Community Property

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Author:
Ellla
ID:
304784
Filename:
Community Property
Updated:
2015-07-04 22:16:11
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bar exam
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Description:
community property terms
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  1. Characterization of Asset
    This depends upon when the asset was acquired, the source of the purchase funds or the means of acquisition, applicability of any legal presumption, and the coupe’s individual actions.
  2. Time of Acquisition
    Property acquired during the course of a couple’s marriage is deemed to be community property and owned equally by both spouses. Property that is owned prior to marriage and property that is acquired after the dissolution of the marriage is classified as separate property.
  3. Source of the Purchase Funds or Means of
    Acquisition
    If purchase funds were acquired through gift, bequest, devise, descent, or from profits derived through separate property, then the asset is separate property, the property is separate property
  4. Applicability of Legal Presumptions
    Legal presumptions may overcome the general community property presumption that property acquired during marriage is community property. The legal presumptions are:

    • 1) proponent can use simple tracing to show purchase funds derived from a separate property source,
    • 2) the parties took title indicating a form other than community property,
    • 3) the parties made some other agreement that the property would not be held as community property, or
    • 4) a party took title in a form displaying intent to make a gift the other spouse.
  5. Simple Tracing
    a separate property proponent may overcome the general community property presumption by tracing the source of the funds used to buy the asset during marriage.  Tracing can only be used if asset is untitled or only titled in the purchasing spouse’s name.  If separate property funds can be shown to have paid a portion of total purchase price, the separate property proponent takes a proportional separate property interest.
  6. Title Held in Different Form
    A separate property proponent may overcome the general community property presumption by establishing a contrary from of title.  Asset title may establish intent to hold property in a form other than community property. If the property is held as joint tenants, tenants by the entirety, or tenancy in common, the court will presume the parties intended to take title in a form other than community property.
  7. Evidence of Agreement to Hold Property in Form
    Other than Community Property
    The general community property presumption can be overcome if the separate property proponent establishes the parties entry into a premarital agreement, or if the parties had entered an agreement during marriage, changing form of asset title.
  8. Premarital Agreements
    a separate property proponent can avoid community property laws by establishing evidence of an agreement to hold property in a form other than community property. Premarital, or antenuptial, agreements usually state that property separately owned by parties, as well as income earned during marriage, will remain separate property. Premarital agreements also limit the surviving spouse’s ability to reach property after the other spouse’s death.
  9. Effect of Premarital Agreement
    The effect of a premarital agreement is to contract out of the community property scheme prior to marriage.
  10. Requirements for Valid Premarital Agreement
    A valid premarital agreement does not require consideration, but must comply with Statute of Fraud requirements.  Compliance with Statute of Frauds requires a premarital agreement to be in writing and signed by both parties.  Additionally, premarital agreements cannot limit support obligations between spouses, nor can they promote divorce.
  11. Exceptions to Statute of Frauds Requirement
    There are two exceptions to the Statute of Frauds requirement. First, if the promisor fulfills an executor oral promise, a premarital agreement will be enforced despites the lack of writing. Execution of the executory oral promise evidences an agreement. Secondly, a party cannot raise a Statute of Frauds defense when the other spouse has detrimentally relied upon the party’s oral premarital agreement.
  12. Operation of Premarital Agreements Governed by Statute and Case Law
    Premarital agreements entered into prior to January 1, 1986 are governed by statutory code and case law.  Premarital agreements entered into after January 1, 1986 are governed by the Uniform Premarital Agreement Act. Premarital agreements are generally treated the same under the pre 1986 as under the post 1986 statute.
  13. Agreements Made by Parties during Marriage
    Separate property proponent may overcome the general community property presumption by presenting evidence of a valid agreement (transmutation) made by the parties during marriage holding the asset in a form other than community property.
  14. Requirements for a Valid Transmutation
    Transmutations must be separated into two types. Those agreements made prior to January 1, 1985 and those made after January 1, 1985.
  15. Requirements for Valid Transmutations prior to
    1985
    Agreements made prior to 1985 are still governed by liberal case law. Courts recognize explicit oral promises to hold property in a form other than community property and also recognizes agreements implied from behavior.
  16. Requirements for Valid Transmutations Made after 1985
    Agreements made after January 1, 1985 are governed by statutory law and Courts will require a written statement signed by the party whose interest is negatively affected. Courts will not consider parties oral statements in post January 1, 1985 transmutations.
  17. Taking Title in a Form Indicating a Gift to the
    Other Party
    Prior to 1975, if title was placed in the name of a married woman, the husband was deemed to be making a gift and the wife took the property as her separate property.
  18. Rational for Married Woman's Special Presumption
    Prior to 1975 the husband was deemed to have total control over disposition of the community property. After 1975, the spouses were given joint control.
  19. Application of Married Woman's Special
    Presumption
    The presumption applied when a married woman received title in her name alone, shared title with a third party outside the marriage, or when the husband and wife took the title in form of tenants in common.  This presumption may still apply to title placed in a married woman’s name prior to 1975, and, if title is taken after 1975, a reasonable inference of gift arises
  20. Overcoming the Married Woman's Special
    Presumption
    The presumption can be overcome between parties by showing that the husband did not place title in his wife’s name. Simple tracing to a community property source will not rebut the gift presumption.
  21. Parties’ Actions
    These may indicate intent to take an asset in a form other than community property. Parties may take title in a joint form but pay disproportionate amounts drawn from separate property. The disproportionate contribution is considered a gift of the separate property to the community.
  22. Marriage of Lucas
    This case, decided in 1980, holds that a separate property contributor to the purchase of a jointly titled asset is deemed to have made a gift to the community. A separate property proponent can overcome the gift presumption by establishing evidence of an understanding or agreement, oral or written, that parties
  23. Lucas Modified in Cases of Divorce
    Although Lucas still applies in cases of death, marriages ending in divorce are now subject to Cal Civ Code Section 4800.1.
  24. California Civ. Code Section 4800.1
    • 1.       
    • All property held in joint form is
    • presumed community property.  This
    • presumption can be overcome only by the means of a written agreement or
    • statement in title that the property is “separate property and not community
    • property. “
  25. Two Versions of 4800.1
    There are two versions of 4800.1 and each is still in use. The earlier version controls acquisitions from January 1, 1984 to December 31, 1986 and provides that property held as joint tenancy was to be considered community property. A later version enacted January 1, 1987 applies to all jointly held property.
  26. 4800.1 and 4800.2 Not Applied Retroactively
    Retroactive application of 4800.1 and 4800.2 unconstitutionally deprives persons of their vested property rights.
  27. If Proponent Cannot Meet Statutory (4800.1)
    Burden, then Entitled to Reimbursement under 4800
    If a separate property proponent cannot meet the burden of establishing an agreement to maintain a separate property interest under 4800.1, he is entitled to simple reimbursement of his contribution, without interest or a proportionate share of property appreciation.
  28. Timeline for Proper Application of 4800.1 and
    4800.2
    Refusal to apply statutes retroactively creates a confusing time line. Titles acquired prior to 1984 are controlled by the Lucas case, titles acquired between 1984 and 1987 are controlled by the 1983 version of 4800.1 and 4800.2 and titles acquired after January 1, 1987 are controlled by the 1986 version of 4800.1 and 4800.2.
  29. Recovery for Party Proving Existence of Separate Property Interest
    The separate property proponent who proves by means of a written agreement or statement in title that a separate property interest was to be preserved, receives original separate property contribution, proportional share of the property's appreciated value, and a community property share of the remainder.
  30. Commingling of Separate Property Funds
    Often community funds will be mixed with separate property funds in a joint bank account. Problems arise when a separate property proponent claims that an asset was purchased with separate property funds from a commingled account.
  31. Separate Property Proponent Allowed to Trace
    Funds to Separate Property Source
    A separate property proponent must show that funds taken from a commingled account came from a separate property source. The separate property proponent will attempt to trace the purchase funds to her separate property.
  32. Presumptions Governing Commingled Funds
    Courts will consider a separate property claim in light of two presumptions. First, separate property funds are used to pay expenses only when the community funds are depleted. Secondly, a gift is presumed when separate property funds are used to pay family expense unless rebutted by evidence of reimbursement agreement.
  33. Direct Tracing
    When using direct tracing to establish character of an asset purchased with commingled funds, the separate property proponent must show the availability of separate funds and the intention of using those funds for asset purchase.
  34. Indirect Tracing
    When using indirect tracing to establish the character of an asset purchased with commingled funds, the separate property proponent must show that, at time of purchase, there were no community funds available. Therefore the asset must have been purchased with separate funds.
  35. Failure to Trace
    Failure of the separate property proponent to successfully trace separate property funds results in the Court's classification of commingled account as community property.
  36. Classification of Business Profits
    A business may be brought into a marriage as separate property of one spouse. When the spouse works in this business during marriage, a portion of the profits earned are considered community property. Courts have developed two different methods for proper apportionment of these profits. These methods are named the Pereira and the Van Camp Accounting Methods.
  37. Pereira Accounting Method
    The court considers the initial value of the separate property business at the time of marriage, then imputes a fair rate of return upon this value. The fair rate of return belongs to the separate property owner and the remainder is considered community property. Courts use this method when the individual owner had a great deal to do with the success of the business. This method leaves a greater sum to community property.
  38. Van Camp Accounting Method
    The court values the separate property owner’s services at a fair market rate, and then subtracts paid family expenses. Whatever value of the services remains is considered community property. The separate property proponent retains all other value as his/her separate property. Courts use this method when the success of the business results from market conditions. This method leaves a greater sum to the separate property proponent.
  39. Community Funds Used to Improve Separate
    Property
    If a separate property owner uses community funds to improve the separate property of other spouse, courts imply a gift of the community funds. The separate property proponent will not be entitled to reimbursement. If a separate property owner uses community property to improve his/her own separate property, courts grant the community a right to reimbursement, or the right to the value of the improvement in light of appreciation, whichever value is greater.
  40. Assets Acquired through Credit
    Credit acquired by one spouse during marriage is presumed community property. Therefore purchases made through extended credit are also characterized as community property
  41. Lawful Marriage
    Typically, formation of economic community begins with a lawful marriage. A legal marriage requires legal capacity and performance of legal requirements.
  42. Legal Capacity
    A valid marriage requires legal capacity. Legal capacity requires; 1) compliance with statutory restrictions prohibiting marriage among degrees of kinship, and 2) the parties cannot be concurrently married to another
  43. Elements of Making Marriage Voidable
    Elements such as fraud, coercion, under age, and lack of sexual capacity may make the marriage voidable at the request of an interested party
  44. Legal Requirements
    In  California, these  consist of a licensed, registered, and witnessed ceremony culminating in a public announcement of marriage. Marriages not in compliance are not recognized in California, unless the marriage is afforded legal recognition in another jurisdiction.
  45. Putative Spouse
    A person who is not lawfully married, but has an objectively reasonable, good faith belief that she is lawfully married is afforded the same legal protection as if the marriage were lawful. If a person leaves both a putative and a lawful spouse, the courts will divide the estate equally between the two parties
  46. Loss of Putative Status
    Once an unlawfully married spouse no longer has an objectively reasonable, good faith belief; she loses status as putative spouse.
  47. Unmarried Cohabitants Cannot Avail Community
    Property Law
    If parties live together but do not intend to legally marry, California will not apply community property law. Instead California applies general contract law.
  48. Courts Apply Contract Law to Cohabitants
    Courts are willing to apply contract law to cohabitant agreement and have enforced express contracts as well as implied contracts. Courts have been unwilling to enforce a contract between cohabitants if based upon sexual services.
  49. Cohabitant Rights against Third Parties
    Cohabitants are not given the right to make a claim against third parties nor the government, as they do not possess those rights which flow from the marital relationship.
  50. Separate Property
    Each spouse has complete control over his or her separate property
  51. Community Property
    In 1975, spouses were given equal control over community property. Accordingly each spouse may now sell, trade, encumber, and buy all of the community property. But each spouse still maintains testamentary control over his ½ interest in the community property.
  52. Nonconsenting Spouse Has Power to Void
    If property is transferred without consent, the nonconsenting spouse has one year to void the transfer, but must tender the purchase price back to the buyer. A nonconsenting spouse may also void any encumbrance placed upon the community property without his/her consent, in its entirety
  53. Sale to Good Faith Purchaser
    The power to void does not affect transfers to good faith purchasers.
  54. Personal Property Belonging to Community
    A spouse cannot sell, convey, or encumber community property used as a family dwelling or community property household furnishings or clothing of the spouse or minor children without the written consent of the other spouse.
  55. Bank Accounts
    If a married individual keeps an account in his/her name alone and it is held for his/her exclusive benefit, the account cannot be reached by the second spouse.
  56. Control of Business
    If a spouse has primary management and control of a separate property business, or a community property business, she can act alone in all transactions except those consisting of any sale, lease, exchange, encumbrance, or disposition of all or substantially all of the personal property used in the operation of the business. The nonconsenting spouse is given the power to void the transaction, but only if the action substantially impairs the spouse’s ½ interest.
  57. Checks on Managerial Powers
    One spouse must have the written consent of the other to effectuate a valid gift of community property.  However, a nonconsenting spouse’s subsequent behavior may act to ratify the gift. A nonconsenting spouse may void the unauthorized gift in its entirety during the lifetime of the gifting spouse.  After the death of the gifting spouse, a nonconsenting spouse may avoid only ½ of the gift
  58. Spouses Fiduciary Duty to Other Spouses
    Each spouse has a fiduciary duty toward the other spouse and must act fairly in matters concerning control and distribution of community property.
  59. Requirements of Fiduciary Duties
    The fiduciary duty requires spouses to share in the control of the community assets, and one spouse may not diminish the community assets without permission of the other.
  60. Other Duties Owed
    In addition to the fiduciary duty, the managing spouse has a duty to deal in good faith with the nonmanaging spouse, a duty to account to other spouse, and a duty to secure nonmanaging spouse’s consent prior to distribution of community assets.
  61. Nonmanaging Spouse’s Remedy for Breach of Duty
    If the managing spouse breaches her duty, the nonmanaging spouse may 1) request an accounting of the community property, 2) make a claim against the managing spouse’s separate property for value of loss, or 3) request his name be added to title to reflect the community nature of the asset.
  62. Statute of Limitations
    Nonmanaging spouse, still married to managing spouse, has three years from date of discovery to bring action. But an action may always be brought upon death or divorce.
  63. Property Liable for Debt
    When taking property to satisfy debt obligations, creditors are subject to limitations: if a debt is incurred prior to marriage, then creditors can reach all community property plus the debtor’s separate property. The other spouse’s separate property cannot be reached.  A debt incurred by one spouse during marriage exposes all community property and the debtor separate property
  64. Creditor’s Rights Determined Date Debt Is
    Incurred
    A creditor’s right to recovery depends upon the date the debt was incurred. Tort debt is incurred at time tort occurs; contract debt occurs at time of contract formation; a spouse’s child and spousal support obligations from a prior marriage are treated as debts made before the current marriage; and in all other cases, a debt is incurred the date the obligation arises.
  65. Debt Necessities Exception
    Each spouse will be liable for debt incurred for his spouse’s necessities.  Necessities include expenses appropriate to sustain the spouse’s unless the debt was incurred for “common necessities.” Common necessities are restricted to basic living expenses.
  66. Payment of Tort Judgment
    Generally a person is not liable for payment of a tort judgment against his spouse, unless the person would have been liable despite the marriage
  67. Liability for Tort Judgment
    Creditors can reach both separate and community property interests of the tortious spouse.  But creditors are limited in the order upon which they can collect.
  68. Creditor Takes Property According to Established Order
    Creditors will be able to reach property so long as the required order of taking is followed:

    1) If the tortious conduct occurred while acting for the benefit of community, the creditor must first pursue community property, and then separate property of the tortious spouse;

    2) If the tortious conduct occurred while in activity having no benefit to community, the creditor must first pursue the separate property and then the community property interest of tortious spouse.
  69. Creditor's Rights at Time of Divorce
    Divorce courts assign the parties’ liabilities. Generally, each spouse is personally liable for his own debts and each spouse is personally liable for any debts assigned by the divorce court.  But if a debt was not incurred by the spouse, and not assigned by the divorce court, then there is no liability. If the spouse’s property is applied to cover the debt of other spouse, the contributing spouse has a right to reimbursement.
  70. Statutory Enactments
    Recent statutory enactments allow spouses to seek reimbursement where:

    • 1) payment of a tort judgment levied against the other spouse did not follow the statutory plan;
    • 2) payments were for child or spousal support resulting from a prior relationship; or
    • 3) separate property has been applied to pay “necessary” expenses of other spouse.
  71. Right to Distribute
    A spouse is entitled to distribute all of her separate property and ½ of the community property upon death.  The surviving spouse owns the other ½ of community property.
  72. Property Acquired out of State
    If a married couple acquires property prior to residing in a community property jurisdiction, they may elect to treat the property as quasi-community property.
  73. Treatment of Quasi-Community Property
    Quasi-community property is treated as community property in cases of divorce and death.  During marriage, quasi-community property is treated as the owner’s separate property.

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