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Terms in this set (52)
What is marital economic community (MEC)?
Begins at marriage. Ends at divorce, death of spouse, or a separation (complete and final break in marital relationship).
What is the CP presumption?
All property, income, or debts acquired by a married person while live in CA is presumptively CP.
What is the SP presumption?
Property acquired by either spouse before marriage or after (death/divorce/permanent separation) marriage, or by gift or inheritance during marriage, is presumptively SP
What is the special CP presumption (Lucas and anti-Lucas)?
Presumption: All jointly held property is CP (applies only at divorce)
Anti-Lucas (after 1/1/1984):
-Presumption can be rebutted by written evidence of intent to keep SP.
-If a spouse contributes SP to purchase of the property, they have right to reimbursement for contribution amount (but no value increase)
Lucas (before 1984):
-Presumption can be rebutted by oral or written evidence of intent to keep SP.
-Any SP used to purchase the property was presumed to be a gift and there was no right to reimbursement
What is quasi-community property (QCP)?
Property acquired during marriage while couple lived in a non-CP state that would be CP if acquired while living in CA.
What 5 things should you include in the community property opening paragraph?
1) CA is CP state
2) Marital economic community definition (in CP states, it starts at marriage and ends at divorce, death, or permanent separation)
3) CP presumption (property, earnings, & debt acquired during marriage)
4) SP presumption (property acquired before marriage or after divorce/permanent separation, inheritance, and gifts)
5) QCP definition (property acquired by married couple while living in a non-CP state that would be CP if couple was living CA)
How should you organize a CP essay?
Organize by asset/liability. For each, go in this order:
1) Source and character of asset/liability
2) Actions taken on asset/liability (break down each action individually)
3) Effect of prenup (if there is one)
What 3 factors should be considered in deciding if an asset is CP or SP?
1) Asset's source;
2) Any actions by the parties may have altered the asset's character; and
3) Any applicable statutory presumptions
When is a marriage considered permanently separated? What 2 conditions must be present?
-When there is a complete and final break in the marital relationship. Needs two conditions:
1) At least one spouse has expressed intent to end marriage; and
2) Spouse's conduct is consistent with intent to end the marriage
How does CA approach common law marriages?
If a couple had valid common law marriage in another state while live there, CA will recognize their marriage if the couple moves here.
How is the property of unmarried cohabitants distributed?
According to contract principles. Express contracts are valid as long as they aren't based on sexual services. If no express contract, court will look for implied contract or understanding*
*Property acquired when they are unmarried cohabitants is still distributed this way even if they later get married
What is a putative spouse and how are their property rights determined?
-Putative spouse has a good faith belief that their marriage is valid, but it isn't
Putative spouse can collect on CP principles, but rights stop accruing when they discover the marriage is not valid
What are elements of a valid premarital agreement?
(1) In writing,
(2) Signed by both spouses; AND
(3) Voluntary (only if spouse raises defense, but then it's presumed involuntary)
How can a proponent of a premarital agreement overcome the presumption of involunutariness?
Must show that the non-proponent spouse was:
(i) Represented by independent counsel (or waived right in separate writing more than 7 days before signing pre-nup);
ii) Given at least 7 days to decide whether to sign it; AND
iii) If not represented by counsel, be fully informed in writing of the terms and basic effect of the agreement
What are the 2 main defenses to enforcing a premarital agreement?
-Already discussed in previous slides
2. It was unconscionable
-Unconscionable if one spouse didn't give full disclosure of their property and/or financial obligations
-Waivers of spousal support are unenforceable if the party wasn't represented by independent legal counsel or the provision is unconscionable at the time of enforcement
How should you incorporate sourcing and tracing in an essay?
-When discussing the character of a property, start with the source and then trace it through each form.
-To get points, need to analyze each change, can't just say that it started as A and ended as D, gotta walk through A, B,C, and D
What are the 4 types of spousal actions that might change the nature of a piece of property?
2) Title in one spouse's name
3) Equal rights and management (gift or sale/lease to 3rd party)
4) Fiduciary duties (breach)
What is the definition of transmutation and what are the elements?
Definition: A change in the nature of property from SP to CP; CP to SP; or W's SP to H's SP
1) In writing*;
2) Signed by the spouse whose interest is adversely affect, AND
(3) Must expressly state that a change in ownership is being made
*Pre 1985, oral transmutations (express and implied) were permitted.
How does a spouse taking sole title of an asset change the nature of the property?
If the source was CP, it stays CP even if only one spouse has name on the title.*
*Bar testers often have facts where a spouse takes title to an asset (bank account, home, stock) in their name only. Always apply this rule if source was CP
What is the gift exception to transmutations?
Gift between spouses of personal property doesn't require a written transmutation if:
i) Tangible item;
ii) For use principally by donee spouse; and
ii) Value isn't substantial considering the relative wealth of the couple
What is the spousal fiduciary duty rule statement?
Each spouse owes the other a fiduciary duty to act in the highest of good faith in managing and controlling CP. A spouse breaches this duty when they gift or sell CP or lease CP for more than a year without the written consent of the other spouse. The non-breaching spouse may receive a greater share of CP due to the breach.
What is the Equal Management and Control principle?
Each spouse has equal management and control over CP, so fiduciary duty includes not to improperly sell, encumber, or gift CP.
Duty not to encumber came up on past exam when H took a lien on CP house to pay legal fees.
What is the rule for when a spouse gifts CP to a third party?
-Spouse must have written consent of other spouse if giving personal CP for less than fair/ reasonable value.
-If spouse doesn't get written consent, the non-consenting spouse can (i) ratify the gift or (ii) revoke the gift and sue to recover it.
What is the rule for a spouse selling or leasing CP real property?
-Both spouses must sign any instrument that sells CP real property or leases it for more than a year.
-If both spouses don't sign, non-offending spouse has one year to void a sale if the buyer
was not a BFP
; if BFP or after 1 year, spouse can get reimbursed for other spouse's breach of fiduciary duty at dissolution
What is the commingling funds rule statement?
The commingling of funds does not automatically transform SP into CP. However, burden is on SP proponent to show that SP funds were used to purchase the asset in question. The SP proponent must be able to trace the funds back to an SP source using one of the two following methods: Direct Tracing or Exhaustion Method.
What are the two methods of tracing funds from a commingled bank account?
Direct Tracing Method: SP proponent has to prove that there were sufficient SP funds available at the time that the asset was purchased and that they intended to use the SP funds to purchase the asset.
Exhaustion Method: SP proponent must prove that CP funds in the account were already exhausted by the payment of family expense at the time that the asset was purchased.
How do CP states reimburse the community for a spouse's use of CP to improve their SP?
Improvements become part of the SP. The community can seek reimbursement for the cost of improvements or the enhanced value of the SP attributable to the CP (whichever is greater).
How do CP states reimburse a spouse for the use of their SP to improve the CP?
As of 1984, spouse has a statutory right reimbursement if the funds can be traced to SP (anti-Lucas).
Prior to 1984, it was presumed to be a gift.
How do CP states reimburse a spouse for the use of their SP to improve the other spouse's SP?
As of 2005, spouse has a right to reimbursement unless there is a waiver of their right to reimbursement or written transmutation.
Generally in CP essays, be sure to note when law changed.
What is the Pro Rata Rule and when does it apply?
Community estate takes a pro rata portion of the property measured by the percentage of principal debt reduction attributable to the expenditure of CP.
1) Installment purchase pre-marriage and subsequent payments are made w/ CP after marriage
2) Spouse inherits land w/ mortgage and pays it off w/ CP
3) Spouse purchases a whole life insurance policy before marriage and pays subsequent premiums with CP
How do courts analyze the nature of assets purchased on credit or loan?
In the absence of evidence that the seller relied "solely" on the purchaser's SP in extending credit or a loan, the acquired property or loan will be characterized as CP.
Fact pattern from past bar: H & W get loan based on both their salaries. W's puts up SP as collateral. Loan is used to improve H's SP. At divorce, community is entitled to reimbursement for the loan or the increased value of H's SP, whichever is higher.
What is the community entitled to for educational degrees acquired during marriage?
Education degrees acquired during marriage are not CP. However, community gets reimbursement when:
i) CP funds are used to pay education expense; AND
ii) Educated spouse's earning capacity was substantially improved; AND
iii) Couple didn't waive right to reimbursement in writing
What defenses to reimbursement can the educated spouse raise?
1) If divorce occurred more than 10 years after the degree, rebuttable presumption that the community already substantially benefitted from the education; OR
2) The other spouse also received an education paid for with CP during marriage; OR
3) Education reduced the need for spousal support upon divorce.
How do courts analyze the character of retirement benefits at divorce?
Benefits are CP if earned during the marriage. When they've been earned both before and during marriage, the courts apply the time rule to determine how much came from CP labor and how much came from SP labor.
Formula for CP: (present value) x (# of years worked during marriage/ total # years worked)
How do you determine if stock options are CP?
-Stock options granted during marriage and which vest during marriage are CP.
-Calculating how much is CP/SP depends on if they were granted to compensate an employee for past service or incentivize continued employment.
How do you calculate the CP and SP of stock options if they were granted to compensate past service?
DOH=date of hire, DOS=date of separation, and DOV= date the options vest
CP: ((DOH-DOS)/(DOH-DOV)) x (# of shares)
SP: (# of total shares) - (# of CP shares)
How do you calculate the CP and SP of stock options if they were granted to incentivize continued employment?
DOG=date of grant, DOS=date of separation, DOV=date the options vest
CP: ((DOG-DOS)/(DOG-DOV)) x (# of shares)
SP: (# of total shares) - (# of CP shares)
What is business/professional good will rule statement and what is its character?
RS: Good will are the qualities that generate income beyond the income derived from (1) the professional's labor and (2) reasonable returns on assets.
Character: It is CP to the extent it is earned during marriage.
What is the rule statement for SP businesses that increase in value during marriage?
When community labor is used to enhance the value of a SP business, the community is entitled to a share in the increased value of the SP business.
What are the two approaches to calculating the community interest in a SP business and when are they used?
Pereira: Used when the increase in value is primarily a result of a spouse's skills and effort.
Van Camp: Used when the increase in value is primarily the result of the unique nature of the SP asset.
*NOTE: Remember to always apply both on an essay
What is the Pereira formula for determining SP and CP?
SP: value of SP business at time of marriage + (value of business at time of marriage x 10% fair rate of return x years of marriage)
CP: (Fair market value of business at divorce) - (SP value as calculated above)
What is the Van Camp formula for determining SP and CP?
CP= (reasonable value of services - salary taken - annual family expenses) x (years of marriage)
SP= (Fair market value of business at divorce) - (CP value as calculated above)
How is CP usually divided at divorce and what are the exceptions?
CP is divided equally unless the court finds that "the interest of justice require an unequal division". One spouse may get the whole of one asset as long as both end up with 50% of all CP in terms of economic value.
1) Misappropriation by one spouse (breach of FD);
2) Liabilities exceed assets;
3) Educational debts assigned to the educated spouse;
4) Tort liabilities assigned to the tortfeasor;
5) Family home may be awarded to the person who is given custody of the minor children
How is CP divided at death if there is a will and if there is not?
-Dead spouse can devise of all SP and 1/2 of the CP & QCP in their will.
-Survivor's Duty to Elect: Surviving spouse must elect between the will and CP rights if will attempts to devise more than 1/2 of CP
-CP is awarded entirely to surviving spouse
-Spouse gets between 1/3 and all of dead spouse's SP (1/3 if >1 heir, 1/2 if 1 heir, all if no heirs).
How is QCP treated at divorce and death?
Exactly like CP.
How are a spouse's earnings and accumulations characterized after a permanent separation?
They are SP of the earning spouse, BUT living necessaries exception
What expenses of a spouse is the other spouse liable for when they are living apart?
Necessaries of life: Living costs consistent with the spouses' station in life, including food, clothing, shelter, and medical expenses*
*Includes debts incurred on these necessaries. A creditor can reach one spouse's SP in satisfaction of necessary debt for the other.
When is the CP liable for debts incurred?
If they are incurred by either spouse before or during marriage (but not after permanent separation).*
*But, non-debtor spouse can protect CP earnings by depositing them in a separate bank account that debtor spouse can't access.
How are debts distributed at divorce?
-Debtor spouse is assigned the debts they incurred (assigned as SP if they weren't for the benefit of the community)
-Creditor cannot reach CP awarded to a spouse
When are personal injury awards SP and when are they CP?
-SP: If cause of action arose before marriage
CP or after permanent separation
-CP: If cause of action arose during marriage.*
*However, at divorce, CP personal injury awards will be awarded to injured spouse if the funds can be traced and are not already spent.
How does a court determine the character of tort liability?
Liability will always be SP of the tortfeasor unless the tort occurred while the spouse was acting for
the benefit of the community
Tort occurred when the incident occurred, not when the judgment was handed down. Include that in essay
What is the order of payment for debts or tort liabilities incurred during marriage?
If incurred for the benefit of community:
CP first, then the debtor/ tortfeasor spouse's SP
If NOT incurred for the benefit of the community:
Debtor/ tortfeasor spouse's SP first, then CP.
When discussing a debt or liability, be sure to include a separate subheading for "Order of Payment". Include a note that the community is entitled to reimbursement if CP was used to pay off debt not incurred for the benefit of the community if debtor spouse had available SP.
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