California Community Property

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Flashcards for the final exam

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Timeline Topics Parties, Property Characterization, Rebuttable Presumptions, Apportionment/Reimbursement
Theories of Community Property (1) Partnership/contract model; (2) Presumed intent; (3) Spousal protection
Definition of Community Property Except as otherwise provided by statue, all property, real or personal, wherever situated, acquired by a married person during the marriage while domiciled in this state is community property.
Quasi-Community Property Quasi-community property is property acquired outside of a community property state by migrating couples. It only applies if the parties have become domiciled in a community property state and subsequently file for divorce.
Statutory Exclusions Property acquired before marriage; property acquired by gift, bequest, devise, or descent.
Gift, Bequest, Devise A gift is made during the marriage. A bequest is personal property given to somebody through a will (i.e., a testamentary gift of personal property). A devise is a gift of real property under a will. These are not community property because the title is lucrative, not onerous. For gifts there has to be intent, delivery, and acceptance.
General Presumptions All property acquired before marriage is separate property. All property acquired during marriage is community property.
Standard of Proof When a particular acquisition falls within the scope of CA Family Code Section § 760 it is presumed to be community property. The burden then falls on the separate property proponent to rebut the statutory presumption by a preponderance of the evidence. The burden of proof is to persuade an unprejudiced mind that there is evidence sufficient to defeat the naked presumption. If not, the court must uphold the presumption as a “true presumption.”
Ways to Rebut the General Presumptions (1) transmutation; (2) tracing; (3) statutory exclusions; (4) special presumptions; (5) contractual modification.
Rebutting the Presumption in Commingling Cases In commingling cases, there are 2 established methods for rebutting the community property presumption and carrying the burden of proof to show property purchased during marriage was separate: (1) tracing the purchase to a separate property source, and (2) proving that at the time of purchase all community income was exhausted by family expenses.
Transmutation Transmutation is triggered by subsequent events that make you think the characterization of property has changed. Pre-1985: Low threshold—valid unless involuntary and unconscionable; Post-1985: High threshold—writing, consent to detriment, and express declaration of change in character.
Personal Property Exceptions to Transmutation Requirements Transmutations apply not only to real property but also to personal property EXCEPT gifts of clothing, jewelry, and other tangible articles of personal nature and not substantial in value taking into account the circumstances of the marriage.
Substantial Gifts When a gift is given to one spouse from the other and its value is substantial, taking into account the circumstances of the marriage, the property will not be considered that gifted spouse’s separate property unless there is an express declaration (not a gift card) transmuting the property from community to separate.
Undercutting the General Presumption The weight should not change due to length of marriage, the presumption is just easier to rebut.
The Close of a Long Marriage invokes Presumption Instead of using the date of when the property was acquired, the court uses evidence of possession at the close of a long marriage. For Estate of Jolly, that is sufficient to give rise to the community property presumption that can only be overcome by clear and satisfactory proof that the property in question is separate property. Note: Jx split.
Tracing The general community property presumption applies to assets acquired during marriage that are UNTITLED or titled in the purchasing spouse’s name ONLY, and it rebuts by tracing to a separate property source of funds for the acquisition. Thus, tracing is a doctrine of probability that looks backwards in time to determine the likely ownership of property.
Indirect Tracing may be too weak to rebut the Presumption Despite few community funds, the presumption can trump contradictory evidence. This is a question for the trial judge.
Preponderance of the Evidence Standard The evidence code states that except as otherwise provided by law, the burden of proof requires proof by a preponderance of the evidence. When only money or property is at stake, no higher burden of proof is required.
Settlement Payments The compromise of a right which is a separate property interest yields separate property.
Onerous Title Earnings of property attributable to or acquired as a result of labor, skill, and effort of a spouse during marriage are community property. Thus, if it is a gift in form, but in recognition of services, it is still community property.
Property Acquired while living Separate and Apart from the Other Spouse The earnings and accumulations of a spouse and the minor children living with, or in the custody of, the spouse, while living separate and apart from the other spouse, are the separate property of the spouse. (Note: This is a statutory exception that trumps the general presumption.)
Living Separate & Apart: Objective Standard During the period that spouses preserve the benefits of marriage, their earnings are community property.
Living Separate & Apart: Subjective Standard If both parties subjectively agree the relationship is over, physical separation may not be necessary.
Date-Of-Separation Test Threshold: Subjectively, the parties agree to have a complete and final break with no intention to resume the marriage. If not—one party may unilaterally terminate if (1) conduct clearly conveys to the spouse (2) his/her intent of final break (3) consistently. If intent and actions are too inconsistent to put the spouse on notice, the court uses objective standard.
Married Woman’s Property Acquisition Statute Any property acquired by (1) a married woman (2) titled in her name alone, is presumed to be separate property, (3) if acquired pre-1975. Rebuttable, but not by tracing, because pre-1975, husbands were the sole property managers.
Low Threshold to Rebut the Married Woman’s Separate Property Presumption When determining the intent of the donor, declarations, by an alleged donor made either before or after the transfer of the property, are admissible and such declarations need not have been made in the presence of the adverse party.
Property conveyed by Third Party with Knowledge and Consent of Husband is Presumed Separate Property When the language is explicit, parol evidence is inadmissible, and the presumption may only be rebutted by wrongful conduct or mistake. E.g., Husband asks his dad to sell the house lot to his wife for $100 in community funds under her name “as her separate property” in case he dies at work.
High Threshold to Rebut the Married Woman’s Separate Property Presumption A separate property presumption applies to property acquired by a married woman prior to 1975 by an instrument in writing, but it is rebuttable (as to all except bona fide purchasers) by clear and convincing evidence of management.
Rebutting the Married Woman's Separate Property Presumption by Acquiring Title as "Husband and Wife" If acquired by husband and wife by an instrument in which they are described as husband and wife, the presumption is that the property is the community of the husband and wife, unless a different intention is expressed in the instruments. (Otherwise, the wife will argue that it is her separate and the husband’s property is community property.)
Abolishment of the Married Woman's Separate Property Presumption Post 1975, the married woman’s statutory presumption is abolished. However, the transfer of property to a Wife as her separate property could still be important for intent. Between 1975 and 1985, for example, the language can indicate transmutation occurred b/c the standard was easier. Post 1985, however, there is a higher standard for transmutation.
Evolution of Form of Title/Joint Tenancy Presumption No parol evidence, no hidden/secret intent, rebuttable by extrinsic evidence, rebuttable by any agreement (written, oral, or an inferred understanding by conduct of the parties), single family residence is presumed to be a community property upon divorce (rebuttable by any agreement), Anti-Lucas statutes retroactively broaden presumption to cover all joint ownership (rebuttable by writing only).
Lovetro Standard (1965) Property acquired as joint tenants may be shown to actually be community property or the separate property of one spouse according to the intention, understanding, or agreement of the parties: (1) Purchased with community property, (2) treated as marital property, and (3) unaware of the consequences of JT.
Single Family Residence (1965) For the purposes of the division of property upon DIVORCE, there is a statutory presumption that a single family residence acquired as joint tenants during the marriage is community property, overcome only by showing an agreement or understanding to the contrary.
Anti-Lucas Statutes (1984) Post 1984: All property taken jointly, for purposes of DIVORCE, will be presumed to be community property. Rebuttable by (1) a clear statement in deed or other documentary evidence of title; or (2) proof of a written agreement.
Anti-Lucas Retroactivity Unconstitutional where pre-1984 agreement created a vested separate property interest. Requiring a written agreement to rebut the presumption would constitute a de facto taking by depriving a person of a vested property right without due process.
Form of Title Presumption at DEATH For the purpose of determining the character of real property upon the death of a spouse, there is a rebuttable presumption that the character of the property is as set forth in the deed. The hidden intention of one spouse to sever a joint tenancy does not constitute an agreement and does not rebut the presumption.
Overlap btwn Divorce Proceedings and Death Divorce severs joint tenancy absent clear & convincing evidence of contrary intent. However, divorce is a personal action that does not survive the death of a party. When there is an overlap between divorce proceedings and death, the divorce proceedings end and the property is governed under the death presumption of joint tenancy.
Property Acquired during Marriage Terminated by Dissolution more than Four Years Prior to Death The community property presumption does not apply to a person at death if the marriage during which the property was acquired ended by divorce more than four years prior to his/her death.
Community Property with Right of Survivorship Effective July 1, 2001, the legislature enacted a new form of title creating a hybrid form of joint tenancy and community property in California for probate avoidance AND a double step up in basis (i.e., both spouses’ shares get stepped up in basis to FMV on date of one’s death.) CPWROS rebuts general presumption with signed/initialed statement on the face of the document by the grantees.
Premarital Agreement For premarital agreements executed after January 1, 2002, the Act provides that a premarital agreement will not be enforceable if: (1) The agreement was not made voluntarily; (2) The agreement is unconscionable and the disclosure requirements of the Act were not met; or (3) The agreement violates public policy.
Premarital Agreement: Voluntary Requirements The party seeking enforcement must prove: (1) 7 days between notice and execution; AND (2) represented by independent legal counsel or expressly waived in writing; AND (3) if not represented, the individual was fully informed of the terms and basic effect of the agreement as well as the rights and obligations given up. No presumption of undue influence arises in the context of a premarital agreement because unmarried persons do not owe fiduciary duties to each other (Bonds).
Premarital Agreement: Disclosure Requirements The party resisting enforcement of the agreement must prove: procedural/substantive unconscionability AND no full disclosure, no waiver in writing of the full disclosure, and no actual/constructive knowledge of extent of other party’s property and financial obligations.
Putative Spouse A putative spouse has a good faith belief that there is a valid marriage. Proper assertion of putative spouse status must rest on (subjective, personal) facts that would cause an (objective, reasonable) person to harbor this good faith belief. A solemnization ceremony is a major factor in determining whether there was a good faith belief in valid marriage.
Quasi-Marital Property (Divorce Only) Quasi-marital property is property that would have been classified as community property if the marital union had not been void or voidable. A good faith belief in the validity of the marriage relationship is a requisite to operation of the quasi-marital property system, including spousal support. It is an equitable doctrine that applies to dissolution only.
Putative Spouse at DEATH A putative spouse is treated like a legal spouse at death and is entitled to succeed to a share of the decedent’s separate property. Note: Surviving spouse’s take depends on state. If community property state, then the putative spouse receives 100% of the decedent’s half. If separate, then 100% if no issue, 50% if child, 33% if more.
Putative Spouse AND Legal Spouse At death, if there is no other spouse, the putative spouse gets the same rights. If there is another spouse then evaluate the property from both perspectives; if equitable, split equally between legal and putative spouse.
Domestic Partnership Act Registered domestic partners shall have the same rights, protections, benefits, duties, etc. as spouses (e.g., community property). The law applied retroactively; opt-out provision prevented “takings.”
Putative Register Domestic Partner The Domestic Partnership Act provides that it must be construed liberally to give registered domestic partners the same rights and obligations as married couples. Thus, a person with a reasonable, good faith belief in the validity of his or her registered domestic partnership is similarly entitled to protection as a putative registered domestic partner.
Cohabitants Cohabitants do not qualify as putative spouses but may have a contractual claim: (1) express (oral or written); (2) implied in fact (conduct); or (3) implied at law (unjust enrichment theory).
Intangible Property Goodwill (i.e., customer base, reputation, and proprietary knowledge) is usually community property. Degrees are not. However, student debt is allocated to the student spouse, and educational/training expenses are reimbursed to the non-student spouse.
Reimbursement for Education/Training Community contributions to education/training or repayment of their loans which substantially enhance earnings of the student spouse are reimbursable if the community did not substantially benefit from enhancement. There is a rebuttable presumption that the community has not substantially benefited from community contributions made less than 10 years before the commencement of the divorce proceeding.
Non-Student Reimbursement vs. Spousal Support Reimbursement is limited to educational expenses, but when awarding spousal support, a court may consider the totality of one spouse’s contribution to the other spouse’s attainment of a degree, including contributions for ordinary living expenses.
Professional Practice The spouse maintains a community property interest in the value of the practice of the other spouse, even if acquired before marriage because the practice acquired most of its value during the marriage from labor, skill, and effort. The professional practice includes four variables: (1) fixed assets, (2) accounts receivable, (3) the goodwill of the practitioner, and (4) liabilities.
Whole Life Insurance Cash surrender value and death benefits are community property if the proceeds were paid with community funds. If paid with separate property and community property, the amount of cash value or benefits is apportioned.
Term Life Insurance No cash value; only coverage. Community property if purchased with such. Apportioned if purchased with both. Employer benefits are community property, but a term life insurance policy with no community property payments toward that period of coverage has a jx split. Majority approach says the coverage for that term is separate property.
Evolution of Term Life Insurance Policy (1) Lorenz: The benefits of term life insurance are not divisible because they have no value until payable; (2) Gonzales: Discount on premiums based on past community property payments make discount community; (3) Logan: If insured becomes uninsurable during community paid period, right to renew is community asset; (4) Spengler: If the insured becomes uninsurable during the marriage, the right to renewal is not community after dissolution. The community received the full benefit of its bargain—continued coverage during marriage.
Employer Offered Group Term Life Insurance A benefit contingent on continued employment may or may not be property, depending on whether it is a contract right or a mere expectancy. Without an enforceable right to renewal, there is no property subject to division.
Quasi-Community Property at DEATH The dead spouse cannot invoke quasi-community property because she does not need spousal protection. These statutes apply on the death of the acquiring spouse and can only be invoked by the survivor. (Note: you cannot claim an elective share in any community property asset.)
Division of Real Property Outside CA Technically, California cannot change title to real property in another state, so other funds will be allocated to create equitable division of the assets. (Conveyances are discretionary.)
Commingled Funds Commingling refers to the combining of community and separate funds into a common pool. Rebuttable by tracing. Characterization is a question of fact for the trial judge.
Commingled Funds: Direct Tracing The spouse seeking to establish the separate character of a portion of the funds may rebut the general presumption by directly tracing that portion of the funds to a separate property source. Requires (1) availability of separate funds at time of acquisition; (2) that were actually withdrawn; (3) with the intent to acquire a separate property asset.
Commingled Funds: Indirect Tracing Indirect tracing is aided by the judicial presumption that family expenses are paid from community funds. If it can be established that at the time of the disputed acquisition, the community funds in the account had been exhausted by community expenses, then the balance in the account at the time the property was purchased was necessarily separate. Recapitulation requires (1) adequate records (2) to establish the balance of community income and expenditures.
Business Profits If business operations continue during marriage, it becomes a commingled community asset and must be apportioned. Courts examine the primary factors of the appreciation of the business, i.e., labor, skill, and effort, or good investment.
Business Profits Approach When the separate property capital investment is the most significant factor determining business growth, then the approach yielding the largest separate property gain should be chosen. When the increase in value during marriage was primarily due to a spouse’s efforts, the court should apply whichever approach will yield the greatest community gain.
Pereira Formula Where one spouse during marriage renders substantial community services to his separate property, the amount of the income, profits, etc. generated thereby which he will be entitled to retain as his separate property is equal to the amount of his original capital outlay for such separate property times a reasonable rate of return (i.e., “PeReiRa” rate is 7% in the absence of evidence establishing some other figure).
Van Camp Formula Under the Van Camp formula, reimbursement is based on the difference between its fair market value and the value of the community labor (i.e., reasonable value of those services) less family expenses.
Reverse Pereira Apportionment When you want the bulk of the profits to go to the laborer, use the reverse Pereira apportionment. The community property should be valued as near to the date of trial as reasonably practicable to get a fair rate of return. For a sole proprietorship, use the date of separation because the appreciation is largely the result of the operating spouses’ skill, labor, and effort, rather than the business’ capital assets.
Presumed Reimbursement for Contribution of Separate Property Contributions to the acquisition of the property include down payments, payments for improvements, and payments that reduce the loan but not payments of interest on the loan or payments made for maintenance, insurance, or taxation. There’s no reapportionment of the appreciation. Note: This presumption may be waived or modified by written agreement.
Community Contributions to Improvement of Separate Property Asset Absent an agreement to the contrary, the use of community funds to improve the separate property of one spouse does not alter the character of the separate property; however, the community is entitled to reimbursement.
Separate Contributions to Improvement of Separate Property 2004: Legislative amendment mandates reimbursement absent waiver.
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