Community Property - Short Rules

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Community Property - Short Rules
2014-07-15 17:29:06
Community Property Short Rules

Community Property - Short Rules
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  1. Earnings, is it CP?
    All money earned during marriage is considered CP because it is made using each spouse's time, labor, and skill, which is a community asset.
  2. Earnings saved in a bank account, in one spouse's name only. CP or SP?
    • Issue: Was there a gift?
    • If there is no evidence that a gift was intended, or that the other spouse agreed that it would be SP, then it is CP.
  3. What is a Putative spouse? How are they treated?
    • (H & W were never legally married)
    • A putative spouse is one that has an:
    • 1) objectively reasonable,
    • 2) good faith belief
    • that he/she is lawfully married.
    • In CA, a putative spouse is treated as a legal spouse and takes according to quasi-marital property (QMP) principles
  4. Quasi-Marital Property Laws?
    • All property acquired during the putative marriage is quasi-marital property (QMP)
    • Property acquired before the putative marriage or after permanent separation, or by gift or inheritance, is separate property (SP)
  5. Who gets to share in QMP?
    • When 1 partner is a good-faith putative spouse, but the other knows of the defect in the attempted marriage, it is unclear whether the non-good-faith spouse gets to share in the QMP.
    • CA SC has left this question open, but has suggested that it might treat the spouses equally, despite the lack of good faith.
    • Thus, still share 50-50.
  6. What is quasi-marital property?
    All property that would be QCP if H & W's marriage were lawful is labeled as QMP.
  7. Married Woman's Special Presumption
    • 1. property acquired by a woman (titled in her name only)
    • 2. prior to 1975
    • 3. by an instrument in writing
    • 4. presumed to be her SP
    • 5. unless a different intention is expressed in the instrument.
  8. How do you effectuate a gift from CP to SP?
    1. Spouse was aware that title was taken in 1 spouse's name only, and does not object.
  9. How do you effectuate a gift from SP to CP?
    1. gift is presumed when one spouse uses CP to improve the other spouse's SP (gift presumption can only be overcome by evidence of an agreement to reimburse the improvement costs)
  10. Transmutations?
    • Change in character from CP to SP, or vice-versa.
    • 1. Pre-1985: oral transmutations were valid
    • 2. Post-1985: must be in signed writing by the spouse who loses his SP.
  11. Debt incurred before marriage? What can the creditor reach?
    • 1. all of debtor's SP
    • 2. all of the CP
    • Exception: *EARNINGS* of the non-debtor spouse cannot be reached for pre-marital debts if?
    • 1. held in a separate account (debtor spouse has no right to withdraw)
    • 2. not commingled with other CP funds
    • If the debt was paid using CP, CP is entitled to reimbursement: if the debtor spouse had SP available to satisfy the obligation (but didn't use it)
  12. Debt incurred during the marriage?
    • All of the CP and the debtor's SP are liable for a debt incurred during the marriage.
    • Reimbursement: generally, no reimbursement. Each spouse has the right to manage the community, including entering into K's for debt.
  13. Is a degree CP?
    • Even if a degree is earned during marriage, it is not a divisible asset subject to CP laws.
    • Community has no interest in a degree.
    • However, community may be entitled to reimbursement for direct education expenses.
  14. Is goodwill in a business CP? How is it calculated?
    • CA treats goodwill as CP. Thus, the community has an interest in H's business goodwill.
    • Courts use 2 valuation techniques:
    • 1. market sales valuation (FMV of the business)
    • 2. capitalization of past excess earnings (present value of the future stream of income)
    • capitalization is likely higher, because it values the goodwill in the earner's hands.
    • much of goodwill may be lost in a sale contemplated by the market sales valuation