Community Property - Basic Presumptions
California is a CP state . Al property acquired during marriage is presumed CP. All property acquired before marriage or after permanent separation is presumed to be SP. In addition, all property acquired by gift, devise, or bequest is presumed to be SP.
In order to determine the character of any asset, courts will trace back to the source of funds used to acquired the asset. A mere change in form of an asset does not change its characterization.
QCP Rule Statement
QCP is property acquired by either spouse while domiciled in a non-community property state that would have been CP had the spouses been domiciled in CA at the time of the acquisition. At divorce, QCP is treated as though it were CP. [Note re domicile of marriage, death, etc.]
A putative spouse is not lawfully married, but has a good-faith belief based on objectively reasonable grounds that she is lawfully married. Once she learns that her marriage is invalid, she no longer accrues putative property rights. In California, a putative spouse is treated as a legal spouse and takes according to quasi-marital property principles.
Pereira is used when the W/H's management was the primary cause of the business' growth. The SP consists of the manager's capital plus a fair rate of return for each year (the usual legal rate is 10%). The remainder is CP.
VC is applied when the character of the business was the primary cause of the growth. Under VC, the manager's services are valued at the going market salary for the position. The amount of family expenses that were paid from the business earnings are then subtracted. The remainder, if any, represents the community portion of the business. The remainder is SP.
Equitable right of reimbursement for educational expenses paid from CP if the education substantially enhanced spouse's earning capacity, UNLESS 10 years passed since degree (rebuttable presumption the community already benefitted) or spouse not in need of support after divorce
Married Woman's Special Presumption
Before 1975, if CP was used to take written title in a married woman's name, and the title did not indicate that CP or JT was intended, the property was presumptively the wife's SP (gift). NOT rebuttable against third-party BFP; IS rebuttable between H & W.
Trap: if taken in name of both H & W with no reference to marital status, it's a TIC, with H's ½ CP and W/s ½ her SP.
Personal Injury Awards
Personal injury awards and settlements are CP if the cause of action arose during marriage. Of the COA arose before or after permanent separation, then award or settlement is SP of the injured spouse. Personal injury awards against the other spouse are always SP of the injured spouse. Upon divorce, CP personal injury awards are assigned entirely to the injured spouse so long as they have not commingled and the interests of justice do not require otherwise.
Disability Pay & Worker's Comp
Disability benefits, including worker's comp benefits, are characterized as SP or CP depending on the wages they are designed to replace. Payments received during marriage are CP because they are designed to replace marital earnings. Also, payments received before marriage and after permanent separation are SP because they are designed to replace separate property earnings.
Retirement benefits are CP if earned during the course of marriage. When retirement benefits are earned both during and after and/or before marriage, then the courts will apply the TIME RULE to determine how much of the retirement benefits are CP and SP. The community's share is calculated by determining the number of years the retirement benefits were earned while married divided by the total number of years the retirement benefits were earned.
If a form of compensation earned during course of marriage, community has the right to share in their value.
Marriage of Hug or Marriage of Nelson (q.v.)
Marriage of Hug
Marriage of Hug: deferred compensation proration formula. CP = years from date of employment to date of separation / years from date of employment to date options exercisable
Marriage of Nelson
Marriage of Nelson: incentive to stay proration formula. CP = years from date options are granted to date economic community ends / years from date options granted to date options become exercisable
CP if compensation, SP if "gift" from employer.
Goodwill of a Professional Practice
Qualities that generate income beyond labor and reasonable return on capital and physical assets. CP subject to division on divorce.
Severance Pay After Divorce [SPLIT]
SP because replace lost earnings, vs. CP because result of collective bargaining agreement and therefore earned by employment during marriage
Jointly Titled Property
All property held by the spouses in joint form is presumptively CP for the purpose of distribution at divorce or legal separation. (Anti-Lucas statute, FC § 2581) (For other purposes, the form of title rebuts the community presumption.) The presumption can be overcome with a collateral written agreement or statement of some sort in the documentary evidence of title.
Reimbursement on Division on Divorce/Sep'n
For purposes of division on divorce or legal separation, spouse who made contributions of SP to the acquisition or contributions to Down payment, Improvements, or Principal payments on mortgage (DIP). BUT NO reimbursement for SP used to pay interest on mortgage, insurance, or maintenance.
Installment Purchase Before Marriage, Debt Paid Down with CP
Proration rule: community estate takes a pro rata portion of the property, measured by the percentage of principal debt reduction attributable to the expenditure of community funds.
CP used to Improve Spouse 1's SP
"Feathering Own Nest." Spouse 2 can claim reimbursement for community: the greater of the CP expenditure OR the increase in value of Spouse 2's SP as a result of the improvement
NB: Anti-Lucas statute does NOT apply (reverse situation)
CP Used to Improve Other Spouse's SP [SPLIT]
No reimbursement: rebuttable presumption of gift
Reimbursement: no presumption of gift
Commingled Bank Accounts
NO recapitulation. Must either (1) Show exhaustion of CP at all times / for each asset, or (2) Direct tracing (quick in, quick out)
Spousal transformation of character of property. Prior to Jan 1, 1985, oral agreements as well as donative acts inferred from one or both parties' behavior to transmute property were allowed. After that date, transmutations must be evidenced by an express declaration in writing that is signed or accepted by the spouse whose interest is adversely affected. However, there is an exception for personal gifts of relatively insubstantial value.
Reimbursement for Payment of Other Spouse's Debts (3)
One spouse may seek reimbursement against the other in the following situations: (1) When CP is applied to satisfy child support or spousal support claims arising out of a prior relationship and the debtor spouse had SP available to pay the debt; (2) when one spouse's SP was applied to debts incurred by the other spouse for necessaries and the debtor spouse had SP or CP available to pay the debt; and (3) when the order of satisfaction for the tort debts is not followed.
Areas of CA CP Federal Preemption (4)
(1) Federal homestead law, (2) armed forces life insurance benefits, (3) U.S. savings bonds, unless fraud, (4) social security
Economic Circumstances Exception to the Equal Division Rule (3)
Spouse can get "cashed out" in exchange for (1) Family residence, (2) Closely-held corporation, (3) Pension
Statutory Exceptions to the Equal Division Rule (5)
One spouse can get more than 50% if (1) misappropriates CP, or (2) educational debts treated separately, (3) tort liability not based on activity for benefit of community, (4) Personal injury award (CP, but awarded to injured spouse unless justice requires otherwise, (5) Negative community (community liabilities exceed assets) - relative ability of spouses to pay is considered
Stock Options Mnemonic
Nelson Wants a Hug. Lisa's got options.