Community Property Outline – Jo Carrillo
1. When looking at CP problems you go asset by asset.
2. Overview and History
a. Overview of Marital Property in the US
i. 2 Basic types of Marital Property in US
1. Common Law Title System (majority approach)– husband and wife own all of the property individually except that which they expressly agree to hold jointly; idea that title controls ownership – when spouses divorce we look at the title to ownership, whoever has title controls the asset.
a. Origin: This was inherited from English Common Law – under English Common law when a couple married woman lost her legal identity; she lost all her rights to manage and control property. Nobility wanted to merge wealthy families. Husband controlled all property including that which woman brought to the marriage.)
b. Title controls
c. Special legislation equalizes parties’ rights at divorce and death.
2. Community Property System (minority system 10 states) – spouses own a significant portion of their property jointly unless they have agreed to hold it separately. Each spouse deemed co-owner of property acquired during marriage regardless of the value of his or her actual contributions to the acquisition.
a. Origin: This came to use from the continental European sphere. This was more the property law of peasants. Recognized when two ppl got married they might be working the farm together and they both had interest in the property generated. Two partners were equity partners. Each spouse retains individual legal identity. Each spouse retained right to contract with one another. But they could not overreach. State of CA had to adopt CP by treaty b/c it promised not to divest property ownership. But CA ended up getting a hybrid system b/c the legislature was really against the CP system. So we are CP but the legislature started to build in common law aspects. (Eg. CA Constitution pg. 19 “the husband shall have the management and control of the separate property of the wife.”)
b. Property is classified as either community or separate property. Separate property includes property owned prior to marriage, and property acquired by gift or inheritance.
c. §760 Community Property Defined “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.” – you will always cite this!!!
i. Any property acquired during the marriage is presumed to be community property. If either party wants to rebut this presumption they have to come forward with evidence.
ii. Note this presumption benefits the community.
iii. This rule applies regardless of how title is held.
iv. It also applies to any property where there is a question as to the date it was obtained. It is them presumed to be acquired during marriage and therefore is CP
d. §770 Separate Property of Married Person:
i. All property owned by the person b/f marriage
ii. All property acquired by the person after marriage by gift, bequest, devise, or descent
1. Note: in CA this includes wedding gifts
2. Bequest, devise, or descent – these are fancy ways of saying gift (after death, by will, trust)
iii. The rents, issues, and profits of the property described in this section
1. If separate property earns more money the money that it earns is SP. (This is a CL view that we have maintained in CA.)
iv. A married person may, without the consent of the person’s spouse, convey the person’s separate property.
e. Equality of interest: title alone does not determine ownership;
f. Characterization (CP or SP) determines rights and obligations of parties. THERE ARE ONLY TWO TYPES OF PROPERTY THE FAMILY CAN OWN: SP or CP
g. Protections of CP system – When two people come together they create wealth for the partnership. CP rules are kind of like a partnership charter. BUT, CP system is entirely optional. The only obligation that is not optional is the obligation to support one’s spouse during marriage. This cannot be changed. (This is codified at §720 – “Husband and wife contract toward each other obligations of mutual respect, fidelity, and support.” – They can however, waive the obligation to support each other after marriage.)
i. CP system is default but optional, and thus can be modified by contract – if ppl do nothing but get married the system goes into operation. But the couple can alter the system by contract.
ii. Spousal support is available upon divorce
iii. Assumptions available to benefit community property – idea that property is family property.
h. Three principles of CP:
i. Contractual modification – spouses could alter CP system; always a right, you cannot take it away. The parties are not waiving their freedom of contract rights.
ii. Tracing – aka the doctrine of source; when we can’t tell who owns what we are going to trace back to the dollars that purchased that thing to tell who the owner is.
1. See section 760 pg. 22-23 “Except as otherwise…” creates presumption that property acquired is CP
2. CP$ -> CP
3. SP$ -> SP
iii. Equality of interest – (50/50 principle) On the date that property is acquired title to the property vests (as a fee simple absolute) in each spouse 50/50. (other state follow an equitable split – look for fairness, whatever the judge feels is fair it does not have to be 50/50); All 50 states have this at divorce now; California follows 50% 50% split (at the time the asset is acquired).
1. Eg spouse 1 goes out and earns $100 check. This is CP. On the date of earning 50% of check is owned by spouse 1 and 50% is owned by spouse 2.
contract at an arms length. During marriage, spouses can amend/revoke PMA, but deal as fiduciaries
b. Premarital contracts in California – premarital contracts allow a couple to modify, customize, or limit the default rules of CP by contract before or during marriage.
i. Pre-1985: parties could enter into PMAs about marital property; contracts typically involve a wealth disparity and/or age difference; If ppl got married b/f 1985 and are divorcing today their PMA would be governed by this law.
1. Consideration was in the mutual consent of the parties
2. Fraud, duress, or undue influence negated consent
3. Any contract against public policy was unenforceable. Two types of terms that were against public policy: 1) PMA term enforceable only at divorce allegedly promoted divorce; and 2) PMA with a post-divorce spousal support waiver [SSW] clause was against public policy.
a. The whole contract would be throw away in this instance
b. A term that only became valid upon divorce would be found to be against public policy. In this case the whole contract would be thrown out. See Nougry case.
i. CA courts read this term to mean that it encourages divorce b/c it only becomes effective upon divorce.
ii. BUT, PMA’s only become effective at divorce so how can we say that it is against public policy.
ii. Premarital agreements are often used by ppl that have a lot of money or people marrying individuals with a lot of debt.
iii. Premarital agreements are always litigated.
1. If you help someone draft a PMA you are going to see the inside of the courtroom if the ppl divorce.
iv. What is a PMA? – See sample PMA handout in class
1. It is a contract made in contemplation of marriage.
2. Parties are intending to get married
3. CFC §1610 Definitions
a. “Premarital agreement” means an agreement between prospective spouses made in contemplation of marriage and to be effective upon marriage.
b. “Property” means an interest, present or future, legal or equitable, vested or contingent, in real or personal property, including income and earnings.
4. CFC §1611 Form and Execution of agreement; consideration
a. A premarital agreement shall be in writing and signed by both parties. It is enforceable w/o consideration.
b. NOTE: if a writing does not exist some common law contractual defenses are available
i. Latches – does not apply in marriage