CP

Characterization

100

What is the general presumption for property acquired during marriage in California?

How is it rebutted?

Under Family Code § 760, all property acquired during marriage and before separation while domiciled in California is presumed to be community property.

Tracing is used to rebut the community property presumption by showing that an asset acquired during marriage came from a separate property source.

200

Why is the date of separation critical for characterization purposes?

Because once spouses separate, earnings and accumulations acquired after separation are separate property, even before divorce is final.

300

When do you apply the Moore/Marsden formula? What is it?

Moore/Marsden applies to real property where community funds reduce principal debt on a separate property asset.

Marsden/Moore formula:

1. determine amount CP reduced principle

2. ÷ amount from 1 by purchase Price to get CP %

3. Determine appreciation value of houseduring marriage

4. multiple appreciation by CP%, to get CP share of appreciation

5. Add CP appreciation share to amount CP used for down payment

400

How are pensions categorized?

How do you determine the CP share of pensions?

Earned during marriage → CP

Earned before/after → SP

Defined benefit uses time rule: CP = years of service during marriage/total years pension earned

Defined contribution follows actual contributions (pro rata)

500

How are improvements treated when: 

1. One spouse uses SP to improve other spouses SP

2. One spouse uses CP to improve their own SP 

3. One spouse uses CP to improve other spouse SP

4. One spouse uses SP to improve CP

5. One spouse uses SP to improve their own SP

1. If after 2005, entitled to reimbursement

2. With consent -> transmutation; Without consent -> reimburse CP or increased value

3. Community reimbursed for half the cost

4. Reimbursement of SP after 1/1/84

5. no rule, spouse can do whatever w/SP

Characterization

100

How is property acquired outside California treated at divorce?

It is classified as quasi-community property if it would have been community property had it been acquired in California, and it is divided equally at divorce.

200

How are loans acquired during marriage characterized?

A loan acquired during marriage is presumed community property unless the lender relied solely/primarily on one spouse’s separate property, which is difficult to prove.

300

What is the cash out method and what is the wait and see method? 

Cash out method

- "before retirement, employee spouse keeps 100% of pension but spouse sets their CP pension share through other assets

Wait and see

Uses time rule → wait until employee spouse retires then collect CP share

400

How is a business owned before marriage characterized?
How are profits and growth during marriage characterized?

The business is separate property, but profits and growth during marriage may be partially community property depending on the cause of the increase.

Increase

1. when growth is primarily due to the spouse’s labor: The owner spouse receives a reasonable rate of return on separate capital as separate property; the remainder of the increased value is community property.

2. When growth is primarily due to external or market forces the community receives the reasonable value of the spouse’s services during marriage (minus compensation already received); the remainder of business growth is separate property.

500

What is the presumption of concurrent ownership on divorce? How is it rebutted? What happens when rebutted? What happens if not rebutted?

Presumed CP but is rebuttable by a clear statement/evidence of title being SP and not CP and it must be in writing (if after 1984)

If it is rebutted: apply pro rata apportionment

If it is not rebutted: apply 2640 and reimbursement for the amount of SP invested but may not exceed net value of property at time of divorce 

Debts

100

How is debt incurred before marriage categorized? who is liable for the debt?

Separate Debt of the debtor spouse

Non-debtor spouse SP not liable

200

How is debt incurred during marriage categorized? What is the non-debtor spouse liable for? 

Debt is community debt if incurred for the benefit of the community; It is separate debt is there is no community benefit.

Non-debtor spouse SP is liable for common necessaries and necessaries

300

After separation but prior to divorce, how are debts characterized and who is liable:

1. for necessaries 

2. For non-necessaries

1. Necessaries are considered separate debt of the spouse in the best position; the Non-debtor spouse's SP is liable only for COMMON necessaries

2. Non-necessaries are considered separate debt and the debtor spouse SP is liable

400

How is debt incurred after divorce is filed, but before final judgement, characterized? Who is liable?

Debt incurred before the final judgement is considered separate debt; the non-debtor spouse's SP is not liable

500

During marriage, what property is liable for a tort debt? What is the priority of payment for tort debts during marriage?

How are tort debts characterized on divorce? How are they divided?

During Marriage

- CP: Always liable
- Tortfeasor spouse’s SP: Liable
- Non-tortfeasor spouse’s SP: Not liable

If tort occurred during an activity for the benefit of the community:
1. Community Property first
2. Tortfeasor’s Separate Property second 

If tort occurred during an activity NOT for the benefit of the community:
1. Tortfeasor’s Separate Property first
2. Community Property second

On divorce

Depends on whether the tort occurred for the benefit of the community:

• Community debt → Tort committed during an activity benefiting the community
• Separate debt → Tort committed during an activity not benefiting the community 

Community tort debt: Divided equally (unless inequitable).
Separate tort debt: Confirmed to tortfeasor spouse without offset.

random

100

What type of goodwill is divisible at divorce?

Enterprise goodwill is divisible community property; personal goodwill is not.

200

When will the court not divide CP equally?

• CP personal injury damages must be awarded entirely to the injured spouse unless economic circumstances justify a different division.
• Where one spouse deliberately conceals or misappropriates community assets, the court may award some of the wrongdoer spouse’s CP to the innocent spouse.
• When the value of the community estate is less than $5,000 and the respondent spouse can’t be located and the case proceeds to default judgment the court can award all of the CP to the petitioner.
• When one spouse successfully sues the other domestic violence, damages can be paid out of the abuser’s share of CP.
• A spouse who has been convicted of attempting to murder their spouse, or convicted of sexually assaulting the spouse, receives no share of the victim’s pension.

300

what is a transmutation and what does it require? What is the presumption? how is it rebutted?

During marriage, a couple is free to change the character of property (CP to SP; SP to CP)

Effective January 1, 1985, transmutations must be in writing

Transmutation that economically advantages one spouse over the other is presumed to have been induced by undue influence. To rebut, the advantaged spouse must prove by a preponderance of the evidence that the disadvantaged spouse: (1) freely entered into the transmutation, (2) had full knowledge of the facts, and (3) understood the legal implications of the agreement.

400

what is the form of title presumption?

The owner of the legal title to property is presumed to be the owner of the full beneficial title.

Property acquired during marriage is presumptively CP. Rebuttable by tracing.

Evidence Code section 662 does not apply to property acquired during marriage when it conflicts with FC section 760.

500

What are Watts charges? When are they used? How are they calculated

What are Epstein credits? When are they used? what counts for Epstein credits?

Watts charges 

-  an equitable charge against a spouse’s share of community property when that spouse has exclusive post-separation use of a community asset (usually the family home) without paying rent.

- Used after separation and before trial when:
• The asset is community property, and
• One spouse has exclusive possession, and
• The other spouse is excluded from use.

- Calculation: Reasonable rental value × months of exclusive use → Then charge one-half against the occupying spouse’s community share.

Epstein credits

-an equitable reimbursement to a spouse who uses separate property post-separation to pay community debts incurred during marriage.

- Used after separation and before trial when:
• A community obligation exists (mortgage, taxes, insurance), and
• One spouse pays it with separate funds.

What qualifies as community obligation

• Mortgage principal
• Property taxes
• Insurance
• Other debts incurred during marriage

other

100

When is the waiver of spousal support allowed?

if the spouse is represented by independent counsel after 2002

200

What is the married woman SP presumption? How is it rebutted?

If acquired before January 1 1975: 

(a) If acquired by the married woman, the presumption is that the property is the married woman’s SP. 

(b) If acquired by the married woman and any other person, the presumption is that the married woman takes the part acquired by her as a tenant in common, unless a different intention is expressed in the instrument. 

(c) If acquired by husband and wife by an instrument in which they are described as husband and wife, the presumption is that the property is the CP of the husband and wife, unless a different intention is expressed in the instrument.

Rebutted
Rebuttal is by tracing plus the husband’s testimony that he did not intend a gift of his interest to wife

300

What are Marvin agreements? What can they do? 

Unmarried couple's contract regarding how property is owned and obligations/support

To bring a Marvin action, there must be evidence of a stable and significant relationship arising out of cohabitation.

400

How do you determine if a prenup is voluntary

Bond factors

• Presence or absence of coercion, fraud, duress, or undue influence.
• Did the party understand the agreement and, in particular, understand the rights being waived?
• Was there full disclosure of property and debts?
• Did the party have adequate time to study the agreement?
• Was the party represented by independent counsel?
• Was the party sufficiently mature and intellectually capable of understanding the agreement?
• Were the parties of equal or unequal bargaining power and sophistication?

FC 1615 elements

• The party against whom enforcement is sought was represented by independent counsel, or waived in writing the right to counsel (regarding waiver of spousal support, counsel can’t be waived).
• If the person did not have an attorney, the person was fully informed of the terms of the agreement and its effects.
• The person had at least seven days to consider the agreement, before signing.
• There was no fraud, undue influence, or duress.
• The parties had the mental capacity to enter the agreement. AND
• No other factors indicate involuntariness.

500

After the divorce court divides community property and debts, what property can creditors reach?

Creditors may reach only the property awarded to the debtor spouse

The non-debtor spouse’s awarded CP is protected

Exception only if the non-debtor spouse personally agreed to liability