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California Marital Property
University of California, Hastings School of Law
Schwartz, Lois W.

 
Community Property
Schwartz
2014
 
 
Four Factors to keep in mind when answering CP Questions
1.       The date of the Marriage
2.       The date of the acquisition
3.       The date of the separation
4.       The date of the divorce (**or death of a spouse)
5.       IMPORTANT DATES:
a.        1975- Married woman’s presumption;
b.      1984-1987- Anti-Lucas (I) -(can be reimbursed for SP contribute to jointly titled property);
c.        1987- Anti-Lucas (II)- ANY Property- when a married couple takes title in any form it is presumed CP and Anti-Lucas (reimbursement) applies
d.      1985- transmutation of property (before they could be oral; after they need to be in writing)
Overview:
–          Community Property- All property acquired by a spouse during marriage while domiciled in California; CP is owned equally by both spouses—upon divorce CP must be divided equally (upon death spouse receives ½ share)
o   REMEMBER- Salary earned during marriage is CP—even if placed in a separate bank account
–          Separate Property- All property owned before marriage or acquired after permanent separation; all property acquired by a gift, request, devise or descent; Rent and profits of separate property; property acquired in exchange for separate property
–          Quasi-community property- all real or personal property, wherever situated, acquired by a spouse while domiciled elsewhere, which would have been CP if the acquiring spouse had been domiciled in CA at the time of acquisition (**and all property traced to QCP) ; treated like CP at divorce; survivor has ½ interest in decedents QCP—and decedent has no interest in survivors QCP(cant pass to someone else in will)
–          Permanent Physical Separation- requires 1. Actual separation 2. A communicated intent not to continue the relationship
–          Classifying property- 1. Determine the character of the source property 2. Trace forward through all transactions; exchange rule: a change in form does not change the character of the asset
–          Item Theory- each spouse is entitled to ½ of each item not half of aggregate
–          Transfer of CP- A spouse can transfer ½ of CP and all the SP by will—Gifts from CP can be voided by the non-consenting spouse
Introduction to Community Property
Maynard v. Hill- F: man attempted to divorce his wife without her knowledge; refused to pay alimony I: Is marriage a status, contract, or both? R: Marriage creates rights, duties, and obligations of law, consisting of more than a civil contract A: Marriage is an institution that creates a relationship—like that of a mother and child.  C: Marriage more than a contract
CA Definition of marriage= A civil contract that creates a legal relationship.  Need consent, license, and solemnization as authorized by this division.
–          Tracing Principle- Property acquisitions are traced back to their original source
o   All property acquired during marriage is CP EXCPET:
§  Property received by gift, bequest, devise, or descent
§  The rents of SP
§  Property acquired in exchange for SP
o   Overcome the CP presumption by showing:
§  The property was acquired by gift or is the fruit of SP; OR
§  Trace the acquisition back to SP source
o   Remember: ALL PROPERTY—Real/personal—wherever situated that is acquired with CP funds during marriage is CP
George v. Ransom- F: Creditor of husband trying to get dividends of wife purchased with her separate property R: TRACING PRINCIPLE- CA rule that separate property produces separate property and community property produces community property A: Wife is not the trustee of the husband—she has legal title to stock, he is not entitled to the dividends C: Origins of property determine its status
–          Equality Principle- Spouses have equal ownership interest in community property (Justice Stewart: the property interest of the spouses are present, existing, and equal)
Stewart v. Stewart: F: Wife wants accounting of community property I: Wife challenging the presumption that the husband is the manager of the community property R: She only has an expectancy in the property (like someone named in the rule) **NO LONGER TRUE: as of 1975- Civil code 1908= both spouses have an equal and present interest C: Spouses have present interest in community property
Agreements to modify Community Property rights
Premarital Agreements-  Parties can avoid the CA CP system by agreement
Require:
1. Good Faith
2. Writing –covered in SoF—
-unless there is detrimental reliance (promissor is estopped from asserting SoF—promisee must rely on promise for more than marriage) or
the executory promise was fully executed by the promisor (executory promise is one not performed—performance evidence of promise)  (EG. Man who promised wife beneficiary—does it—then changes it—she can enforce promise)
 3. Consideration not required
Note: Provisions limiting spousal support are enforceable –but higher scrutiny will be applied—will not be enforceable if (i) the party against whom enforcement is sought was not represented by counsel (ii) enforcement of the provision would be unconscionable at the time of enforcement
 
Unenforceable if:
–          1. Agreement limits child support
o   Spousal support agreement will be unenforceable if (i) the party was not represented or (ii) enforcement would be unconscionable at the time of enforcement
–          2. Agreement promotes divorce
–          3. Unconscionable WITH non-disclosure—need to lack adequate knowledge of wealth or waive right to disclosure
–          4. Involuntarily executed (NEED ALL OF THESE)
o    Legislature protects disadvantaged parties by requiring five things for voluntariness (CA F.C. 1615(c)) (Reaction to Bonds)
1.       Party against whom enforcement is sought saw independent counsel or waived the right in an express writing
2.       Seven days to review agreement and advised to seek counsel
3.       If no counsel—unrepresented party needs to fully understand the terms and sign a writing saying as much (proficient in the language)
4.       No duress, fraud, or undue influence in waiving any right
a.       Presumption of undue influence if a party is disadvantage (burkle) –overcome by showing the agreement was not obtained by fraud
5.       Any other factors the court deems relevant (catch all for shady conduct)
Agreements during the marriage (transmutation) –
–          Before 1985: oral and implied agreements were sufficient to be binding. 
–          After  1985: in order to change the character of the property, a signed writing is required—needs to expressly declare a change in ownership and be signed by the disadvantaged party.  **Exception: gifts of personal property= look at the circumstances at the time the gift was made (need to be insubstantial when they are made).  Eg. Steinberger- the ring was an investment that was community property b/c it was purchased with community property- Wife wanted a transmutation from the community property to her property (expensive enough to be more than insubstantial)
o   Look for agreements that dictate a share of a property as separate property—in that case the property is part SP/part CP, and the owner with the SP interest still gets hal

estments to purchase the house.  I: What is the status of the house R: Fundamental presumption that property purchased during the marriage is community property A: The defendant has not presented enough evidence to rebut the presumption of community property C: Presumption that property acquired during the marriage is community Property—presumption alone will support a finding in accordance with it
Commingled Funds- Property purchased with CP and SP is presumptively CP—but can be rebutted with proof 1. Exhaustion–That CP funds were depleted to pay family expenses 2. Direct Tracing—At the time there was sufficient SP in the account to pay
Fidelity v. Mahoney- F: Man buys a life insurance policy from a machine at the airport and names son (not wife) as beneficiary—it crashes and he dies I: Is the life insurance policy community property because the $1 policy was purchased with community funds? R: The court avoids inequitable decision of giving wife policy, by stating that the community property presumption does not kick in because the short duration of the marriage A: Court plays fast and loose with the presumptions—put the burden on her to show the origin of the five dollars C:  Short duration of marriage may place burden on party to est. the presumption should apply
Rebutting Presumptions- rebut  a presumption by tracing the asset back to separate property source of funds. ( Eg. Property was purchased with funds received through inheritance, funds earned prior to marriage.) REMEMBER **Separate property proponent may establish a pro rata ownership depending on what percentage of separate property funds purchased the asset.
Marriage of Ettefagh- F: husbands father gave him gifts of land—parties dispute as to when the gifts were made.  I: Battle of presumptions—which presumption applies? What is the standard for establishing a burden should apply? R: Presumption of community property can be rebutted by a preponderance of the evidence A: The case law is inconclusive regarding the standard  C: Need preponderance of evidence to rebut a presumption
Acquisition of Property before Marriage or During Marriage by Gift- considered separate property under CA F. C. 770.
Statutory Presumptions regarding separate property:  Onerous Title=Property gained through community property (generally community property); Lucrative Title= property acquired gratuitously (generally separate property); Also property acquired before the marriage or after separation is presumed to be separate property
Estate of Clark: F: Son dies shortly before H’s second marriage. H contests the will, inherits $150K I: When did the interest in the will vest (to determine SP/CP) R: Prop acquired by compromise is SP if the right compromised is separate. A: The settlement Mr. C obtained by contesting his son’s will constitutes separate prop. C: Legal Right to inherit existed before marriage so inheritance is separate property