1) Third party gifts are irrevocable (unless conditioned on marriage) (2) Inter spousal gifts are considered personal property that is redefined as SP at marriage between parties (a) Revocable if gift was under assumption marriage would happen and the receiving party (1) refuses to enter marriage as contemplated or (2) is released by mutual consent. iii) LOTTERY WINNING RULE: Lottery winnings are not onerous, but are subject to tracing of the funds used in the betting. Therefore, if the gambled monies stem from CP, the winnings are CP. 3) Dissolution of a Marital Relationship a) SEPARATE AND APART RULE: The earnings of accumulation of a spouse while living separate and apart from the other spouse are the separate property of the spouse. i) Current test in CA: (1) The spouse has expressed to the other spouse his or her intent to end the marriage (in exam’s the statement has to be in quotes) (2) The conduct of the spouse is consistent with his or her intent to end the marriage b) DEGREE RULE: When a marriage dissolves, only the educated spouse walks away from the marriage with a property right to the human capital that an income-enhance degree represents (1) DEGREE REIMBURSEMENT RULE: The COMMUNITY (not the person) can seek reimbursement for community contributions to education of a party that substantially enhances the earning capability of the party (a) Includes: Tuition, fees, books, repayments of loans. (b) EXCEPTION: (i) If community has substantially benefitted from the education reimbursement is limited. Rule of thumb, 10 years prior to divorce.

c) DEFERRED COMPENSATION RULE: When a marriage dissolves, the deferred compensation earned is characterized by the employees marital status during the period which the compensation was earned. Ex: IRA, 401k, pension. i) Pension note. Generally found based on time, can take other methods based on ratios, points, etc. 4) Joint Title Forms a) California allows spouses to hold property as: i) Joint Tenants with Right of Survivorship ii) Tenants in Common iii) Community Property iv) Community Property with Right of Survivorship Title Notes

Interests Undivided, ½ interest

Transfers Alienable, devisable, descendible

JT with RoS

Ambiguous title is TiC

Transfer severs to TiC

CP

No title = CP

Undivided, 1/n interest ½ for spouses Spouse has Undivided, ½ interest Spouse has Undivided, ½ interest

TIC

CP with Ros

Devisable to 3rd, trans. revocable to 12 mo Devisable to 3rd, trans. revocable to 12 mo

Dissolution TiC Property presumed to be CP JT Property presumed to be CP CP is presumed CP CP with RoS is presumed CP

Death TiC property is concurrently held SP JT property is concurrently held SP. Survivor takes title by RoS CP is CP Intestacy? descend to surviving spouse CP with RoS is CP. At death, surviving spouse takes title

5) Commingled Bank Accounts a) Basics: i) All sums on deposit are presumed to be net CP contributions ii) Net SP character contributions are owned as net SP deposits once proven iii) A commingled account includes net contributions of different character that are maintained b) Types of Bank Accounts i) SOLE ACCOUNT: An account which only one person that can access the money. CP deposited into a sole account is still CP. ii) JOINT ACCOUNT: An account which multiple parties can access and control the money. iii) JOINT ACCOUNT with RoS: Default account that incorporates right of survivorship. iv) JOINT ACCOUNT without RoS: Analogous to tenancy in common. At death, each party’s interest in the account passes according to the contract or estate. v) JOINT ACCOUNT by Spouses with ROS unchangeable by will: Basic CP account with right of survivorship vi) JOINT ACCOUNT by Spouses with ROS designated as CP account: Default CP account under CAMPAL c) Titling for Bank Accounts i) If married, all monies in an account are presumed to be CP regardless of title. ii) Surviving spouse retains all testamentary rights to CP account at death. (1) Exceptions

(a) Bank account agreement expressly says otherwise (b) The spouses describe account as CP with the right of survivorship in the account agreement d) REBUTTING THE CP PRESUMPTION RULE: A party can rebut the presumption of SP if: (i) the sums on deposit can be traced to SP, OR (ii) there is an express written agreement separated from the deposit agreement indicating its SP. Burden of proof is clean and convincing. i) BY EXHAUSTION RULE: On date of purchase, the CP sums on deposit were exhausted (such that only remaining monies were SP). (1) Requirements: (a) Track the character of deposits and withdrawals, as they are made. (b) Keep a balance of SP and CP sums on deposit including family expenses (c) Specific to individual disputed items ii) BY DIRECT TRACING: Direct tracing to SP with declaration of intent (1) Requirements: (a) On date of purchase, both CP and SP sums were sufficient for purchase (b) SP proponent declared intention in writing separate from instrument to use SP (c) Immediately after the amount was withdrawn from SP (d) Record prepared in anticipation are disallowed iii) Standards: (1) CP Presumption: (a) You get the property (b) Preponderance required – strict records (2) CAMPAL (a) You get the money (b) Clear and convincing required – strict records iv) EXCEPTION: (1) Family expenses: Spouses have a duty to support each other, and that includes family support. If CP funds are insufficient for family expenses, SP funds are liable. E.g., food, housing, clothing, medical costs, recreation. 6) CP Contributions to SP Assets a) STANDARD TRACING RULES: i) Community Property

CPcontributions ¿ CP%=¿ purchase Purchase Price ii) Separate Property

SP contributions ¿ SP %=¿ purchase Purchase Price iii) (SP Contributions to CP assets): At dissolution, the SP contributor to a CP asset is reimbursed for the SP contributors contribution without interest or appreciation. b) AUFMUTH TRACING RULE: For purchases on credit during marriage i) Fact pattern for exam: (1) Existence of marriage

(2) A purchase on credit (3) Commingling of SP and CP fund sources ii) Community Property

CPcontributions ¿ CP%=¿ purchase Purchase Price iii) Separate Property

CPcontributions ¿ SP %=¿ purchase Purchase Price iv) Appreciation: Fair Market Value at divorce less Purchase Price (1) Funds adhere to the percentages above c) MOORE TRACING RULE: For purchases on credit slightly before the marriage i) Fact pattern for exam: (1) SP down payment (2) SP loan. (3) Property purchased shortly before marriage (4) CP contribution to principal of loan. (5) Dissolution of marriage ii) Community Property

CPcontributions ¿ CP%=¿ principal Hitoric Purchase Price iii) Separate Property

SP %=

SP down payment +(SP loanvalue−CPcontributions ) Hitoric Purchase Price

iv) Appreciation: Fair Market Value at divorce less the Historic Purchase Price (1) Funds adhere to percentages above d) LENDER’S INTENT RULE: Used to rebut CP presumption for borrowed funds. If the lender intended to rely solely on a spouse’s SP in extending a loan, then the loan is property characterized as a SP loan. If unsure, the presumption to CP applies. e) MARSDEN TRACING RULE: Same as Moore, but accounts for pre-marriage appreciation i) Fact pattern for exam: (1) SP down payment (2) SP loan (3) Property purchased further from marriage. (4) Property value appreciates before marriage, and the SP proponent can provide an appraisal report dated on or near the date of marriage (5) CP contributions to loan principal (6) Dissolution of marriage ii) Community Property

CPcontributions ¿ CP%=¿ principal Hitoric Purchase Price

iii) Separate Property

SP %=

f)

SP down payment +(SP loanvalue−CPcontributions ) Hitoric Purchase Price

iv) Equity: SP contributions to house before marriage v) Appreciation: Fair Market Value at marriage less the Historic Purchase Price (1) Must have proof of FMV at marriage CP Improvements to SP Property i) Non-gift rule: Non-owning spouse consensual use of CP to improve SP is not a gift ii) Capital improvement rule: If the improvement is a capital improvement (e.g., increases FMV), the CP estate is entitled to an equitable ownership interest in the property iii) Non-capital improvement rule: If the improvement is a non-capital improvement, the CP estate is entitled to reimbursement for its contributions

7) SP Businesses and CP a) Analytical Process i) SP claimant has burden that business is SP ii) Community can show that community labor contributed to more than minimal effort to the growth of the business value during marriage. iii) Apply either Pereira Method or Van Camp Method to further substantial justice between the parties. b) PERERIA SP BUSINESS RULE: The growth of the business is attributable to CP labor. i) Fair Markey Value @ Dissolution – (Fair Market Value @ Marriage + Fair Rate of Return) = CP excess profits (1) Fair rate of return = Principal x interest x time (2) 10% usually applies unless instructed otherwise c) VAN CAMP SP BUSINESS RULE: The growth of the business is not attributable to CP labor. i) Fair Market Value @ Dissolution – (Labor – Family Expenses) = SP (1) Labor = Annual benchmark salary x years (2) Expenses = Annual expenses x years OUTLINE MISSING LAST HALF OF LECTURE 6 8) Premarital Agreements a) PREMARITAL AGREEMENT RULE: In a CP system there is a presumption of CP for all property onerously acquired during marriage. However, spouses retain the contractual right to enter into a premarital agreement to opt out of that system, either on an asset-by-asset basis or for all the property that they acquire before or during marriage. i) PMA FORMALITIES: W.NC.P. (1) All premarital agreements and other marital property agreements ‘shall be in writing and signed by both parties.’ (2) Consideration is not a required element for enforceability. (3) Finally, proxies cannot enter into a premarital agreement (e.g., parents, cultural agents) on behalf of one or both parties. ii) SUPPORT WAIVER RULE: Premarital agreements that were executed on or after January 1, 2002 may waive post-divorce spousal support. There are independent counsel, conscionability, and non-justiciability requirements.

(1) INDEPENDENT COUNSEL: the party waiving spousal support must be represented by separate and independent counsel for the agreement (2) CONSCIONABLE: At enforcement, the party against whom enforcement is sought can present evidences that the waiver is unconscionable (3) JUSTICABILITY: Court can choose to not enforce a post-divorce spousal support waiver on voluntariness grounds. This is especially the case when the parties have a documented history of abuse on or near the execution date of the premarital agreement. iii) PMA MALLEABILITY: PMAs are malleable throughout the marriage in several circumstances: (1) AMENDABLE: During marriage, a PMA may be amended or revoked so long at the same formalities are followed. (2) CONDITIONS: In an original PMA, parties can agree about trigger conditions for amendment or revocation. Can include a date after which the PMA is ineffective iv) PMA Permissible subject matter – “quantifiable” (1) Any subject matter not in violation of public policy of statute imposing criminal penalty (2) Rights and obligations over acquired property. (3) Management and control of property (4) Disposal procedure at separation, dissolution, or death of spouse. (5) Property disposal in the event of windfall contingency, or business process. (6) Wills and trusts (7) Life insurance (8) Choice of law v) PMA Non-permissible subject matter – “non-quantifiable” (1) Dictating religion (2) Sexual performance for financial support (3) Money for virginity (4) Lump sums on divorce (5) Child support, custody, visitation, etc. (6) Waiving support during marriage, good faith during marriage (7) Terms supporting dissolution (8) Unconscionable at the end of marriage provisions b) Defenses to Enforcement i) ENFORCEMENT RULE: Enforceable premarital agreements are based on fair disclosure and are entered into voluntarily. When a proponent produces a premarital agreement that satisfies the basic formalities, the burden of proof shifts to the opponent to prove that the agreement (as a document) is either unconscionable or involuntary. (1) UNCONSCIONABLE PMA: A PMA is unconscionable if, before execution, all of the following applies to the party against whom enforcement is sought: (a) There was no full disclosure, (b) No express wavier to right of disclosure (c) Inadequate knowledge of property final obligations of the party attempting to enforce. (2) INVOLUNTARY PMA: A premarital agreement was coerced UNLESS the court finds the following, with the burden of proof on the party against whom enforcement is sought:

(a) Independent counsel represented the party against whom enforcement was sought at time of signing, or written waiver. (b) Seven calendar days between presentation of agreement and signing (c) No evidence of foul play including duress, fraud, undue influence or incapacity (d) No other facts that raise question of voluntariness (e) Non-translation (3) EQUITABLE ESTOPPEL: One can assert the affirmative defense of equitable estoppel alleging good-faith reliance on a misleading representation and an injury or detrimental change in position resulting from that reliance, where the reliance was on the PMA. (a) Changing circumstances: condition of spouses pre-marriage is vastly different than where they are at dissolution, enforcement in current circumstances would be nonequitable. (b) Reliance: entering into a marriage based on an oral agreement (e.g., give me the house, you move, we marry) c) Transmutation i) TRANSMUTATION RULE: Transmutation is a change in the character of property that takes place during marriage. Spouses can change the character of property from SP to CP, CP to SP, or from SP of one spouse to the SP of the other spouse. (1) Requirements: (a) SIGNED: Transmutations must be in writing and demonstrate an express declaration that the character of property will be changed, and signed by the spouse whose interest in the property is adversely affected. (i) Express Declaration: A valid express declaration is an unambiguous statement of present intent to change the character of the asset in question. (b) NO UNFAIR ADVANTAGE: Spouses have a fiduciary duty to one another of good faith and fair dealing, and neither spouse may take unfair advantage of the other. (i) In bargained for exchanges only raised if there is proof that the benefitted spouse took advantage (ii) In gratuitous exchanges: the presumption of undue influence is raised in favor of adversely affected spouse, i.e., the benefitted spouse got something for nothing. (c) MUTUAL CONSENT: Both spouses must agree to the same thing in the same sense. (d) VOLUTARINESS: Spouses must freely agree after full and fair disclosure. (2) Property Requirements: same as above AND (a) Signing only needs to be adversely affected grantor (b) The effective date is the signing date (c) Real estate rules apply d) Interspousal Gifts i) INTERSPOUSAL GIFT RULE: Gifts of tangible property between spouses are exempt from written formality requirements for transmutation in two circumstances: (1) The gifts is a tangible article of a personal nature that is usable solely or principally by the receiving spouse (e.g., clothing, wearing apparel, jewelry, NOT cars, cash, real property) AND (2) The gift is not substantial in value taking into account the circumstances of the marriage.

9) Domestic Violence in CP a) INTERSPOUSAL TORT RULE: Interspousal tort claims may be pursued during marriage, independent of a dissolution proceeding or consolidated with appending dissolution. They may also be pursued after a final judgement. i) STATUTE OF LIMITATIONS: ISTs must be filed within three years from the date of the last act of domestic violence, or within three years from the date the plaintiff discovers or reasonably should have discovered that an injury or illness resulted from the IST actions. ii) Damages: Typical for tort damages. Liable spouse can be assessed general, special, or punitive damages. The injured party is also entitled to equitable relief, an injunction, costs, or any other relief that deemed proper. iii) DAMAGES: The torfeasors SP is marshalled first. CP cannot be used without the written consent of the injured spouse, and only at the discretion of the judge. b) Protective Orders i) EMERGENCY PROTECTIVE ORDER: An EPO can be requested by a police officer if there is an immediate and present danger of abuse, abduction, or stalking, with the purpose of preventing future acts of abuse, abduction, or stalking. These are very restrictive. ii) TEMPORARY RESTRAINING ORDER: One spouse may request a TRO ...