Community Property

Pereira is used when the W/H’s management was the primary cause of the business’ growth. The SP consists of the manager’s capital plus a fair rate of return for each year. (The usual legal rate is 10%). The remainder is CP. Here,

Van Camp is applied when the character of the business was the primary cause of the growth. Under Van Camp, the manager’s services are valued at the going market salary. The amount of family expenses that were paid from the business earnings are then subtracted. The remainder, if any, represents the community portion of the business. The remainder is SP. Analyze the facts under Van Camp.

Education: and training received during marriage are not CP assets subject to division. However, the community may be entitled to reimbursement when community funds were used to pay for the education or training of a spouse and that education substantially enhanced the earning capacity of the spouse. Loans still outstanding at divorce are assigned entirely to the educated spouse. Here,

When CP and SP funds are used to purchase an asset, the CP and SP acquire a pro rata ownership interest in the asset. To determine the respective shares of ownership, you start by figuring out the percentage that each contributed to the purchase price. Each estate is given its contributions to the equity plus a proportional share of any appreciation. If the property was acquired on credit, the credit is treated as a contribution toward the purchase price and either the CP or SP will be given credit for the loan depending on what property the lender relied upon when making the loan.

California is a community property state. All property acquired during marriage is presumed community property (CP). All property acquired before marriage or after permanent separation is presumed to be separate property (SP). In addition, any property acquired by gift, devise, or bequest is presumed to be SP. 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 the above principles in mind, we can now turn to the specific items of property involved.

Quasi-community property (QCP) is property acquired by either spouse that would have been community property had the spouses been domiciled in California at the time of the acquisition. At divorce, QCP is treated as though it were CP. Here,

A putative spouse is not lawfully married, but has a good faith belief based on objectively reasonable grounds that she is lawfully married. Once she learns that her marriage is invalid, she no longer accrues putative spouse property rights. In California, a putative spouse is treated as a legal spouse and takes according to quasi-marital property principles.

"Pereira is used when the W/H’s management was the primary cause of the business’ growth. The SP consists of the manager’s capital plus a fair rate of return for each year. (The usual legal rate is 10%). The remainder is CP. Here, Van Camp is applied when the character of the business was the primary cause of the growth. Under Van Camp, the manager’s services are valued at the going market salary. The amount of family expenses that were paid from the business earnings are then subtracted. The remainder, if any, represents the community portion of the business. The remainder is SP. Analyze the facts under Van Camp.

The MWSP applies to prop taken in the married woman’s name alone prior to 1975. According to the presumption, prop taken in the name of a married woman prior to 1975 is presumed to be her SP. The presumption is based on the fact that prior to 1975, the husband was given sole management and control of the community assets and thus, any property in the woman’s name was presumed to have been a gift to her.

Property that’s acquired before marriage, after permanent separation or divorce, or property that’s acquired at any time by gift, devise, or bequest. In addition, all rents, income, and profits that were separate property remain separate property.

When you pay family expenses out of a commingled account, it’s presumed that you drew down on the community funds first.

Comingling of funds does not necessarily change the character of a fund. However, the inability to demonstrate the origin of funds might b/c you have to show that you had SP and that you drew from the SP to make the purchase. Assets purchased from a commingled account are presumed to be community property. Burden is on the party trying to prove its separate property.

The Exhaustion Method: Requires you to show that at the time of the purchase, all of the community funds in the account were exhausted b/c they were spent on the community. In-and-Out Method/Direct Tracing: (If Community funds are not exhausted) Requires you to show that at the time the asset was purchased, you kept track in your commingled account that you drew money from the separate property.

In CA, ends upon “Permanent Separation.” 2 Requirements: a. Parties are living apart “actual physical separation”) and b. One has communicated to the other an intent not to continue the marital relationship

If your marriage is invalid b/c one party already married or one party lacked capacity, etc., if one party had a good faith belief that s/he was lawfully married, they are titled “putative spouses” and get the benefits of quasi-marital rule. Property acquired during course of putative marriage is called Q-M property. Spouse has same inheritance rights as CP spouse and ½ of assets upon divorce like CP spouse.

Any SP contributed to a CP asset entitles the Separate estate to reimbursement. Limited to the value of the property- if significant depreciation, just get the value of the property.

"CP gets reimbursed the amount spent or the increase in value to your SP, whichever is greater. Policy here: People discouraged from using CP to benefit own SP.

It used to be that a gift to the spouse’s SP was presumed. More recent cases have undermined that view. The more recent cases indicate that when CP is used to improve your spouse’s SP, a transmutation has occurred and it will be invalid unless there is a writing signed by the person whose interest is adversely affected, here, the spouse who used the CP.

a. Each spouse has undivided ½ interest in whole property. b. Management/control by both c. Protection at death d. Can NOT be severed.

a. Each spouse has undivided ½ interest in whole property. b. Right of survivorship: Survivor takes all. c. Generally disfavored. Must specify you want it or else CP. d. Severable: Becomes Tenancy in Common.

a. Can have unequal shares b. No right of survivorship c.Default assumption that an unmarried couple has TIC if nothing else specified.

Prior to 1984, when a couple took title to an asset in joint and equal form, any SP used to purchase the property was presumed to be a gift. The SP was not entitled to a separate ownership interest in the prop unless there was an oral or written agreement. In additional, the SP was not entitled to even reimbursement unless there was an oral or written agreement for reimbursement. When a married couple took title to an asset in joint tenancy between 1984 and 1987, the asset is presumed to be CP for purposes of divorce unless there is a writing to the contrary. Any SP used to purchase the asset is reimbursed to the SP contributor w/o interest. Beginning in 1987, this rule was extended to all jointly-titled assets.

Personal injury awards and settlements are CP if the cause of action arose during marriage. If the cause of action arose before marriage or after permanent separation, the award or settlement is SP. Personal injury awards against the other spouse are always the SP of the injured spouse. Upon divorce, CP PI awards are assigned entirely to the injured spouse so long as they have not been commingled with other CP funds and so long as the interests of justice do not require otherwise.

"Retirement benefits are CP if earned during the course of the marriage. When pensions and other retirement benefits are earned both before marriage and during marriage, cts use the time rule to determine how much of the pension is attributable to community labor and how much is attributable to separate labor. The community’s share is calculated by determining the number of years the pension was earned while married and dividing that number by the total number of years the pension was earned. Upon divorce, a pension may be difficult to divide b/c of the uncertainty associated w/the exact date of retirement. Cts can do several things upon divorce to divide a pension: 1. The court can assign the entire pension to the earning spouse and another community asset of equal value to the non-earning spouse; 2. The court can adopt a wait-and-see attitude by dividing the other community assets and reserving jx over the pension until the age of retirement; or 3. Calculate the community’s share of the pension, and order the pension plan administrator to make payments of one-half of the community’s interest directly to the non-earning spouse when the age of retirement is reached.

"Education and training received during a marriage are not CP assets subject to division. However, the community may be entitled to reimbursement when community funds were used to pay for the education or training of a spouse and that education or training substantially enhanced the earning capacity of the spouse. This right to reimbursement is the exclusive remedy for the community. Reimbursement is with interest.

"1) Where the other spouse has received comparable community-funded education during the marriage; 2) Where the education or training has reduced the need for spousal support for the educated spouse; or 3) Where the community has already benefited from the education or training. If more than 10 yrs have passed since the education or training, it is presumed that the community has already benefited from the education or training.”

The community has an interest in whole-life insurance policy to the extent that the community paid the premiums.

For term-life insurance, cts look at which estate paid the premium for the latest term (term that the spouse dies). If the community paid the premium, the community is entitled to the benefits of the policy.

“When community labor is used to enhance the value of a SP business, the community is entitled to share in the increased value. Courts use one of two formulas for calculating the community’s interest in the increased value of a SP business. Pereira is used when the increase in value of a SP business is primarily the result of community labor. Using Pereira, you determine the value of the SP at the beginning of the marriage and give it a fair rate of return over the course of the marriage. Normally, this is the legal interest rate calculated annually. The SP is awarded the initial value plus the fair return. The remainder is community. In this case, (apply to facts). Van Camp is used when the increase in value of a business is primarily the result of the unique nature of the SP asset. Using VC, you determine what a fair salary would be for the community labor. You subtract any salary already received and any amounts paid out of the business for community expenses. You multiply that by the yrs of the marriage. The result is your community property share. The rest is SP. In this case, (apply to facts).”