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Community Property
Bar Study

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Separate Property

1. property owned before marriage

2. Property acquired during marriage by gift or inheritance

3. Property acquired during marriage with the expenditure of separate funds.

4. Property acquired after service of petition for divorce if petition results in a decree

5. Spouse can agree that property will be separate

6. Income from and appreciation in value of separate property

7. Tort recovery for personal injury

a. But not tort recovery for medical expenses or lost wages.

Community property

Property, other than separate property, acquired by either spouse during marriage. All assets acquired during marriage, including on credit and on hand whenever the issue is raised, presumptively belong to the community.

1. Salary and wages of either spouse

2. Income from community assets 

3. Royalties that come after the marriage but that were acquired because of rights that were created during the marriage.

Legal Marriage

Does not recognize common law marriages. Must attain license, ceremony must be conducted in the presence of at least two adult witnesses by an organized clergy or judge--or by a person purporting to be authorized and at least one party believed in good faith that he or she had authority, and 18 or over (otherwise, consent from parent with custody and a superior court judge if under 16 and if judge orders both to submit to premarital counseling, finds that the marrying is voluntary, and finds that marriage is best interest of the child). unless validly held in another state. Invalid marriages will result in TIC. The following are invalid:

1. Bigamy

2. Consanguinity- Relatives

3. Same sex 

When Does the marital community end?

When divorce petition is served if petition results in final decree.

*Look out for death. Death before petition results in final decree does not render decree final.

*Separation is not enough.

What division of property is made on dissolution of Marriage?

1. The Court cannot divest title to separate property of one spouse and award it to another spouse.  Can only impose lien to secure payment of child support, spousal maintenance, or equitable claim against the property.

2. Community property is divided equitably, which means substantial equal division in absence of sound reason requiring a contrary action.  Does not have to be "in kind" or pro rata.

a. Marital misconduct cannot be taken into account, but Financial misconduct can.

b. Later discovered community property not divided on divorce will be deemed TIC unless reason property was not divided was dude to concealment. 

c. Good Will (factor that raises expectation of continued patronage) is CP and valued at court's discretion.

d. Professional degrees are not property subject to division and would result in post-divorce earnings.

e. Indefinite promises are not CP.

f. Contributions to education and contributing to educational opportunities of the other spouse are factors to determining equitable division and spousal maintenance.

Community Debt

Also subject to equitable division, which court has great discretion over.

1. Court order is not binding on creditors, and creditors can go after either spouse even if court order assigns debt to only one spouse.

Spousal Maintenance

Alimoney can be ordered by court if spouse establishes one of the factors set below:

1. Lacks sufficient property to meet reasonable needs.

2. I unable to support herself through proper employment or is custodian of child whose age or condition makes it difficult to work outside of the home, or lacks the ability to obtain employment

3. Contributed to educational opportunities of other spouse.

4. Had a marriage of long duration and is of an age that effectively precludes her from gaining suitable employment.


Once court determines an award of spousal maintenance is called for, the amount is determined based on a laundry list of economic factors.

*Remember, can consider financial misconduct but not marital misconduct.

Inception of Title Rule

The character of an asset is determined at the time the asset is acquired. Subsequent events or expenditures never affect the asset's characterization, but go only to the possibility of a reimbursement claim and equitable share in enhanced value.

Community funds expended to discharge debt or improve separate property.

1.Community share: CP funds expended in making principal payments + CP's share of enhanced value.


CP funds expended/Value at time of marriage x enhanced value= Share of enhanced value.


*Reimbursement is only measured by amount of principal payments made with community, and no reimbursement for CP funds expended on mortgage interest, property taxes, or casualty insurance premiums.


2. Improvements: CP is entitled to enhanced value, not on what was spent to improve.

Separate funds are expended to Discharge debt or improve CP

If separate funds are expended to discharge debt or make improvements on CP, there is a presumption of gift to the community, which can only be overcome by clear and convincing evidence of agreement to reimburse.

1. Exception: Expenditure was involuntary, or spouse had to spend because other spouse refused to do so even with sufficient community assets.

Separate funds are expended to improve joint tenancy property

Unlike CP, there is no presumption of gift in a JT situation. Entitled to half the amount by which improvements enhanced property's value.

Life insurance policies (CP)

Whole Life insurance: Pro-ration: divide how much premium was spent as SP and how much was spent as CP.


Term Insurance policy: Last premium paid determines

Employee Retirement Benefits

Employee retirement benefits (including military, but not military disability) accumulated during marriage are community property whether or not vested at time of divorce because they are a form of compensation that was earned during marriage.


*Years from date of marriage to date marital community ends/Years of employment to date marital community ends.

*401k accounts: Trace the account if possible


1. Preferred approach is to give spouse lump sum payment of present cash value and award other CP assets of offsetting value to other spouse.

2.Otherwise, court can reserve jurisdiciton to award both spouses their interests in the plan under an if, as and when received decree (Benefits to be paid if, as and when pension benefit kicks in).


*Exception: if marriage ends by death rather than divorce, then nonparticipant spouse does not have a divisable interest in a qualified plan if she predeceases the participant (Due to federal law); However, a state law pension plan will allow it.

*Courts classify disability retirement and workers' comp. benefits when received, not when earned.

*Courts will not allow spouses to transfer retirement benefits that constitute CP to those that don't (Military-->Military disability)

Stock Options

If the option is awarded during marriage but does not vest until after the marital community has ended.


*Primarily to award for past services= Years from date of employment to date marital community ends/Years from date of employment to date options become excercisable.


*Primarily to keep employee with company= years from date options are granted to date martial community ends/years from date options are granted to date options become excercisable

Separate property business that increases in Value--Apportionment rule applies to increased value.

Step 1: Business is still SP

Step 2:  Compute reasonable rate of return on separate property = Value on date of marriage+ %interest per year for length of marriage

Step 3: Compute increase in value during marriage = FMV at time of divorce - reasonable rate of return on separate property

Step 4: Determine how much of increased value was attributable to community= Increase in value during marriage x fraction court deems community labor.

Step 5: Spouse is entitled to half of value attributtable to CP.



Commingled bank accounts

Presumption that of CP unless spouse can trace funds.

1. Deposits were negligible in comparison to separate funds

2. an inactive account, and salary and wages were deposited in another account.

Effect of How Title is Taken

In all community property state, as a general rule how title is held does not affect characterization. Instead, it is the time and circumstances of acquisition.

1. taking title in joint tenancy form using CP funds without proof of spouses' agreement does not overcome CP presumption (both spouses must sign).

a. JT is different from CP because it affects rights on death, creditor's claims, expenditures of SP on JT property, Federal tax upon death.

2. Community property with right to survivorship: Property passes to survivor, but remains CP for purposes of creditor's claims, expenditures of SP on CP, and for Federal tax benefits upon death.

3. Taking title in JT with SP funds does create a JT.

a. Putting SP into a joint bank account with ROS provision.


*Look at whether item was purchased with CP or SP to determine presumption of CP or presumption of gift, and whether that presumption can be overcome with clear an convincing evidence showing otherwise.

Agreements altering character of assets (Premarital or marital agreements)

1. Must be in writing and signed by both parites

2. No consideration required

3. Agreement can govern disposition of property in any way.

4. Agreement can waive right to homestead, allowance, and can deal with any other matter including personal rights and obligations.

a. Unless this causes one party to be eligible for support under a public assistance program.

5. CANNOT limit rights regarding child support.

6. In order to set aside an agreement later, spouse must show by clear and convincing evidence  that:

a. It was not signed voluntarily, OR

b. Was unconscionable when made AND there was no fair disclosure of property/obligations, the right to disclosure was not waived in writing, and spouse had no adequate knowledge of property/obligations.


Liability on Contracts

Each spouse has equal management and control over all community property, and thus have full power to buy or sell CP and contract debts without other spouse's consent. All funds borrowed by either spouse during marriage and all asssets purchased on credit during marriage are presumptively on Community credit, and thus create community obligations.

*Test: Was the obligation intended to benefit the community?

1. First, creditor can go after CP, then SP of spouse that signed the agreement.

2. Joinder of both spouses are required for guaranty, indemnification or suretyship, and acquistion, encumberance, or disposition of real property.

a. in the event of no joinder: First creditor can go after SP, then CP but only to extent of signing spouse's contribution to the CP

b. Exception: Spouses can be estopped if they know of the transaction and accept its benefits.

3. CP can be reached in satisfaction of a premarital debt, but only to extent of the value of spouse's contribution to the CP which would have been spouse's SP if single.

4. Liability in Torts are CP if tortfeasor was serving a community purpose and was performing an act for benefit of community.

a. includes recreational activities

Can a spouse make a gift to community property without the other spouse's consent?

A spouse can make a reasonable or moderate gift of CP without other's consent so long as they are not excessive, fraudulent, or capricious.


(Washington) Gift is void in its entirety

(California) Gift voidable as to one-half

(Texas) Considers relation of donee to donor spouse, amount of gift in relation to size of community, and whether spouse is adequately provided for.


*Watch out for financial misconduct

Multistate problems

1. You don't lose common law property rights by moving to a CP state.

a. However, for purposes of marital property division upon divorce, property acquired in another state which would have been community property if acquired while domiciled in AZ is treated as CP subject to equitable division

Property acquisitions outside the marital relations

1. Property relationships between unmarried cohabitants are governed by equitable principles. If there was an agreement that they would pool their income and expenses, property is divided in accordance with their contractual expecations.

a. While consideration is required, consideration can be of different kind so long as not solely sexual services.

2. If married person marries another person (bigamy) and acquires property, it is not CP.

a. Treated as a partnership if person was unaware of other marriage (putative spouse). Putative spouse will get half, and married person will get half to be divided with spouse.

b. If other person was aware of other marriage, she gets nothing.

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