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California Bar Review - Community Property
California Bar Review - Community Property

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Opening paragraphs for a Community Property essay?

"California is a community property state. All property acquired during the course of a marriage is presumed to be community property. All property acquired before marriage or after permanent separation is presumed to be separate property. In addition, any property acquired by gift, devise or bequest is presumed to be separate property."


[when tracing comes up]

"In order to determine the character of any asset, courts will trace back to the source of funds used to acquire the asset. A mere change in form of an asset does not change its characterization. With these basic principles in mind, we can now turn to the specific items of property involved in this instance."


Summarize presumptions/rules regarding:

1. Personal injury awards

2. Retirement benefits

3. Disability pay and worker's compensation benefits

4. Severance pay

5. Stock options

6. Business and professional goodwill

7. Education and training

8. Child support / spousal support payments


1. Personal injury awards - Presumptively CP. But if divorce then awarded to injured spouse unless justice requires otherwise. (If against other spouse, always SP)

2. Retirement benefits - Presumptively CP if earned during marriage. Use Time Rule. (don't necessarily need to do the math)

3. Disability pay and worker's compensation benefits - depends on wages they're designed to replace. If taken in lieu of retirement benefits, then treated as such.

4. Severance pay - split! SP, b/c replaces future wages, or CP b/c compensation for past wages.

5. Stock options - Use time rule.

6. Business and professional goodwill - Presumptively CP if earned during marriage. [may need to apply Pereira and Van Camp also]

7. Education and training - Not a community asset. But community can get reimbursed if enhanced the earning capacity of the spouse. But community already benefited, if (1) 10 years or more, (2) other spouse has community-funded education, or (3) educated spouse's need for spousal support is reduced b/c of it.

8. If paid with CP, other spouse can get reimbursed to the extent that SP was available to pay for it.


Rules for following:


1. Both SP and CP funds spent to purchase a property in one spouse's name?


2. CP funds spent to improve one spouse's SP?


3. CP funds spent to purchase jointly titled property?



1. We then have pro-rata ownership (tracing). Each gets reimbursed the sum it contributed, PLUS an appropriate proportion of any appreciation.

[One typical situation: one spouse acquires property before a marriage, but uses CP funds to help pay off the MORTGAGE.]


2. By contrast, if a spouse uses CP to improve other spouse's SP, we don't have pro-rata ownership - a gift is presumed.

If uses CP for OWN SP, presume a gift also - but can get reimbursed for cost of improvement or increase in value, whichever is GREATER.


3. Depends on whether death or divorce:

At divorce, anti-Lucas statute after 1987: is community property. However, SP is entitled to reimbursement.

At death, Lucas applies: gift is presumed, unless oral/written agreement to the contrary. (character of property!)

Requirements of a prenuptial agreement?
Define a transmutation, for community property law.
"A transmutation is an agreement between spouses to change the character of an asset (or series of assets). Prior to 1985, it could be oral. After 1985, however, a transmutation must be in writing to be enforceable."
Community labor is used to enhance the value of a separate property business. How do we split the value of the business?

"Here, although H's business is SP the community is entitled to a share of the appreciation of that business b/c H's labor during the course of the marriage was used to increase the value of the business."


"Pereira accounting is used when the increase in value is primarily the result of community labor. Using Pereira, you determine the value of the SP at the beginning of the business and give it a fair rate of return over the course of the marriage. Normally this is the legal interest rate (10% simple interest) calculated annually. The SP is given the initial value plus the fair rate of return. The remainder is CP. [apply]"


"Van Camp accounting is used when the increase in value of a business is primarily the result of the unique nature of the SP asset. Using Van Camp, you determine what a fair salary would be for the community labor. You multiply that by the years of the marriage. You subtract any salary already received and any amounts paid for community expenses. The result is your CP share. The rest is SP. [apply]"


CHOOSE one method as the better one.

In a marriage, each spouse has the right to manage and dispose of community property. But what are the exceptions?

1. Real property transfers. (right to set aside transaction: if buyer was unaware of marriage, then 1 year statute of limitations, otherwise there's no time bar)

2. Personal belongings (incl. clothing and furniture)

3. A spouse managing a business

4. Bank accounts in the name of one spouse alone.

Explain how you'd write about a preemption issue in a community property problem.

"Under the Supremacy Clause, federal law preempts inconsistent state laws. In some instances, federal law preempts California from applying community property concepts to certain assets."


YES preemption:

federal homestead claims

military life insurance benefits

U.S. Savings Bonds

Social Security benefits


NOT preempted:

railroad retirement benefits

military retirement benefits


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