1) Community Property-
a) CB 151-159
i) Traditional Community Property
(1) Basics
(a) Based on Spanish Law
(b) Reflects the economic union aspects of marriage.
(c) All Property acquired during marriage, except property acquired by gift, bequest, devise or descent, is considered community property. This character is retained even if the property is sold, i.e. the proceeds are either community or individual property.
(d) Any property obtained during the marriage is presumed to be community unless there is evidence to the contrary—in whose name the title is made is not evidence.
(e) The spouses may change the character of the property (transmute) by agreement—except in Texas.
(f) Either spouse may control the property except that some transactions such as gifts to third persons or conveyances require consent of both spouses.
(g) Each spouse owes fiduciary duties to the other in respect of the property.
(h) Upon death, half of the property passes to the spouse and the other half to the successors. If the deceased spouse had conveyed property without authorization, the surviving spouse may be able to recover his half.
(2) Estate of Bray (Cal. 1964)- Appellant is wife of deceased. All property owned by spouses was community property. For years, deceased had put money into a joint savings account that was in his name and his son’s name (a son from a previous marriage). Deceased had also purchased bonds for his son. At death, appellant claimed half of the proceeds in the account and the bonds as community property and the son claimed them as surviving joint tenant. Trial court found that the son had given consideration for the accounts (by working with the father in his business) and that the wife was not, therefore, entitled to the proceeds as community property. Appellate court reversed. There was no bargain involved in the alleged transaction between father and son. The son did work for the father, but there is no evidence that the son did so as a bargain for receiving the funds in the account upon death. This is required to find a contract that would make the cash anything but a gift to the son outside the power of the husband to convey the wife’s half.
(3) Notes
(a) Classification of property as community can be difficult when the property involves non-community funds.
(b) Federal preemption (for example a provision making co-ownership of US bonds trump state community property law) is active in this area.
ii) Uniform Marital Property Act (1983)
(1) Adopted only in Wisconsin, but provides a reference for all states.
(2) Retains the general character of marital and individual property, but clarifies certain issues regarding insurance, commingled funds, etc.
b) Salestore- see materials- 22pages
c) Community Property
i) Upon death, community property is distributed differently than individual property.
(1) Probate Code § 45- how community property is distributed if a person dies intestate.
(a) On the intestate death of one of the spouses to a marriage, the community property estate of the deceased spouse passes to the surviving spouse if:
(1) no child or other descendant of the deceased spouse survives the deceased spouse; or
(2) all surviving children and descendants of the deceased spouse are also children or descendants of the surviving spouse.
(b) On the intestate death of one of the spouses to a marriage, if a child or other descendant of the deceased spouse survives the deceased spouse and the child or descendant is not a child or descendant of the surviving spouse, one- half of the community estate is retained by the surviving spouse and the other one-half passes to the children or descendants of the deceased spouse. The descendants shall inherit only such portion of said property to which they would be entitled under Section 43 of this code. In every case, the community estate passes charged with the debts against it.
(2) Probate Code § 38- how non community property is distributed upon intestate death.
a) Intestate Leaving No Husband or Wife. Where any person, having title to any estate, real, personal or mixed, shall die intestate, leaving no husband or wife, it shall descend and pass in parcenary to his kindred, male and female, in the following course:
1. To his children and their descendants.
2. If there be no children nor their descendants, then to his father and mother, in equal portions. But if only the father or mother survive the intestate, then his estate shall be divided into two equal portions, one of which shall pass to such survivor, and the other half shall pass to the brothers and sisters of the deceased, and to their descendants; but if there be none such, then the whole estate shall be inherited by the surviving father or mother.
3. If there be neither father nor mother, then the whole of such estate shall pass to the brothers and sisters of the intestate, and to their descendants.
4. If there be none of the kindred aforesaid, then the inheritance shall be divided into two moieties, one of which shall go to the paternal and the other to the maternal kindred, in the following course: To the grandfather and grandmother in equal portions, but if only one of these be living, then the estate shall be divided into two equal parts, one of which shall go to such survivor, and the other shall go to the descendant or descendants of such deceased grandfather or grandmother. If there be no such descendants, then the whole estate shall be inherited by the surviving grandfather or grandmother. If there be no surviving grandfather or grandmother, then the whole of such estate shall go to their descendants, and so on without end, passing in like manner to the nearest lineal ancestors and their descendants.
(b) Intestate Leaving Husband or Wife. Where any person having title to any estate, real, personal or mixed, other than a community estate, shall die intestate as to such estate, and shall leave a surviving husband or wife, such estate of such intestate shall descend and pass as follows:
1. If the deceased have a child or children, or their descendants, the surviving husband or wife shall take one-third of the personal estate, and the balance of such personal estate shall go to the child or children of the deceased and their descendants. The surviving husband or wife shall also be entitled to an estate for life, in one-third of the land of the intestate, with remainder to the child or children of the intestate and their descendants.
2. If the deceased have no child or children, or their descendants, then the surviving husband or wife shall be entitled to all the personal estate, and to one-half of the lands of the intestate, without remainder to any person, and the other half shall pass and be inherited according to the rules of descent and distribution; provided, however, that if the deceased has neither surviving father nor mother nor surviving brothers or sisters, or their descendants, then the surviving husband or wife shall be entitled to the whole of the estate of such intestate.
ii) A person can only dispose by will property that is his own. A person owns one-half of community property.
iii) States that have community property (8)- LA, TX, NM, AZ, CA, WA, NV, ID. Alaska has common law as default but allows a couple to opt into community property. The uniform marital property act has been adopted only by Wisconsin. It is a good uniform law, but relies on community property principles and naively believes that 42 states will adopt these principles
iv) Definitions- all property owned by married people is divided into community property and individual property.
(1) Family Code § 3.001- Separate Property is
(a) Anything acquired before marriage
(b) Anything acquired during marriage by devise (will), descent (intestacy), or gift.
(c) Any personal injury collections except that portion meant to compensate for expenses incurred by the community or loss of earning potential, etc, which would have become community property.
(d) NOTE: this definition leaves out a couple of other categories that are considered SP.
(i) Proceeds of SP
(ii) Increase in Value of SP- if stock value increases (but not if dividends are paid).
(2) Family Code § 3.002- Community Property is anything other than separate property.
v) Inception of Title Theory- property is labeled at the time of inception of title and doesn’t switch.
(1) H inherits 100 IBM shares. This is separate property. If he sells the shares and buys Xerox, those new shares, which are proceeds of the separate property, are also separate property.
(2) If the Xerox triples in value and then H sells, the cash is separate property.
(3) Any income from separate property is community property. Thus, if dividends were paid on Xerox stock, those dividends would be community property. There are a couple of exceptions to this rule.
(a) If a couple agrees that income from SP is SP- Tex. Const. Art. XVI, S. 15 says that a couple can agree to this.
(b) If one spouse makes a gift of property to the other spouse, income from the gift is SP.
vi) Presumption of Community Property- Family Code § 3.003- The spouse who asserts claim of SP has burden of proof. That burden is clear and convincing evidence.
(1) W gains a large inheritance and deposits the money into a joint banking account. Probate Code § 438 says that the account is owned by each spouse in proportion to the contribution. But commingling makes it impossible to determine who has contributed what. The lowest intermediate balance can be used to determine what portion is still W’s SP (supp. 8).
(2) Commingling- illustrates the presumption towards CP. If property is commingled, it will become very difficult to prove its SP status and will thus become CP.
(a) Example- A joint bank account. W deposits an inheritance check of $50k into account. H continues to auto-deposit his paycheck into the account. In most states, commingling would lead almost instantly to CP label. In Texas, two rules allow W to retain some of her SP.
(i) First out rule- any money taken out of the joint account is considered to be first CP.
(ii) Lowest intermediate balance rule- the lowest balance is considered to be the amount of SP retained in the account.
(b) Solutions- keep separate property separate- keep separate bank accounts. Because interest off separate bank account is CP, perhaps put in a trust.
(3) Title doesn’t matter in a CP state. What matters is when and how the property was obtained.
vii) When a spouse dies, the surviving spouse does not really inherit community property. Instead, he is already thought to have owned the half he gets to keep.
viii) Right of Economic Contribution
(1) H buys house before marriage. Makes down payment and a couple of mortgage payments, but still owes substantial amount when he gets married. After marriage, the mortgage payment is made out of CP, but the house retains its SP status under the inception of title theory. Legislature has enacted two statutes to help with this problem.
(a) When CP is used to pay down an encumbrance on SP, there is a right to economic contribution. (Supp 5).
(b) When CP is used to make a capital improvement to SP, there is a right to contribution.
(2) Formula for contribution (Supp 5). Tex. Fam. Code §3.403(b).
Equity in Property x Contribution of CP
Contribution of CP + Contribution of SP (CBE)
CBE = equity at date of first CP contribution + subsequent debt reduction with SP.
(3) 3.403(e)- free use and enjoyment is not considered in formula, but is relevant. So after the court determines that there is a right to economic contribution, this right can be reduced by a showing that the spouse who did not own the SP benefited (for instance by living in the house).
(4) When
divests the parent and child of all legal rights and duties with respect to each other, except that the child retains the right to inherit from and through the parent unless the court otherwise provides”
v) Dual Inheritance: most people inherit f/ both mother and father, this is not dual inheritance. Example: parents die and child is adopted by grandparent. May child inherit from them as grandchild and as a child? May depend on whether there are other children or GCs. Unlikely that child will take in both capacities.
(1) UPC: child may only take in one capacity, must select largest share.
(2) Texas: does not address dual inheritance issue.
vi) Adult Adoption: e.g., property owner adopts an adult. TX Prob. §40 makes no distinction, but:
(1) TX Fam. §162.507(c): “the adopted adult retains the right to inherit f/ the adult’s biological parents. However, a biological parent may not inherit through an adopted child.” Could adopt young mistress, but why not use a will?
(2) Oddity: notice that a “child” is subject to court severance per TX FC §161.026(b)—why are adults better suited to inherit?
vii) Adoption and Testamentary Gifts: if will makes gift “to my children,” does that include adopted children?
(1) TX Fam. §162.017(c): “The term child, descendant, issue, and other terms indicating the relationship of parent and child includes an adopted child unless the context or express language indicates otherwise.”
(2) Texas Case Law: however, a reference in will to the birth process is construed as showing an intent to exclude adopted children (child born).
(3) Hypo: elderly client has 50 yr. old son and daughters he wants to inherit. What if 50 yr. old son “adopts” his girlfriend? TX statute would permit girlfriend to inherit—so carefully draft an “cut out” clause.
(a) Express Clause: to cut out “adopted children after age 21” will work.
(4) “I Leave to my Wife Lilly:” is sentimental clause, but could create rift in testamentary succession if Lilly dies. Lawyer should check-up regularly. Second, a lawyer should never assume that H will predecease W
(5) Alternative Beneficiaries: always create several alternatives; “my wife…if she survives me, and if not my issue per stirpes, etc.”
e) Illegitimate Children
i) TX Fam. Code §160.201: sets different presumptions and standards of proof for maternity and paternity (makes biological and practical sense).
(1) Mother-Child Relationship: is est. b/n a woman and child by
(a) 1. Birth: woman giving birth to child.
(b) 2. Adjudication: of woman’s maternity.
(c) 3. Adoption: of the child by woman.
(d) Detecting the child’s mother is obviously easier than detecting the child’s father
(2) Father-Child Relationship: is est. b/n man and child by:
(a) 1. Unrebutted Presumption: under TX Fam. §160.201. (man is married to mother at birth, married to mother an child is born 300 days later, voluntarily asserted parenthood, etc.)
(b) 2. Effective Acknowledgement: of paternity under chapter D.
(c) 3. Adjudication: of the man’s paternity.
(d) 4. Consent: man consents to assisted reproduction by his wife.
ii) TX Prob. §42: inheritance rights of children
(1) 42(a): Maternal Inheritance: “child is the child of his biological or adopted mother.”
(a) A child can inherit from the child’s mother
(2) 42(b): Paternal Inheritance: paternal inheritance rights are established (1) if presumed under circumstances described in TX Fam. §160.201, dad has adopted, made a sworn statement of paternity, adjudicated, etc.
(a) Court Petition: “person claiming to be a biological child…who is not otherwise presumed to be (above)…may petition the probate court” to establish paternity.
(b) Clear and Convincing: “If court finds by clear & convincing evidence” he was father, child is treated as any other child
iii) §53(A)(B)(C) provides elaborate scheme for genetic testing. Just recently in probate code.
iv) POSTHUMOUS CHILDREN: §41(a) says that baby who is conceived but not born counts as a child only if the class includes expected children.
f) Unworthy Heirs
i) Parents who fail to support children are not allowed to inherit from those children.
(1) See TX §41(e)
(a) child under the age of 18
(b) clear and convincing evidence (usually a preponderance of the evidence in civil cases)
(c) voluntarily abandoned and failed to support child for three years before start of child’s death OR
(d) didn’t support child during pregnancy, abandoned child
(e) been convicted or placed on supervision for death or certain injury of a child under certain penal codes (includes possession of child pornography)
(2) UPC says that a parent who neglected child cannot inherit from them.
UPC §2-11
