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Community Property/Marital Property
University of California, Davis School of Law
Ikemoto, Lisa C.

I.         Introduction to Martial Property
A.    Family economics:
1.     Assets
2.     Income
3.     Debt
4.     Mutual obligation of support btw spouses
5.     Obligation to support children
B.    Legal issues upon divorce/termination
1.     Property, spousal support, child support
a.     All of these issues are interdependent
b.     Typically look at the available income at the time of separation
C.    Marriage and partnership end in one of two ways
a.     Divorce or termination
b.     Death of one spouse or partner
D.    What does marital ppty law do that ppty law does not?
1.     Addresses rights/responsibilities of two ppl who are married to each other bc they are married- not bc they have executed a deed
2.     Addresses rights/responsibilities btw married couples and 3d parties
E.     Wirth v. Writh (NY. 1971): 30 years marriage. Both spouses worked. For 22 years, pooled earnings to pay household expenses and make investments. H’s salary went into a saving plan, and W’s salary into living expenses. Divorce. W claims saving acct, home, life insurance, retirement. H is the sole title holder of all. W argues a equitable remedy-i.e. that but for my contribution, it would not be possible to gain these properties”
1.     NY does not have marital ppty law at that time: ppty law goes by title usually
2.     Ct: Need evid of the promises of repayment OR putting title in her name as well
a.     Problems:
i.      Her contributions cannot be counted by this method
ii.     Implicit agreement of marriage: an economic partnership
iii.    Financial burden of the states due to W without ppty
F.     Two types of marital ppty laws: (1) CL (most states); and (2) Statutory CP law (8 states including CA+Wiscon)
1.     Key points of distinction
a.     What event triggers marital ppty law?
b.     What is marital ppty?
c.     What is the standard of ownership and distribution?
d.     How forms of joint ownership are recognized?
2.     What event triggers martial ppty law?
a.     CL:
i.      Divorce
ii.     During marriage, no martial ppty rights; title controls
iii.    Marital ppty recognized at divorce only
iv.    If marriage ends in death, “elective share” rules triggered
·         Primary concern is the spouse at divorce and what their contributions during marriage.
·         Assumes that spouses should have separate economic interest, and that they only take joint tenancy if they wish
·         No clear assumption of equal distribution
b.     CP:
i.      Marriage and state-registered domestic partnership
ii.     Begins to accumulate upon marriage/partnership
iii.    CP divided and distributed at end of relationship, by divorce or death
·         Marriage is an economic and equal partnership.
·         Assumes that despite actual earnings, that spouses will share equally
3.     What is martial ppty?
a.     CL
i.      Hotchpot approach: everything couple owns at divorce is marital ppty-no matter how it was acquired. Ct has jx over everything
ii.     Marital and Nonmarital/individual ppty: distinguishes btw ppt acquired bf marriage (individual) and ppt acquired after marriage (community)
·         when was it acquired?
b.     CP
i.      Basic criteria
·         When was it acquired?
Ø During the marriage: CP
Ø Before the marriage/after the separation: SP
·         (If it is acquired during the marriage), How was it acquired?
Ø By labors: CP
Ø By gift: SP
4.     What is the Standard of Ownership and Distribution?
a.     CL: equitable distribution
b.     CP: Split in jx
i.      Majority: equitable jx std
·         Basically leaves a lot to the discretion of the courts. Ct will try and match current needs and contributions of individual parties to the financial state
ii.     CA+2states: equal division, 50-50.
·         No discretion over how CP divided at divorce
c.     Equal Division
i.      3 CP states, including CA
ii.     Growing numbers of CL states
d.     Equitable distribution: facts and circumstances analysis
i.      Most CL states
ii.     Most CP states
iii.    Great discretion on the courts: depending on the facts of the states
e.     Painter v. Painter (1974, NJ). NJ CL/Equitable distribution
i.      Marital and Nonmarital/individual property:
·         When it was acquired
ii.     Equitable distribution
·         Factors taken into account: std of living, ability of self supporting
·         Current need, past contribution
5.     How forms of joint ownership are recognized?
a.     CP (CA)
i.      Tenancy in common
ii.     Joint Tenancy
iii.    CP
b.     CL states
i.      Tenancy in common
ii.     Joint Tenancy
iii.    Tenancy by the entirety (marital ppty, only at divorce)
 
II.       Premartial Ks and Transmutation During Marriage
A.    Ways of bypassing the CP rules
1.     Premarital agreements
2.     Transmutation agreements during the marriage
3.     Settlement agreement upon divorce
B.    Premartial Agreement
1.     General Rule: Premarital agreements are enforceable except in extreme cases.
a.     Key date: 1/1/1986
i.      Pre-1986: CL
ii.     From 1986: CA UPAA
b.     Reasons for getting premarital agreements
i.      Planning for short-term marriage
ii.     Protection against creditors
iii.    If unequal wealth in the marriage, protects assets for the wealthier spouse
iv.    Estate planning device-e.g. protect ppty for children of a prior marriage
v.     Eliminate conflict during the marriage (e.g. take out the trash once a week)
vi.    State hopes and dreams (e.g. we’ll overseas for one year)
vii.   To control behavior that might cause divorce (e.g. “bad boy” clause-penalties if one partner commit adultery)
2.     Common Law
a.     Statute of Frauds: must be in writing and signed by both parties
b.     Public policy Standard:
c.     Marriage of Dawley (1976). Betty and James agree on a temporary marriage, since they are expecting a child out of wedlock & Betty can lose her job as teacher. Sign a premarital agreement (1) to keep ppty separate; (2) to get support for Betty, her other daughter, and child until not being minor. Married for 8 years. Betty challenges the agreement at dissolution.
i.      Betty’s 1st arguments: Contrary to public policy bc encourages divorce and is contrary to policy of upholding marriage if these agreements contemplate a dissolution at a specific date
·         Ct: Will only refuse to enforce a premarital agreement IF the terms itself promote divorce (objective basis)
Ø E.g. Limiting spousal support would violate this rule
·         Marriage of Noghrey: Short marriage. Both signed an agreement that W would get the house+$500K upon divorce. H owned the house during marriage. Thus, W does better under agreement than under CP.
Ø Ct: Unenforceable bc W does better upon divorce than staying in the marriage
Ø If somebody is benefited by the divorce financially, then it might trigger public policy problem
v as long as there is an incentive to divorce on one spouse
Ø So how to carry out intent of this agreement so that it will enforceable upon divorce? A: Transfer ppty upon marriage. Then, at divorce it will be SP
ii.     Betty’s 2nd argument: Undue influence
·         Ct: No bc both were in bad bargaining position
·         Differs from Estate of Nelson: (50-year old real estate broker marries his 22-year-old secretary. Has her agree to waive all CP rights, spousal support, attorney fees.) Here, “shocks the conscience” with substantial difference in legal/financial sophistication, age difference.
·         In comparison, Betty and James are educated, adults, professionals, older.
iii.    Client advise:
·         Should have a schedule of assets to help distinguish SP and CP. Also helps with creditors claims during marriage.
d.     Subject matter: property, child support, spousal support
e.     Enforcement Standards:
i.      Voluntary
ii.     Not unconscionable
3.     California Premarital Agreement Act (CPAA)
a.     NOT APPLIED RETROACTIVELY. Thus, the C/L governs agreements bf 1986.
b.     Provisions
i.      §1611: No consideration needed to enter into agreements
ii.     §1612: Subject matter of statute: (a) Property…(7) etc. clause: “Any other matter, including their personal rights and obligations, not in violation of public policy or a statute imposing a criminal penalty”; (b) cannot limit or waive child support
iii.    §1615: Standard of enforcement. Agreement can be i

and herself whereas 1941 through 1944 returns were her returns in which she reported half of the total earnings of her husband and herself
iii.    Criticism:
·         Oral statements may be made without the intent of changing title or character of the ppty. He is dead
·         Differing reasons for filing taxes might exist
iv.    General rule: Cts less likely to find the agreement is enforceable if the person dies in debt. If the marriage ends in divorce, then unlikely to find the agreement enforceable bc this is a “he says/she says”
d.     Referring to house as “ours”, mere use of the property during marriage, the use of community funds to pay mortgage, W’s subject idea are not enough to show intent to change character. Marriage of Jafeman.
i.      House owned bf marriage by H. Marriage. Then use CP funds towards the house. At divorce, W argues that ppty was transmuted from SP into CP. W’s evidence: H referred to house as “our house” + using community funds towards the house to pay mortgage + lived in house during marriage + subjectively thinking that ht e house was “ours”.
e.     However, if the transmutor is a person particularly protective of his SP, referring to “ours” can be sufficient evidence of the transmutation of the SP into CP. Estate of Nelson.
i.      50-year old real estate broker marries 22-year-old secretary. Apt building bought bf marriage by H, but H referred to ppty as “ours”
ii.     Ct: Yes, SP was transmuted to CP.
iii.    This is commercial ppty owned by a real estate broker, who is pretty protective of his SP interests. Also, filed joint tax returns.
f.      Rule of Easy Transmutation (in CL period): Quality of evidence is low.
i.      Pros: informal requirements protect ppl who do not have legal knowledge and consequences
ii.     Cons: unsure of the reliability of the evid
·         Even with the almost same evid, it is hard to predict the outcome
·         Might encourage litigations bc the rule is not really clear
3.     Post-1984 Transmutation-NOT RETROACTIVE        
a.     Provisions:
i.      § 852(a): Must be in writing by an express declaration that is made, joint in, consented to, or accepted by the spouse whose interest in the ppty is adversely affected.
·         Increase the certainty
·         To make admissible evidence clear: no extrinsic evidence
ii.     § 852(b): A transmutation of real ppty is not effective as to third parties without notice thereof unless recorded
iii.    § 852(c): Exceptions for gifts btw spouses
b.     The requirement of an express written transmutation is absolute and is not subject to an exception for part performance. The writing needs language expressly stating the transmutation. Marriage of Benson, 2005.
i.      H claims he conveyed W his community property interest in their home after she orally promised to waive, in writing, her community property interest in H’s retirement accounts. No writing was made.
ii.     IRS documents do not expressly state the transmutation, so no sufficient evidence of transmutation.
iii.    The policies governing premarital Ks does not apply equally to postnuptial transmutation: prospective spouses negotiate at greater arm’s length than married couples
c.     The writing requirement needs an express declaration in writing that the transmuting party knew that she/he was giving up her interest. Estate of MacDonald