Term
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Definition
- Property owned by either spouse before marriage
- Property acquired during marriage by gift, will, or inheritance
- Property acquired during marriage with the expenditure of separate funds
- The rents, issue, and profits derived from separate property. |
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Term
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Definition
Property, other than separate property, acquired by either spouse during marriage.
The most common examples are
(i) salary or wages earned by either spouse
(ii) the income from community assets |
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Term
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Definition
A California is a community property state.
All assets acquired during the marriage are presumptively community property.
All property acquired before marriage or after permanent separation is presumed to be separate property.
All property acquired by gift, devise, or bequest is presumed to be separate property.
All property acquired by expenditures of separate funds and are also separate property.
Quasi-community property is acquired by either spouse that would have been community property had the spouse been domiciled in CA at the time of acquisition.
Upon dissolution of marriage, all CP assets are subject to equal division unless statute or policy require otherwise. |
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Term
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Definition
The community property system applies to registered domestic partners upon filing a Declaration of Domestic Partnership with the Secretary of State. It is available only to
-(i) same sex couples, and
-(ii) elderly opposite-sex couples receiving Social Security benefits.
Same-sex couples lawfully married after In re Marriage Cases but before the effective date of Proposition 8 may claim community property rights as spouses, not as domestic partners. |
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Term
| When does the economic community end? |
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Definition
Permanent physical separation
AND
Intent not to resume the martial relation |
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Term
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Definition
| Absent a property settlement agreement, all community property (assets and liabilities) must be divided equally - 50/50 |
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Term
| Economic Circumstances Exception |
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Definition
| Can have non-pro rata division, giving particular asset wholly to one spouse and “cash out” other spouse with other assets (with each spouse getting 50% of total value). |
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Term
| Statutory Exceptions to “Equal 50/50 Division |
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Definition
- One spouse misappropriates CP, whether before or during pendency of divorce.
- One spouse has incurred educational debts; treated separately as separately incurred debt (take law school loans with you!)
- One spouse incurred tort liability not based on activity for benefit of the community.
- Personal injury award is CP but on divorce is awarded to injured spouse (unless interests of justice require otherwise) |
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Term
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Definition
| Neither spouse can make a gift of CP without the other spouse’s written consent. |
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Term
| Consequence of gift of CP without consent |
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Definition
During marriage - other spouse can set aside gift
At divorce - other spouse can take offsetting CP
After death - other spouse can set aside gift (taken either from donee or estate of other spouse) |
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Term
| Exception to gift of CP without consent |
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Definition
| Federal law preempts state restraints on gifts of CP with other spouse's consent |
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Term
| Disposition of SP and CP ppty at death |
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Definition
| Each spouse has the power of testamentary disposition over all of his SP, but only over ½ of the CP. |
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Term
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Definition
- Take under will
- Take against the will by claiming 1/2 CP |
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Term
| Community Credit Presumption |
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Definition
| Funds borrowed during marriage, and goods purchased during marriage, are presumptively community credit |
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Term
| Primary intent of lender test |
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Definition
| borrowed funds (and credit purchases) are classified according to the Primary intent of the lender. We look at where the lender is looking for satisfaction of the debt |
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Term
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Definition
| Spouses are subject to fiduciary duties that arise from their confidential relationship, imposing a duty of the highest good faith and fair dealing with each other. If one spouse gains an advantage from a transaction, a PRESUMPTION OF UNDUE INFLUENCE arises. That spouse has the burden of proof to show she did not breach her fiduciary duty. |
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Term
| Premarital agreements (PMA) |
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Definition
| Premarital agreements must be in writing, signed by both parties. Oral agreements are invalid. |
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Term
| Exceptions to PMA requirements |
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Definition
- Oral agreement is executed (i.e. fully performed) e.g. promise to name someone as a beneficiary on insurance and actually do so
- Estoppel based on detrimental reliance
e.g. marry someone in reliance on their promise not to assert a claim against your estate |
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Term
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Definition
| Just about anything (e.g. each party’s salary and wages will be that parties SP; that neither will claim a family allowance in other’s estate; that an agreement will govern disposition of property on separation, divorce, or death) |
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Term
| Defense to enforcement of PMA |
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Definition
- Not voluntarily signed
- Unconscionable |
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Term
| Not voluntarily signed (Defense to PMA) |
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Definition
A premarital agreement shall be deemed not voluntary (and thus unenforceable) unless court finds that party challenging agreement:
- represented by independent legal counsel at time agreement signed (or waived in separate writing)
- given at least 7 days to sign
- if not represented by independent counsel, was fully informed in writing (in language in which party proficient) of terms and basic effect of agreement. Party must execute document declaring that they got information and identifying who provided it. |
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Term
| Unconscionability (Defense to PMA) |
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Definition
Unconscionability claims divide into two areas, those involving spousal support
and those involving anything else. |
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Term
| PMA involving spousal support unconscionable |
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Definition
- Party challenging was is not represented by independent legal counsel at time signed
- Provision is unconscionable at the time of enforcement (even if party represented by independent legal counsel). |
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Term
| PMA involving anything else (i.e. spousal support) |
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Definition
Agreement unenforceable if unconscionable when made AND
(i) no full and fair disclosure of other party’s property or financial obligations;
(ii) right to disclosure not waived in writing; and
(iii) party challenging had no adequate knowledge of other party’s property or financial circumstances. |
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Term
| Unconscionable Definition |
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Definition
| Matter of law to be decided by the court, not a question for the jury. |
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Term
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Definition
| Agreement during marriage to change the character of an asset |
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Term
Transmutation Requirements
(Before and After 1985); Exception |
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Definition
Before 1985, oral transmutations were permitted, whether by express agreement or agreement-in-fact.
After 1985, must be
- in writing (NOT testamentary instrument or one creating will)
- signed by spouse whose interested is adversely affected; and
- must explicitly state that a change in ownership is being made.
EXCEPTION - gifts of tangible property of personal nature (e.g., inherited jewelry) which “are not substantial in value taking into account the circumstances of the marriage |
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Term
| Married Woman’s Special Presumption |
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Definition
Where CP was used to take written title in a married woman’s name before 1975, and the title did not indicate CP or joint tenancy was intended, the property is presumptively wife’s SP.
This is an exception to the general principle that an asset titled in one spouse’s name does not overcome the community presumption. |
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Term
| Rebuttal Married Woman’s Special Presumption |
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Definition
Not rebuttal as to third party
Rebuttable between H and W (i.e. H could show he did not intend to make a gift to W, but had some other reason for taking title in her name) |
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Term
| Married Woman’s Special Presumption Summary |
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Definition
- Title is taken in W’s name alone before 1975 (property is W’s SP)
- Title in name of W & H before 1975, but title is not taken in joint tenancy form, and not as “husband and wife” or “Mr. & Mrs.” (property is ½ W SP, ½ CP)
- Title in name of W and some third party before 1975 (W would be tenant in common with third party) |
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Term
| Joint and Equal Form Title (Lucas) |
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Definition
Property acquired during marriage in joint and equal form is presumptively CP [it is inconsistent with the preservation of a SP interest in the asset].
Any SP used to acquire the asset is presumed to be a gift of SP unless there is an oral or written agreement to the contrary.
Lucas applies at DEATH. |
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Term
| Joint and Equal Form Title (Anti-Lucas) |
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Definition
OWNERSHIP – Property acquired during marriage in joint and equal form is presumptively CP, and is subject to equal division on divorce. CP presumption can be rebutted by:
- Express statement in the deed or other instrument of title that the property is SP
OR
- Written agreement by the parties that the property (or portion thereof) is SP.
REIMBURSEMENT – Spouse who made contributions of SP to the acquisition or improvement of CP is entitled to reimbursement without interest for contributions to Down payment, Improvements, or Principal payments on mortgage (DIP). But no reimbursement for SP used to pay interest on mortgage, taxes, insurance, or maintenance.
Anti-Lucas applies at DIVORCE |
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Term
| Proration Rule (Installment Purchase) |
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Definition
Applies to installment purchase before marriage, payment with CP funds after marriage (or during marriage W inherits land subject to mortgage and pays off note with CP funds).
The community estate takes a pro rata portion of the property, measured by the amount (percentage) of principal debt reduction attributable to the expenditure of community funds.
Formula: Principal debt reduction attributable to CP/Purchase Price
*Not mortgage interest, ppty taxes, or insurance |
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Term
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Definition
Whole Life Insurance: Proration Rule Applies
Formula: Premiums paid attributable to CP/ Total premium payment
Term Life Insurance Policy: Last premium determines the character |
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Term
| Community Funds to improve OWN SP |
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Definition
Expenditure of CP does not change ownership character of house.
Other pouse can bring a claim for reimbursement: community gets the greater of the CP expenditure or the increase in value. |
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Term
| Community Funds to improve OTHER SPOUSE'S SP |
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Definition
Expenditure of CP does not change ownership character of house.
SPLIT of authority
- No reimbursement – Give rise to presumption of gift to separate estate; presumption of gift can be overcome only by evidence of an agreement to reimburse community estate.
- Reimbursement – Other cases rejected presumption of gift and granted reimbursement. |
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Term
| Separate funds to improve CP |
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Definition
Divorce - ANTI-LUCAS APPLIES: When asset is held in joint and equal form, and SP is expended to improve CP, upon divorce, the party who expended SP would get reimbursement (without interest) for DIP (down payment, improvements, principal payments).
Death - LUCAS APPLIES: When asset is held in joint and equal form, and SP is expended to improve CP, upon death, there would be NO claim for reimbursement unless there was proof of an agreement to reimburse. |
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Term
| Commingled Bank Accounts Generally |
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Definition
The mere fact that SP funds are commingled with CP funds does not transform or transmute the SP into CP.
Spouse seeking to establish that ppty is SP has burden of showing that it was purchased with SP funds. |
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Term
| Family Expense Presumption (Commingled Bank Accounts) |
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Definition
It is presumed that expenditures for family expenses were made with community funds, even though separate funds were available.
Family expenses paid with SP presumed to be gift to the community with no reimbursement intended, unless there is agmt to contrary. |
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Term
| Establishing SP asset (from Commingled Bank Accounts) |
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Definition
SP proponent can satisfy burden of proof to show ppty purchased with SP funds by
- Exhaustion Method
- Direct Tracing Method (Quick in, quick out) |
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Term
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Definition
| At the time the asset was purchased, community funds in account already been exhausted by payment of family expenses, and therefore asset must have been purchased with SP funds. |
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Term
| Direct Tracing Method (Quick in, quick out) |
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Definition
| At time asset purchased, there were separate funds available, and the SP proponent intened to use those SP funds to purchase SP asset. |
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Term
| Characterizing Business Assets |
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Definition
Biz owned before marriage and greatly increases in value during marriage
- Pereira - Personal skill and effort
- Van Camp - Valuable Company or Asset
Court will use the one that most achieves substantial justice between the parties. |
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Term
| Pereira Definition and Formula |
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Definition
Use where spouse’s time, skill, and effort are major factors in growth of business. Look for instances where spouse contributed creative ideas or develops new techniques, and/or worked long hours and only drew modest salary.
Formula: Pay interest (legal rate of 10% annum) on value of business at time of the marriage (SP); the rest is CP. |
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Term
| Van Camp Definition and Formula |
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Definition
Use where capital investment was the major factor in the business’s growth, and spouse’s skills and efforts were less of a factor. Look for instances where spouse was paid substantial salary and large bonuses
Formula: Start with value of spouse’s services at market rates MINUS family expenses paid from community funds EQUALS community component. The balance is SP. |
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Term
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Definition
Employee retirement benefits accumulated during marriage, whether or not vested at the time of divorce, are CP.
Under ERISA, NPS interest terminates if she predeceases the participant. |
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Term
| Retirement Benefits (Vested at divorce) |
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Definition
Vested at divorce:
Nonparticipant spouse (“NPS”) in a qualified pension plan divorces a participant spouse, her community property interest is recognized; under federal law she can get a qualified domestic relations order (“QDRO”) and receive payments from the plan. |
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Term
| Retirement Benefits (Not vested at divorce) |
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Definition
Years of service while married/total years employed to retirement = CP
Two options:
- “If and when received decree” – if and when received, other spouse gets her share
- “Cash her out” |
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Term
| Disability Retirement & Workers’ Compensation Benefits |
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Definition
| Treated as wage replacement. Thus, classified according to when they are received - not when earned. |
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Term
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Definition
SPLIT
- SP because it replaced lost earnings which after a divorce or permanent separation would be SP
- CP because it arose from a collective bargaining agreement and was thus earned by employment during marriage |
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Term
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Definition
| If the option is awarded during marriage but does not vest until after the economic community has ended, the proration formula that is used in determining what portion of the option is CP and what portion is SP depends on the primary intent of the employer in granting the option. |
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Term
| Primarily to reward (Stock Option) |
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Definition
Marriage of Hug - stock options awarded for past services will be considered a form of deferred compensation.
CP = Fraction is the date of employment
[Years from the date of employment to date economic community ends/ years from date of employment to date options become exercisable] x Shares of Stock |
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Term
| Primarily to encourage (Stock Option) |
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Definition
Marriage of Nelson - stock options awarded to encourage spouse to remain with company.
CP = Fraction of the date option granted [Years from date options are granted to date economic community ended/years from date options granted to date options become exerciseable] x Shares of Stock |
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Term
| Goodwill of a Professional Practice |
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Definition
Goodwill of a professional practice (to the extent acquired during the marriage) is community ppty subject to division upon divorce.
Goodwill are those qualities that generate income beyond that derived from
- the professional’s labor; and
- reasonable return on capital and physical assets.
Goodwill is primarily established by expert witness testimony as to its value |
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Term
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Definition
Community is entitled to reimbursement for cost of education if the education
- enhanced a spouse's earning capacity and
- paid with CP funds |
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Term
| Defenses to reimbursement (Educational Expenses) |
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Definition
- Community has already substantially benefited - If more than 10 years have elapsed since the degree was awarded, the presumption is that the community has substantially benefited, meaning that unless presumption is rebutted, no reimbursement.
OR
- Other spouse also received a CP-funded education |
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Term
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Definition
CP is liable for the tort liability of either spouse
- Committed while performing an act to benefit community - liability FIRST paid with CP, then from SP
- Committed while NOT performing an act to benefit community - liability FIRST paid with SP, then from CP |
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Term
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Definition
Other spouse was a tortfeasor, recovery is SP.
Third party tortfeasor, recovery is CP.
- Divorce or legal separation: awarded entirely to injured spouse if it can be traced and not already spent
- Death: treated as CP |
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Term
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Definition
| Each spouse has equal management and control over all community property, and thus has full power to buy or sell CP and contract debts without the other spouse’s joinder or consent. |
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Term
| Personal Belongings Exception (Management Rules) |
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Definition
One spouse cannot sell or encumber personal property used in family dwelling (furniture, clothing, etc.) without written consent of other spouse.
Transaction voidable by other spouse at any time. |
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Term
| Business Exception (Management Rules) |
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Definition
Managing spouse can act alone in all transactions, if the spouse sells, leases, or otherwise encumbers substantially all of the personal property used in the business, must give written notice to other spouse.
Applies when a spouse operates a business interest that is all or substantially all community personal property and has primary management and control of all the business. |
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Term
| Conveyance of CP Real Ppty (Management Rules) |
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Definition
Joinder of both spouses is required.
There is a one year statute of limitations for other spouse to demand reconveyance.
Neither spouse can transfer or encumber their ½ interest in real CP (house). Only entire interest can be transferred or encumbered. |
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Term
| Family Attorney's Real Ppty Lien (Management Rules) |
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Definition
| Spouse can unilaterally encumber her ½ interest in real CP to pay the family attorney representing her in a divorce action. |
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Term
| CP Debt (Management Rules) |
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Definition
Spouses have equal management powers, and either spouse can enter into contract and or incur debt.
The earnings of a nondebtor spouse cannot be reached for premarital debts if
- held in a separate account
- not commingled with other CP funds |
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Term
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Definition
Quasi-CP treated the same as true CP.
Property acquired while the couple was domiciled in a non-community property state, which would have been classified as community property had it been acquired under the same circumstances in California, is quasi community property. |
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Term
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Definition
California does NOT recognize CL marriages (where people live together and hold themselves out as married)
Exception – Where common law marriage is validly contracted in another state |
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Term
| Putative Spouse and Quasi-Marital Ppty |
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Definition
Spouses who are not lawfully married but one spouse has an objectively reasonable and good faith belief that they were lawfully married.
If so, then assets acquired by the putative spouses are quasi-marital ppty and split 50/50 when seperate. |
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Term
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Definition
Community is entitled to reimbursement for cost of education if the education
- enhanced a spouse's earning capacity and
- paid with CP funds |
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Term
| Defenses to reimbursement (Educational Expenses) |
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Definition
- Community has already substantially benefited - If more than 10 years have elapsed since the degree was awarded, the presumption is that the community has substantially benefited, meaning that unless presumption is rebutted, no reimbursement.
OR
- Other spouse also received a CP-funded education |
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Term
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Definition
CP is liable for the tort liability of either spouse
- Committed while performing an act to benefit community - liability FIRST paid with CP, then from SP
- Committed while NOT performing an act to benefit community - liability FIRST paid with SP, then from CP |
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Term
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Definition
Other spouse was a tortfeasor, recovery is SP.
Third party tortfeasor, recovery is CP.
- Divorce or legal separation: awarded entirely to injured spouse if it can be traced and not already spent
- Death: treated as CP |
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Term
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Definition
| Each spouse has equal management and control over all community property, and thus has full power to buy or sell CP and contract debts without the other spouse’s joinder or consent. |
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Term
| Personal Belongings Exception (Management Rules) |
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Definition
One spouse cannot sell or encumber personal property used in family dwelling (furniture, clothing, etc.) without written consent of other spouse.
Transaction voidable by other spouse at any time. |
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Term
| Business Exception (Management Rules) |
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Definition
Managing spouse can act alone in all transactions, if the spouse sells, leases, or otherwise encumbers substantially all of the personal property used in the business, must give written notice to other spouse.
Applies when a spouse operates a business interest that is all or substantially all community personal property and has primary management and control of all the business. |
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Term
| Conveyance of CP Real Ppty (Management Rules) |
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Definition
Joinder of both spouses is required.
There is a one year statute of limitations for other spouse to demand reconveyance.
Neither spouse can transfer or encumber their ½ interest in real CP (house). Only entire interest can be transferred or encumbered. |
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Term
| Family Attorney's Real Ppty Lien (Management Rules) |
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Definition
| Spouse can unilaterally encumber her ½ interest in real CP to pay the family attorney representing her in a divorce action. |
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Term
| CP Debt (Management Rules) |
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Definition
Spouses have equal management powers, and either spouse can enter into contract and or incur debt.
The earnings of a nondebtor spouse cannot be reached for premarital debts if
- held in a separate account
- not commingled with other CP funds |
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Term
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Definition
Quasi-CP treated the same as true CP.
Property acquired while the couple was domiciled in a non-community property state, which would have been classified as community property had it been acquired under the same circumstances in California, is quasi community property. |
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Term
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Definition
California does NOT recognize CL marriages (where people live together and hold themselves out as married)
Exception – Where common law marriage is validly contracted in another state |
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Term
| Putative Spouse and Quasi-Marital Ppty |
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Definition
Spouses who are not lawfully married but one spouse has an objectively reasonable and good faith belief that they were lawfully married.
If so, then assets acquired by the putative spouses are quasi-marital ppty and split 50/50 when seperate. |
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