Community Property CA State

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Overarching Concepts

Community Property (760): Except as otherwise provided by statute, all property, real or personal, wherever situated, acquired by a married person during the marriage while domiciled in this state is community property. Courts can infer from the length of marriage and no other source available that property was acquired during the marriage.


--[if !supportLists]-->- !--[endif]-->Simplified: Except as otherwise provided by statute, all property acquired by a married person during the marriage while domiciled in CA is presumed to be Community Property. Courts can infer from the length of marriage and no other source available that property was acquired during the marriage. '''''




Separate Property (770): Separate property of a married person includes all property owned by the person before marriage, all property acquired by the person after marriage by gift, bequest, devise, or descent, the rents, issues, and profits of the property described in this section. A married person may, without the consent of the person's spouse, convey the person's separate property.




Transmutation: Agreement between spouses made during the marriage to alter the ownership characterization of the property.




'Tracing:' The character of the property is determined by its source. A change in form doesn’t change its character.




Classify the players: Who’s alive? Who died? What are their relationships? (spouses, putative, domestic?)


Classify the asset: Is it community property, separate property, quasi-community, quasi-marital?

Rebutting GPCP Through Separation

Separation Rule/Rebuttal to GCP: The earnings and accumulations of a spouse while living separate and apart from the other spouse, are the separate property of the spouse.


'STEP 1': Identify the date of separation.


'STEP 2': Figure out when there was a complete and final break in the marital relationship: Date of separation is determined by (1) the clear intent of one spouse to end the marriage, and (2) this intent must be clearly communicated and conduct must be consistent with the intent, such as a physical separation.

Rebutting GPCP Through Transmutations

1: Identify the character of the asset in question (i.e., SP/ CP/ JT)




'2:' Transmutation: Agreement between spouses made during the marriage to alter the ownership characterization of the property. If there is any writing associated with an alleged transmutation, must do analysis:

Before 1985, a valid transmutation. To change the character of the property, you may do so by actions, conduct, or statements. It can also be implied. Starting 1/1/1985, A valid transmutation of real or personal property requires a written, express declaration conveying a message transmuting the property signed by the adversely affected spouse.

'3:' Small Gift Exception: written requirement does NOT apply to gifts between spouses for (examples) clothing, apparel, jewelry, or tangible articles of personal nature to be used solely by the spouse being gifted the item. The item must not be of substantial value given the circumstances of the marriage at the time the gift was made.

Rebutting GCP - Married Woman’s Special Presumption (Only use 1974 and earlier) (before 1/1975)

MWSP raises a presumption of SP when a title is in writing and acquired by a married woman during marriage prior to 1/1/75.
  1. a title (title in typically real property, and other property capable of holding title)
  2. is in writing, AND
  3. acquired by a married woman
  4. prior to 1/1/1975 ''''

Easy Transmutation Rebuttal: Husband may rebut this presumption by saying there was an agreement between Husband and Wife that even if the title is in Wife’s name, it’s really community property.

Special Circumstance when titled “Wife, as her Separate Prope'rty”''''

RULE: If the title of the property is “Wife, as her separate property”, the husband may only rebut MWSP and show it’s community property if he can prove: fraud, duress, or undue influence.

Intestate Succession for Separate Property

Separate Property: what percentage does of the property does the surviving spouse get of the separate property of the decedent?


--[if !supportLists]-->1. !--[endif]-->The entire intestate estate if the couple had no children


--[if !supportLists]-->2. !--[endif]-->Half of the intestate estate if:


--[if !supportLists]-->■ !--[endif]-->Decedent leaves only one child: 50% to the spouse, 50% to the child


--[if !supportLists]-->3. !--[endif]-->'⅓' of the intestate estate (when there is more than 1 child)


--[if !supportLists]-->■ !--[endif]-->More than 1 child: 1/3 to the surviving spouse, 2/3 split among all the children

What is the Character of the Property?

'Joint Tenancy: Husband and wife own equal, undivided 1/2 shares in the property. Joint Tenancy avoids probate because upon death of one of the joint tenants, their undivided share automatically goes to the surviving joint tenants. '




Is there a death' or divorce?, Was the marriage actually dissolved? '


Death

Divorce

Right of Survivorship: For joint tenancy, when one joint tenant dies, the deceased joint tenant’s ½ immediately passes to the surviving joint tenant. The surviving joint tenant then has a 100% interest in the property, making it the surviving spouse's sole property.




If the property is truly held in joint tenancy, the dead spouse may not bequest their 50% share because that part of the tenancy automatically goes to surviving spouse.


Community Property Presumption for Joint Tenancy: Effective 1/1/1984, any property titled in joint tenancy at any time in any year will be considered community property at divorce.




Any property titled as “Joint Tenant and NOT Community Property” is not considered community property per the statute.




Constitutional Issue: In the event of a JT issue, to rebut the 1984 statute-enacted CP presumption, there must have been a valid oral, written, or IMPLIED agreement of the characterization of property. An implied agreement can be due to the spouses’ ignorance about the character of the property.




Is there a Vested Property Interest?: If there was a valid agreement orally or implied, then the “Joint Tenancy Considered Community Property Presumption” cannot apply. Where a couple acquired assets before 1984 and one party is arguing that it is all or more than half their separate property under an oral agreement, then the statute is taking away a vested property right (because they had something vested more than half)



To rebut the title in JT treated as Community Property Presumption: (a) The title must read “Joint Tenant and not community property” (or it clearly stated that this is not community property in the deed) or (b) a written agreement (transmutation)

Community Contributions to Education

CFC §2641: Contributions to Education


--[if !supportLists]-->(a) !--[endif]-->“Community contributions to education or training” as used in this section means payments made with community or quasi-community property for education or training or for the repayment of a loan incurred for education or training, whether the payments were made while the parties were resident in this state or resident outside this state.


--[if !supportLists]-->(b) !--[endif]--> Subject to the limitations provided in this section, upon dissolution of marriage or legal separation of the parties:


--[if !supportLists]-->(1) !--[endif]-->The community shall be reimbursed for community contributions to education or training of a party that "substantially enhances" the earning capacity of the party. The amount reimbursed shall be with interest at the legal rate, accruing from the end of the calendar year in which the contributions were made.


--[if !supportLists]-->- !--[endif]-->Student spouse reimbursed the community (come back)


--[if !supportLists]-->- !--[endif]-->This is why "big degree" things


--[if !supportLists]-->- !--[endif]-->on exam always say plus 10% interest


--[if !supportLists]-->(2) !--[endif]-->A loan incurred during marriage for the education or training of a party shall not be included among the liabilities of the community for the purpose of division pursuant to this division but shall be assigned for payment by the party.



General Rule: College degrees and governmentally issued licenses to practice a profession are considered to be separate property of the acquiring spouse even though earned by labor during marriage.



Rule Exception: The community is entitled to reimbursement for community contributions to education or training of a party that substantially enhances the earning capacity of the party. The enhanced earning capacity does not necessarily need to be realized, just




Qualified Expenses: Expenses must be directly related to the education, such as books, tuition, lab fees. Living expenses are not included.


Right of Reimbursement: The community is entitled to reimbursement for the community funds used for payments directly related to qualifying education expenses with interest. The rate of interest is 10%




10 Year Presumption:


--[if !supportLists]-->- !--[endif]-->If married less than 10 years community may be entitled to reimbursement because the community has not substantially benefited from community contributions to the education or training.


--[if !supportLists]-->- !--[endif]-->Married for more than 10 years (may not be entitled to reimbursement): the community has substantially benefited from community contributions to the education or training.


--[if !supportLists]-->- !--[endif]-->1st year of 10-year timeline begins at 1st year of education, not completion.




Waiver: A waiver for the right of reimbursement must be in writing, oral waivers are not accepted.

Putative Spouses & Quasi Marital Property

Putative Spouse: At least one spouse has a good faith belief that they are married, but they aren’t. Good faith is an objective standard.




Quasi-Marital Property: Acquisitions that would have been community or quasi-community had the marriage been valid - this property is treated the same as community property.




Rights of Surviving Spouse at Death: If there is no bigamy, the surviving spouse has the same rights of a lawful spouse.




Property at “Divorce”:




Bigamy: Must have one legal spouse and one putative spouse. Determine what each spouse would get

Domestic Partners

Domestic Partners Prior to 2005: Unmarried Cohabitants: people who are not married and don’t have a good faith belief they are lawfully married but they are in a long term (like marriage) relationship.




Domestic Partners: Starting 1/1/1999, same sex couples were able to register as Domestic Partners with very limited rights; they were not entitled to property rights. From 1/1/2005, domestic partners were given the same property and “marital rights” as opposite sex marriages, including the right to community property.


--[if !supportLists]-->- !--[endif]-->Those eligible must each file a declaration of Domestic Partnership with the Secretary of State. Registered DPs on or post 1/1/2005 have the same rights and obligations as a married couple and are entitled to quasi-marital property which is treated the same as CP. (see chart below though for constitutional wrinkle depending on the date of registration)



Putative Domestic Partners: Those that have a good-faith belief that they are registered domestic partners are considered Putative Domestic Partners and are entitled to quasi-marital property which is treated the same as CP. (see chart below though for constitutional wrinkle depending on the date of registration)




DPs NOT registered: if the couple is not registered as a domestic partnership they only have the rights they attained through contract.




DP Upon Death: Upon the death of a DP who leaves SP undisposed of by will, the surviving partner receives the same intestate share as would a lawful surviving spouse.

Two Arguments For Domestic Partnerships Started from 1999-12/31/2004''''

Constitutionally Invalid

The statute is a constitutional taking without due process because the Domestic Partners had no community property rights before 2005. Enacting a statute that automatically transforms what was assumed to be separate property into community property interferes with the spouse’s vested property right in his separate property.




Result: A Domestic Partnership registered before 1/1/2005 only starts accumulating community property from that date onwards.

Constitutionally Valid

The statute is valid because there was sufficient notice to the Domestic Partners that what was once separate property would then be considered Community Property. The two year notice was sufficient for the partners to dissolve their partnership and keep what was their separate property.




Result: a domestic partnership registered before 1/1/2005 started accumulating community property from the moment their partnership was registered.

Quasi-Community Property

Step 1: Identify the spouses


Step 2: Identify death or divorce. Divorce qualifies for quasi-community property. If the spouse dies, then what would have been classified as community property is actually that spouse’s separate property.




Quasi-Community Property: Property acquired while the couple was domiciled in a non-CP state, which would have been classified as CP had the parties been domiciled in California at the time of acquisition.The property retains its character during the course of the marriage, it is not treated as community property until death or divorce.




Identify the player:


--[if !supportLists]-->- !--[endif]-->Death: there is no quasi-community property, when the spouse dies the property is their separate property and may be disposed of however they want.


--[if !supportLists]-->- !--[endif]-->Divorce: the property that would be considered community property if it was acquired in CA is treated as community property for divorce purposes only




Property acquired by a married couple domiciled in California is considered community property no matter where the property is located. If the property is located out of CA jurisdiction, courts can do two things with that property. First, they may compel the spouses to convey the property to the other spouse or if a land conveyance would not be appropriate or if that cannot be done without disrupting the character of the property, they may compel one spouse to take other actions to award money value to the other if one is granted a larger portion of the distribution.

Commingled Funds

Commingled Funds: Combining community property and separate property funds into a bank account. Commingling does not change the character of the funds. The separate property proponent must demonstrate the funds are separate property.




General Presumption: Funds used from a commingled account are presumed to be community property (and such things purchased with community funds are community property) unless shown otherwise. Once Separate Property commingled with community property, the separate property owner has the burden to provide evidence that separate property was used to make the purchase. They can do so by direct or indirect tracing.




Direct Tracing: To directly trace the separate property funds you must have (1) an accurate accounting to show that there was sufficient separate property in the commingled account at the time to purchase the alleged separate property AND (2) The separate property proponent shows that they had intent to use their separate property to buy what they bought.




Indirect Tracing: Show that at the time of the purchase, there were no more community funds in the account. Presumption is that community funds are used first for community/family expenses.

Separate Property Contributions to the Community - Apportionment

Examples: Loans/mortgage to purchase a home, improvements to an existing asset, down payments, payments that reduce the principal of the loan used to finance purchase. Does not include general maintenance.

Separate Property contributed before 1/1/84 ''''

Separate Property contributed on/after 1/1/84''''

Separate property contributions to a community asset titled in joint tenancy is absorbed into the community asset. The separate property owner is not entitled to any reimbursement unless there is an agreement otherwise. The agreement may be oral, written or implied.

Death

Dissolution

No right of reimbursement unless an agreement for reimbursement. Separate property contributor is entitled to exactly the amount they contributed unless a valid written waiver to the right of reimbursement otherwise. The reimbursement DOES NOT INCLUDE INTEREST.

Division of a Business

When separate and community property combine in a business, courts need to divide the separate property and community property at dissolution. Depending on what the main contributing factor was for the business’ success will drive which formula to choose.




Identify the funds used to start the business. Use the first chart if separate funds are involved. Use the second one only if a business with community funds/labor are used and then there’s a separation.

When Separate Funds Are Involved

'Periera'

When effort from the community / Labor is a Community Effort. The non-business working spouse will want this, values




(ex: spouse’s management, spouse’s ideas, enginuity, the spouse did something that made biz profitable.)

'Van Camp'

When the business was successful for the character of the business. The business-working spouse will want this, values separate property




(ex: success because of brand name, location, no real effort from a spouse.)

Separate Property Spouse:


--[if !supportLists]-->● !--[endif]-->[1] (Separate Property) + (Sep. Prop x .10)(# Years invested) = Total Separate Property Portion


--[if !supportLists]-->● !--[endif]-->[3] ½ Community Property Portion + Total Separate Property Portion = Grand Total for Separate Property Spouse




The Other Spouse:


--[if !supportLists]-->● !--[endif]-->[2] Value of Business - Total Separate Property = Community Property Portion.


--[if !supportLists]-->● !--[endif]-->[4] ½ of Community Property Portion = what this spouse gets at dissolution



Separate Property': What was the amount of separate property invested into the business initially? ''''

Fair Market Salary: What is reasonable compensation for the spouse’s efforts into the business?




FMV Salary - Salary Actually Taken over course of years = Community Property




Non-Business Spouse gets: ½ of Community Property Value




Separate Property:


Value of the business - Community Property Portion = SP


Total separate property = ½ Community Portion + SP

When Community Property Solely Involved (Imperata)

'When there’s labour from one spouse during a period of Separation. ' Reverse Van Camp


If you contributed labor after separation, we want to give the separate property compensation for labor post-separation

The Community Interest = Community Contribution at time of separation (labor etc) + (Community Contribution)(10%) Fair Salary - Any salary taken after Sep = Separate property




Value of business - Separate Property = Community Property