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8/12/2019 California Bar Exam Lecture Notes - Community Property
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CALIFORNIA COMMUNITY PROPERTY
I. COMMUNITY PROPERTY
A. The community property system views the marriage as a community in which each spouse is an equal partner. (OL I.A.)
EXAMLE!
I" X is marrie#$ every #ime earne# #uring the marriage %elongs to %oth X an# her spouse. I" they were to #ivorce$ "ive
cents woul# go to X an# "ive cents woul# go to her spouse.
B. The community property system is primarily create# %y statute. (OL I.&.)
'. The statutory community property scheme in ali"ornia is set "orth primarily in the ali"ornia amily o#e (*am.
o#e+).
,. A lot o" governing law also set "orth %y cases.
act patterns will usually loo- li-e this! ouple coming together in a true marriage or marriage alternative.
Acquiring property$ assets an# incurring #e%t. eath or #ivorce at the en#. /ill always say *answer
accor#ing to A law.+ hronology0or#er an# #ates0are critical.EXAM
TI
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II. FORMS OF PROPERTY OWNERSHIP
A. Separate propertyis! (OL I.)
roperty owne# %y one spouse %e"ore marriage$ a"ter separation$ or acquire# %y one spouse #uring marriage %y gi"t$ will$
or inheritance$ is separate property
'. There may %e property that loo-s li-e a gi"t %ut is actually compensation "or wor- per"orme# #uring marriage.
Anything receive# in e1change "or la%or #uring marriage$ is community property.
,. ategories o" separate propertya. *2ents$ issues an# pro"its+
%. roperty receive# in e1change "or separate property
EXAMLE!
3toc- given to you %y your gran#"ather on your '4th %irth#ay. ivi#en#s are pro"its "rom your separate property.
ivi#en#s are separate property.
I" you occasionally loo- at your stoc-$ it will still %e separate property. I" you quit your 5o% an# spen# all #ay
tra#ing stoc- an# %uil#ing a port"olio$ this is consi#ere# time$ e""ort an# la%or #evote# to improving your port"olio.
Then you are using community la%or to improve separate "un#s. 3o pro"its woul# %e community property.
(') A mere change in "orm #oes not change the character o" the property.
EXAMLE!
I" you use your separate property stoc- to %uy a %oat$ %oat is still consi#ere# to %e separate property.
c. Earnings an# other acquisitions o" either spouse while living separate an# apart "rom the other spouse are
separate property
(') *3eparate an# apart+ is #e"ine# as!
At least one o" the spouses must regar# the separation as permanent$ an# not merely a trial
separation
(a) It is as i" a line is #rawn an# all property acquire# a"ter that time will %e consi#ere# separate property.
EXAMLE!
Moving out$ ceasing se1ual relations$ planning "or #ivorce or "iling "or #ivorce.
(%) I" someone cannot move out #ue to "inancial circumstances$ it #oes not necessarily mean that they are
not living separate an# apart.
(c) I" evi#encing intent to %e separate an# apart in one way (living with mistress) %ut acting to pu%lic as i"
still together with wi"e$ court may "in# no *separate an# apart.+
(#) This is a "act6sensitive analysis.
B. Community propertyis the #e"ault rule in ali"ornia. (OL I..)
'. e"inition!
E1cept "or separate property$ all real an# personal property acquire# %y marrie# person #uring the marriage while
#omicile# in ali"ornia or another community property state
a. It is a%out when the la%or is per"orme#$ not when the money is receive#.
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EXAMPLE:
7us%an# an# /i"e marry on 8anuary '4$ ,449. On 8anuary ,4$ ,449$ 7us%an# is pai# his salary "or ecem%er o"
,44:. On ;ovem%er ,9$ ,449$ 7us%an# an# /i"e separate$ an# on 8anuary ,4$ ,44
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III. PREREQUISITES TO APPLICATION OF COMMUNITY PROPERTY PRINCIPLES
A. Marriaes (OL II.A.)
'. ull application o" the community property regime requires that the parties %e legally marrie#$ %ut most o" the
principles o" the community property system are applica%le to putative spouses an# spouses %y estoppel.
ouple must "it within the A marital system %e"ore community property principles will apply. These are
threshol# requirements.
,. A vali# marriage requires capacity an# compliance with certain "ormalities.
a. Marriage is a *personal relation arising out o" a civil contract %etween a man an# a woman$+ each age '9 or ol#er
an# capa%le o" consenting to the contract.
(') A male or "emale un#er the age o" '9 may enter into a marriage with the written consent o" his or her
parent(s) an# a court or#er$ or a court or#er alone i" the minor has no parent capa%le o" consenting.
%. Marriage in ali"ornia requires the issuance o" a license an# solemniDation %y an authoriDe# o""icial!
generally an authoriDe# person o" any religious #enomination$ 5u#ge$ magistrate$ or legislator.
c. ;on6compliance %y a non6party to the marriage with any o" the statutory requirements with respect to licensing$
solemniDation$ or authentication an# registration o" the marriage certi"icate #oes not invali#ate a marriage.
B. "oi# an# "oi#a$%e Marriaes (OL II.&.)'. "oi# Marriaes:
Incestuous or %igamous marriages are voi#. &ut where "ormer spouse has %een a%sent "or "ive years$ an# is now
-nown to %e living$ secon# marriage must %e "ormally annulle# when the "ormer spouse reappears
,. "oi#a$%e Marriaes:
Those where one party was incapa%le o" consenting #ue to minority or unsoun# min#$ or consent was o%taine# %y
"rau# or "orce$ unless the party who was capa%le o" or #i# not "reely consent a"terwar#s "reely coha%ite# with the
other as hus%an# or wi"e
EXAMLE!
/hile courting$ 8im promise# arol that they woul# have at least two chil#ren this was one o" the motivating "actors
"or the marriage "or arol as she love# chil#ren. One wee- a"ter the we##ing$ he announce# that he ha# #eci#e# thathe #i# not want chil#ren any more. I" arol "iles "or a nullity o" her marriage it will %e grante#$ as 8imBs change o" heart
went to the essence o" the marital relationship.
=. Common %a& marriaesare not recogniDe# in ali"ornia
a. 7owever!
Other states #o so i" an out o" state couple who is common law marrie# in another state an# comes to ali"ornia
shoul# %e consi#ere# common law marrie#
C. A%ternati'es to Marriae (OL II..)
'. Putati'e Spouses
a. /hen a marriage is voi# or voi#a%le %ut the court "in#s that either party or %oth parties %elieve# in goo# "aith that
the marriage was vali#$ the court will #eclare the relationship that o" putative spouse.
EXAMLE!
X %elieves that her "inal #ivorce papers were "ile# %ut a clerical error prevente# that "rom happening. X is then still
marrie# when she marries her secon# hus%an#. 3he is then a putative spouse %ecause she in goo# "aith %elieve#
that she was #ivorce# %e"ore she remarrie#.
%. Quasi-marita% property (QMP)
(') The court woul# #ivi#e any property at issue that woul# have %een community or quasi6community property
i" the union ha# not %een voi# or voi#a%le. This property is lia%le "or #e%s o" the parties to the same e1tent
as community property or quasi community property
,. Marriae $y Estoppe%
a. Marriage %y estoppel occurs when one party -new that the marriage was invali#$ %ut in#uce# the other party into
EXAMTI
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the marriage$ an# the party that in#uce# is later estoppe# "rom claiming that community property #oes not attach
#ue to invali#ity o" marriage
P*+E+,CAL
/ was a mem%er o" the very tra#itional eastern religious sect. 7 was a non6practicing mem%er o" a church. The two #ate#
"or a short time$ %ut / sai# she coul# not #ate 7 without %eing marrie# to him an# as such per"orme# a private
*ommunity+ marriage. They #i# not coha%it$ #i# not share the same name$ #i# not commingle "un#s$ #i# not support one
another$ an# #i# not ta-e any property together. A"ter 7 in"orme# / he was getting marrie#$ / %rought an action "or
#issolution o" marriage an# sought support an# a property #ivision. Is this a vali# marriageF
There is no solemniDation$ no ceremony$ no putative spouse$ no marriage %y estoppel$ an# there"ore the marriage
#oesnBt "it into ali"ornia marriage system.
=. Mar'inAtionsa. /here man an# woman live together -nowing they are not marrie#$ property will presume# to %e separate
property o" the parties involve#.
%. Marvin v. Marvin G'9 al.=# CC4 ('
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IV. MANAGEMENT OF THE COMMUNITY
A. &oth spouses have equal management rights in community property. (OL III.A.)
'. rior to '
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c. I" a spouse ma-es a gi"t an# the other #i# not consent!
3pouse can rati"y the gi"t or revo-e it an# sue an# recover the property
(') A"ter #eath!
nonconsenting spouse can act to voi# the gi"t$ up to ?4 percent
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V. CHANGES IN THE CHARACTERIZATION OF PROPERTY
A. 3pouses can opt out o" %eing governe# %y ali"ornia community property in two ways!
'. re6martial agreement
,. Transmutation o" assets
B. Premarita% Areements (PMA) (OL IJ.A.)
'. Also -nown as antenuptial agreements or prenuptial agreements.
,. remarital agreements ma#e on or a"ter 8anuary '$ ' 'C'?.
(') *Joluntary+ means!
no "rau#$ coercion or lac- o" -nowle#ge on the part o" the signer at the time o" the e1ecution o" the
agreement
(,) Kn#er am. o#e > 'C'?$ it shall %e #eeme# that the MA was not e1ecute# voluntarily unless the court
e1pressly "in#s that the party against whom en"orcement is sought!
(a) ha# in#epen#ent counsel or waive# counsel in writing
(%) ha# at least seven #ays to review the agreement an#(c) was "ully a#vise# in writing o" all the rights an# o%ligations that attach to e1ecuting the premarital
agreement
C. +ransmutation (OL IJ.&.)
'. e"inition!
/hen a couple agrees to change character o" the asset
,. rior to '
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%. ate is measure# "rom the #ate the attempte# transmutation occurs.
c. E1ception to writing requirement "or gi"ts %etween spouses!
(') i"t must %e o" tangi%le property an# "or personal use o" spouse
(,) i"t must not %e o" su%stantial value as measure against li"estyle o" the parties
EXAMLE!
&us #river wi"e gives hus%an# ,4 #iamon# cu""lin-s "rom artier. Tangi%le property "or personal use o"
recipient spouse. This is su%stantial in value "or their li"estyle. /i"e might prevail in arguing that the cu""lin-s are
community property unless the hus%an# can pro#uce proo" that she inten#e# the gi"t %e his separate property.
=. A transmutation #oes not require any consi#eration.
EXAMLE!
In '
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#. I" separate "un#s use# to acquire an asset cannot %e trace#$ the entire asset will %e treate# as community
property unless the community portion is inconsi#era%le in comparison to the amount o" separate "un#s
contri%ute#.
EXAMLE!
7 an# / have one 5oint chec-ing account into which they #eposit their salaries an# /Bs recent inheritance. This
is a commingle# account. I" 7 an# / purchase a car "rom this account$ / will %ear the %ur#en o" tracing the
amount o" the #own payment %ac- to her separate property in or#er to receive a reim%ursement. I" she cannot
ma-e that tracing$ then the car will %e #etermine# to %e wholly community property.
P*+E+,CAL
7 an# / have %een marrie# "or "our years an# are now getting a #ivorce. or convenience they maintain one chec-ing
account an# #eposit their salaries into the account. 7 owns some stoc- which is his separate property$ an# when he sells the
stoc-$ he #eposits the procee#s into the account. / owne# a car an# some collecta%les which are her separate property she
sells these an# #eposits the procee#s into the chec-ing account. The couple pays all o" their %ills "rom this account. 8ust a"ter
he sol# the stoc-$ 7 purchase# a coin collection with money "rom the chec-ing account. 7e now claims that it is his separate
property. / claims that the coins are community property. /ho has the %ur#en o" proo" on this issueF /hat must 7 prove to
prevail on his claimF oes / have any %ur#en %e"ore the courtF
ommunity property is presume# in ali"ornia 7 has the %ur#en to show that the coins are not community property$ an#
instea# it is his separate property through transmutation. 7e can #o this through two metho#s! tracing an# "amily e1haustion#octrine. Through tracing$ 7 has to show that he purchase# the coin collection with the procee#s o" the stoc- he sol#$
lea#ing to proper transmutation o" property. There isnBt enough in the hypo to support e1haustion. I" 7 cannot show tracing$
community property is presume$ an# the coins will %e community property
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VI. CHARACTERIZATION OF PROPERTY
A. +ime o1 A2uisition (OL J.A.)
'. haracter o" property is "i1e# as o" the time the property was acquire#.
a. /here an asset is acquire# over time an# title #oes not vest in the %uyer(s) until the purchase price or a speci"ie#
portion o" it is pai#$ then each payment is consi#ere# to *%uy into+ title in the proportion it %ears to the whole price
pai#.
EXAMLE!
7 an# / %uy a %oat "or '444 over time$ %ut the %an- maintains title in its name until the %oat is pai# o"" in "ull.
Each month a principal payment o" '44 is ma#e. A"ter the "irst month$ the community will have a '4 interest in
the %oat a"ter the secon# payment$ the community will have a ,4 interest in the %oat$ etc.
B. Manner o1 A2uisition(OL J.&.)
'. 2egar#less o" the time o" acquisition$ the character o" property is primarily #etermine# %y!
The source o" "un#s or other assets use# to acquire it
a. I" the property is o%taine# in e1change "or separate property!
The asset acquire# is separate property even i" the acquisition happene# #uring marriage
%. I" the source cannot %e #etermine#!
Then acquisition #uring the marriage will trigger a presumption that it is community property$ which can %e
Overcome i" the separatiDer can per"orm an a#equate tracing
c. I" the relative proportions o" separate an# community contri%utions can %e #etermine#!
The spouse who contri%ute# his separate property to the acquisition may %e entitle# to a reim%ursement
P*+E+,CAL
Two #ays a"ter marrying Tom$ 3an#y tra#e# in her car on a new "amily car. 3an#yBs car was worth ?44 an# the new car was
purchase# "or ,?$444. Tom an# 3an#y put #own an a##itional ?$444 that they receive# "rom his parents as a we##ing
present$ the #ay a"ter their we##ing. oes 3an#y have a separate property interest in the car an# what is the communityBs
interest in the carF
The character o" property is primarily #etermine# %y source o" "un#s or other asserts use# to acquire it. 7ere$ the sources are
#i""erent. 3an#y place# ?44 into the new "amily car "rom her separate property. ?444 they receive# was community
property. The car is community property$ an# 3an#y can get reim%urse# ?44 "or contri%uting "rom her separate property.
,. e#eral reemption
a. rimarily comes up when #iscussing retirement %ene"its.
%. There may %e an asset that "e#eral law has alrea#y characteriDe#.
(') Then ali"ornia cannot re6characteriDe the property
EXAMLE!
K3 3avings &on# is #eeme# owne# %y the registere# owner regar#less o" what "un#s were use# to
purchase it.
C. +it%e(OL J..)
'. Threshol# issue!
Title #oes not necessarily control ownership.
EXAMLE!
8oint chec-%oo- hol#ing marital earnings is clearly community property. / purchases &M/ with the "un#s in the
account$ titles it in her name. It is still community property.
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,. Title presumptions will control unless an agreement hol#s otherwise.
a. 2eal property that is 5ointly title#$ it will %e presume# to %e community property unless otherwise proven
%. ;early all presumptions are re%utta%le.
c. ;early all presumptions "avor the community.
(') EXETIO;!
Marrie# womenBs presumption
=. Presumption in /a'or o1 Community Property
a. eneral presumption that property acquire# #uring marriage %elongs to the community
%. resumption also arises that i" spouse possesse# asset #uring or at en# o" long marriage$ that the asset iscommunity property unless proven otherwise
EXAMLE!
On the #ate the parties separate# a"ter a ,46year marriage$ there was '4$444 cash in a shoe %o1 un#er the %e#.
Knless one party or the other can clearly trace the cash to show that it is separate property$ the presumption will
%e that given the length o" the marriage an# the "ungi%le nature o" cash that it is community property.
c. or property acquire# %e"ore 8anuary '$ '
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The marital appreciation was @44$444.
@44$444 Q '4 P @4$444.
There"ore the community interest in the property is @4$444 R =4$444 (pursuant to .. > ,C@4). The community
has an interest o" :4$444 in the property.
SEPA0A+E ,4+E0ES+:
3eparate property interest (e1presse# as ) P
(own ayment R Loan) S rincipal ayments Ma#e uring Marriage
urchase price o" the property
In this case!
('44$444 R ,44$444) S =4$444
P
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JALKE AT 3EA2ATIO;
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BAR EXAM APPLICATION
Uuestion '
Applicants were as-e# to #etermine the rights o" the spouses in items owne# %y the couple.
7an- an# /an#a met in Illinois an# %egan #ating regularly$ then move# in together. 7an-$ an attorney$ tol# /an#a that
un#er Illinois law the two ha# a common6law marriage$ which /an#a %elieve#. /an#a maintaine# a separate savings
account in which she #eposite# all her earnings. 7an- an# /an#a move# to ali"ornia in ,444$ an# /an#a purchase# a
parcel o" lan# using the @4$444 in her separate savings account$ "or which she too- title in her name alone. 3oon a"ter$
/an#a inherite# a sculpture$ "or which 7an- %ought a mar%le pe#estal an# which the couple re"erre# to as *our collectorBs
priDe.+
/hat are 7an-Bs an# /an#aBs respective rights in the parcel o" lan# an# the sculptureF
Applicants must consi#er the rights o" a putative spouse to property owne# %y the community or the other spouse$ an# the
requirements "or a transmutation.
Adapted from the July 2002 California Bar Exam
CHECK FOR VA!" #ARR!A$E% &ERHA&' !( )A' CO##O* A) #ARR!A$E !* !% A(ER*A(!VE+, (HERE !' A
&-(A(!VE #ARR!A$E '+'(E#, )H!CH OCC-R' )HE* A #ARR!A$E !' VO!" OR VO!"ABE B-( (HE CO-R(
F!*"' (HA( E!(HER &AR(+ OR BO(H &AR(!E' BE!EVE" !* $OO" FA!(H (HA( (HE #ARR!A$E )A' VA!", (HE
CO-R( )! "ECARE (HE REA(!O*'H!& (HA( OF &-(A(!VE '&O-'E% HERE, )A*"A BE!EVE' (HE+ ARE
#ARR!E" 'O (HE+ )O-" BE (REA(E" A' &-(A(!VE '&O-'E FOR &-R&O'E' OF CA!FOR*!A A) )HE*(HE+ #OVE (O CA!FOR*!A% 'O, )E HAVE A &ACE FOR HA*K A*" )A*"A !* (HE CO##-*!(+ &RO&ER(+
'+'(E# A' &-(A(!VE '&O-'E'%
)H!E (!(E CREA(E' A &RE'-#&(!O* OF O)*ER'H!&, !( !' *O( CO*(RO!*$% 'O-RCE OF F-*"' !' A
&R!#AR+ "E(ER#!*A(!VE FAC(OR !* A'CER(A!*!*$ CHARAC(ER OF &RO&ER(+% )A*"A HA' 'E&ARA(E BA*K
ACCO-*(, )H!CH !' '(! CO##-*!(+ &RO&ER(+ BECA-'E !( !' EAR*!*$' FRO# ABOR "-R!*$ #ARR!A$E%
!F !( !' EAR*!*$' FRO# !!*O!' "-R!*$ #ARR!A$E, !( !' .-A'!/CO##-*!(+ &RO&ER(+ A*" (HE EFFEC( !'
(HE 'A#E A' (HE+ *O) !VE !* CA!FOR*!A% '!*CE 'HE BO-$H( (HE &ARCE OF A*" FRO# #O*E+
AC.-!RE" "-R!*$ #ARR!A$E EVE* !F !( !' !* HER 'E&ARA(E 'AV!*$' ACCO-*(1, (HE A*" !' CO##-*!(+
&RO&ER(+ BECA-'E (HE (RA*'#-(A(!O* CO#E' FRO# F-*"' EAR*E" "-R!*$ (HE #ARR!A$E%
(HE* (HERE !' (HE .-E'(!O* OF (HE 'C-&(-RE% &R!OR (O 345, #ARR!E" )O#A*6' &RE'-#&(!O* )O-"
HAVE A&&!E" A*" HA*K )O-" HAVE 'O#E CA!# (O !(% B-( !( !' O*$ '!*CE 345 '!*CE 'HE !*HER!(E"
(HE 'C-&(-RE% !( !' HER 'E&ARA(E &RO&ER(+ EVE* !F HA*K AR$-E' (HA( (HE 'C-&(-RE BECA#E
CO##-*!(+ &RO&ER(+ 'OE+ BECA-'E !( !' CAE" 7O-R COEC(OR6' &R!8E9 OR BECA-'E HE BO-$H( A
&E"E'(A FOR !(% 'C-&(-RE !' HER 'E&ARA(E &RO&ER(+ A' 'HE !*HER!(E" !( &O'( 345%
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BAR EXAM APPLICATION
Uuestion ,
Applicants were as-e# to characteriDe various assets o" a couple as separate or community property.
7enry an# /an#a marrie# in '
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VII. CHARACTERIZATION OF PARTICULAR TYPES OF ASSETS
A. +e Marita% ome(OL JI.A.)
'. The court may require the home to %e sol# an# the net procee#s #ivi#e#$ or may awar# the home in "ee simple to one
spouse with an o""setting awar# o" other community assets to the other spouse.
,. One spouse may %e permitte# to live in the house "or a perio# o" time until the youngest chil# reaches the age o"
ma5ority$ when the home will %e sol# an# the procee#s #ivi#e#.
P*+E+,CAL
7 an# / are the parents o" a special nee#s chil#. At the time o" the #issolution trial$ the partiesB chil# was ,, years ol#. The
chil# was gravely an# permanently incapacitate# an# una%le to care "or himsel". / live# in the "amily home an# provi#e# "ull
time care "or the partiesB a#ult chil#. / requests that the sale o" the community property "amily resi#ence %e #e"erre# until
the partiesB chil# can care "or himsel". an the court #e"er the sale o" the "amily homeF
Typically$ one spouse can %e permitte# to live in house until youngest chil# reache# age o" ma5ority. 7ere$ whereas the
chil# is ,,$ he is permanently incapacitate#$ which provi#es a strong argument "or / to continue living in the home an#
provi#ing "ull6time care to the a#ult chil#. I" 7 is not su%stantially harme# %y #e"erring the sale o" home$ no reason why /
cannot get sale o" community property #e"erre#. Alternatively$ home can %e given in "ee simple to / to ta-e care o" chil#$while equivalent assets to 7 to o""set the rewar# to /.
=. Although either spouse also has the power o" management an# control o" the community real property$ %oth spouses
must 5oin in e1ecuting an instrument to sell$ convey$ encum%er$ or lease "or more than a year$ any o" the community
realty.
a. re#itorNBona Fideurchaser 2ights
(') resume# vali# when e1ecute# %y a spouse who hol#s title to the community estate
@. Spousa% Consent 0e2uirement
a. In any transaction a""ecting community property in which the consent o" %oth spouses is require#$ the court may$
upon the motion o" a spouse$ #ispense with the requirement o" the other spouseBs consent i" %oth o" the "ollowingrequirements are met!
(') the propose# transaction is in the %est interest o" the community an#
(,) consent has %een ar%itrarily re"use# or cannot %e o%taine# #ue to the physical incapacity$ mental incapacity$
or prolonge# a%sence o" the nonconsenting spouse.
EXAMLE!
7us%an# #etermines that the value o" the house that he an# /i"e own as community property is "alling
"aster than the rest o" the mar-et. &ecause the parties recently re"inance# the property an# too- money out$
the house is in #anger o" losing all o" the remaining equity. The hus%an# is resi#ing in the property$ there are
no chil#ren$ an# the property is the sole asset o" the marriage. /i"e is re"using to sell %ecause she simply
says *no+ to all o" hus%an#Bs proposals$ with no reasona%le e1planation. I" the hus%an# sells the property
an# appropriately accounts "or the money$ he will not %reach his "i#uciary #uty %ecause he is protecting the
community asset.
?. A restraining or#er may %e issue# within the plea#ings themselves in or#er to prevent the #issipation o" marital assets
%e"ore they are #istri%ute#.
B. Businesses (OL JI.&.)
'. /ami%y Business
a. spouse who manages a %usiness that is all or su%stantially all community personal property has the primary
management an# control o" the %usiness
%. The managing spouse must give prior written notice to the other spouse o" any sale$ lease$ e1change$ encum%rance
o" all or su%stantially all o" the personal property use# in the operation o" the %usiness whether or not title to that
property is hel# in the name o" only one spouse.
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(') ailure to give such proper written notice #oes not a#versely a""ect the vali#ity o" the transaction$ an#
reme#ies are only against the spouse "or %reach o" "i#uciary #uty.
,. Business *&ne# $y *ne Spouse
a. A %usiness owne# as separate property %y one o" the spouses can occur in one o" two ways!
(') 3eparate property %e"ore marriage
(,) 3tarte# #uring marriage with separate property "un#s
%. Jalue o" either spouseBs time$ e""ort an# la%or #uring marriage is a community asset.
(') I" community spen#s time$ e""ort$ la%or wor-ing on %usiness an# enhances value o" it$ then community
shoul# gets interest in the %usiness.
c. The court #oes not have to use either ereira or Jan amp$ %ut can choose which it wants to apply.
(') ereira (2easona%le 2ate o" 2eturn)!
(a) Initial investment multiplie# %y reasona%le rate o" return an# the %un#le is #e"ine# is separate property.
2emain#er is community property.
(%) 3ay *assuming a reasona%le rate o" return$ here worth '4+
(,) Jan amp!
(a) ompensate the community through a salary "or la%ors o" the owner an# spouse. 2emain#er o" pro"its
goes to separate property owne# %y spouse.
(%) Ma-e the reasona%le salary a whole num%er (?4 or '44)
(=) ereira is typically use# when!
The spouseBs la%or or special s-ill is #eeme# the primary cause o" increase in the value o" the
%usiness
(@) Jan amp is typically use# when!
More li-ely that the capital investment$ %eing at the right place at the right time$ or something that
is not attri%uta%le to the la%or o" the spouse
EXAMLE!
&e"ore marriage$ / starte# a success"ul %usiness which she continue# to manage #uring the marriage. On
the #ate o" marriage$ the parties agree that it was worth '4$444 on the #ate o" separation$ the parties
agree that it ha# grown to ?4$444. I" the growth was largely #ue to mar-et "orces (a computer company in a
*hot technology mar-et+) the court is li-ely to loo- at Jan amp. I" the growth was largely #ue to the e""orts
o" the owner spouse (a cigar store that the owner aggressively mar-ete# an# wor-e# at) then the court willli-ely loo- to ereira.
EXAMLE!
At the time o" marriage / owne# stoc- value# at '44$444. A"ter the ten6year marriage$ 7 an# / separate#.
At the #ate o" separation$ the stoc- was worth :?4$444. uring the marriage$ the stoc- ha# %een manage#
%y a pro"essional money manager hire# %y /. The entire :?4$444 is /Bs separate property.
#. I" you have a separate property %usiness %ut the spouse who owns it spent no time managing it$ an# instea# pai#
someone else out o" the separate property %usiness pro"its$ it woul# not give rise to a Jan ampNereira situation
%ecause it woul# not %e the community that was responsi%le "or enhancing the value o" it. ;ow i" the spouse ha#
quit an# spent all #ay managing stoc-$ then rise in value$ coul# %e attri%uta%le to community propertyBs la%or.
e. 2everse Jan ampNereira!
(') ommunity property enhance# in value %y separate la%or a"ter separation an# %e"ore #issolution.
EXAMLE!
One or %oth spouses start a %usiness #uring community$ then they separate. There is some time perio#
%etween separation an# #issolution. ourt will have to #ivvy up allocation o" value o" %usiness %ase# upon
%oth what it was value# as while in the community an# what the separate la%or #i# to enhance the value
a"ter the economic community en#e#.
(,) 3imply invert the "ormulas!
(a) ereira!
Initial investment multiplie# %y reasona%le rate o" return an# the %un#le is #e"ine# as community
property with remain#er is separate property.
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(%) Jan amp!
ompensate the separate property through a salary "or la%ors o" the owner an# spouse. 2emain#er o"
pro"its goes to community property owne# %y spouse.
P*+E+,CAL
7 an# / marrie# in '
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%. Term li"e insurance policies!
&ut term li"e woul# %e treate# as a series o" #ivisi%le contracts$ an# the last source o" payment woul# control
/. Disa$i%ity70etirement Bene1its(OL JI..)
'. Loo- at what the #isa%ility %ene"its are compensating "or!
a. I" #isa%ility payments are replacing lost earnings$ it is community property assets
%. /or-erBs compensation %ene"its are treate# the same way as #isa%ility %ene"its
,. 3ome situations ena%le a spouse to choose$ i" the #isa%ility allows them to retire$ to classi"y the %ene"its as retirement
or #isa%ility!
a. ension an# retirement %ene"its resulting "rom a spouseBs la%or are community property unless spouse hasagree# otherwise
%. I" #isa%ility allowe# spouse to retire$ then spouse can choose %etween calling it either #isa%ility or retirement
%ene"its. isa%ility woul# have higher percentage classi"ie# as separate property. 2etirement woul# %e classi"ie#
as community property
c. ourt will not allow the insure# spouse to choose #isa%ility over retirement i" the sole reason is to #etriment the
community.
=. I" retirement %ene"its are calculate# %ase# on the time spent at the 5o%!
ommunity property su%5ect to equal #ivision upon #ivorce
a. I" the %ene"its are calculate# %ase# on some other system!
i.e. points$ then there woul# %e another "ormula$ an# typically it woul# %e num%er o" years person wor-e# at the
company
@. i""erent stages o" retirement %ene"its!
a. Employee cannot #elay retirement to prevent giving share to non6wor-ing spouse
?. e#eral retirement %ene"its an# "e#eral preemption
a. Employee 2etirement Income 3ecurity Act (*E2I3A+) has %een hel# not to a""ect the operation o" ali"ornia
community property laws with respect to E2I3A retirement accounts.
%. E2I3A preempts state law #ealing with the e""ect o" #ivorce on #esignation o" the spouse as a %ene"iciary un#er
an E2I3A plan.
c. Soia% Seurity Bene1its
(') 3ocial 3ecurity %ene"its an# other "e#eral %ene"its such as un#er the 2ailroa# 2etirement Act are controlle#
%y "e#eral$ not state$ law. Thus$ 3ocial 3ecurity %ene"its are not community property an# the court cannot#ivi#e them.
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VIII. DISSOLUTION AND DIVISION OF PROPERTY
A. Legal separation$ annulment$ or #ivorce terminates the community regime. (OL JII.A.)
'. ali"ornia recogniDes 5ust two groun#s "or #issolution o" a marriage or legal separation o" the parties!
a. irreconcila%le #i""erences causing the irreme#ia%le %rea-#own o" the marriage an#
%. incura%le insanity.
B. A "i#uciary o%ligation to the other spouse continues until the property is #ivi#e#$ regar#less o" how long a"ter separation or
#issolution the #ivision occurs. (OL JII.A.)
C. In a procee#ing "or #issolution o" marriage or "or legal separation$ the court must #ivi#e the community estate o" the
parties equally in the a%sence o" an agreement %etween the parties. (OL JII.A.)
'. The value o" ommunity propertyis #ivi#e# ?46?4. Equal #ivision.
,. The value o" asset is #ivi#e#$ not necessarily the physical asset itsel".
=. o not say *equita%le #istri%ution.+ This is a #i""erent regime.
D. Quasi-ommunity property
'. ?46?4
,. ali"ornia might not have 5uris#iction over real property locate# out o" state.
a. The court can or#er the parties to e1ecute conveyances to give the money value in the interest o" the property tothe other spouse
=. At #eath!
ali"ornia community property system cannot reach property in another state
E. "a%uation an# +ime o1 "a%uation (OL JII.&.)
'. eneral rule!
Assets will %e value# at the time closest to trial
a. &ut upon goo# cause shown!
The court may value all or any portion o" the assets an# lia%ilities at a #ate a"ter separation an# %e"ore trial to
accomplish an equal #ivision o" the community estate in an equita%le manner
EXAMLE!
uring the marriage$ 7 %egan a %uil#ing contracting %usiness. A"ter #ate o" separation the contracting %usiness
#ecline#. Evi#ence was pro#uce# at trial that 7 sai# that he #i#nBt care i" the contracting %usiness was run into
the groun#. / %rought a motion to value the contracting %usiness at the #ate o" separation.
/. 0eim$ursement (OL JII..)
'. /or A2uisition o1 Property an# ,mpro'ements
a. arty who contri%ute# separate "un#s to acquisition o" community or separate property o" the other spouse will %e
reim%urse# "or his or her contri%utions to the e1tent the party can trace the separate contri%utions$ unless the
party has waive# the right to reim%ursement in writing
(') The amount reim%urse# is!
without interest o" a#5ustment "or any change in the value o" property$ up or #own$ %ut may not
e1cee# the net value o" the property at the time o" the #ivision
%. I" there is insu""icient equity in a piece o" community property to reim%urse "ully a spouseBs contri%ution o"
separate property use# to acquire# the community asset$ the court may awar# the entire asset to the contri%uting
spouse.
EXAMLE!
uring marriage$ 7 contri%ute# ?4$444 towar#s the #own payment o" a community resi#ence value# at
'44$444. The community contri%ute# the remaining ?4$444. 7 also contri%ute# an a##itional ,?$444 towar#
the improvement o" the property #uring the marriage. At the time o" trial the property ha# su""ere# a #ecline in
value an# was worth only C?$444. 7 will receive the entire C?$444 as his reim%ursement an# the community will
receive nothing.
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,. /or ,mpro'ements
EXAMLE!
7 an# / have a house an# they a## a swimming pool or remo#el a -itchen with separate property. 3eparate estate
will get same type o" reim%ursement as in acquisitions (amount given$ no interest).
a. Tra#itional approach!
(') rior to ,44?$ improvements ma#e out o" separate property o" one spouse to the separate property o" the
other spouse were presume# to %e a gi"t.
%. Mo#ern approach (A"ter 'N'N,44?)!
(') urrent law provi#es a right to reim%ursement when separate property "un#s are use# to improvecommunity property$ a%sent a transmutation. /here community property improves separate property$
reim%ursement to community.
(,) i" separate property o" another is use# to enhance community property$ then separate property gets
reim%ursement
(=) i" one spouse uses separate property to enhance separate property o" another$ still entitle# to a
reim%ursement.
The reim%ursements are amount o" e1pen#iture$ value a##e#$ less interest.
=. /or E#uation an# +rainin
a. 3pouse may o%tain reim%ursement "or the payment o" any separate #e%t with community "un#s or vice6versa
%. The reim%ursement will inclu#e interest. Ksually only e#ucation e1penses$ not living e1penses unless some
unusual situation.
c. There is a re%utta%le presumption that!
A"ter '4 years o" wor-ing at new 5o%$ no reim%ursement %ecause presumption is that community woul# have
receive# value a##e# %ac- in '4 years. an %e e1ten#e# or re#uce# accor#ing to "act pattern.
#. olicy!
I" the community sen#s the spouse "or "urther e#ucation or training$ it woul# help the communityBs earning
capacity. ;o reim%ursement i" e#ucation is not to change 5o% or enhance s-ills that woul# %ene"it the community
e. 2eim%ursement "or community contri%utions an#Nor assignment o" loans is the e1clusive reme#y "or e1penses
relate# to e#ucation an# training in the property #ivision unless the parties have agree# otherwise in writing.
@. /or Payment o1 De$ts
a. 3eparate property is responsi%le "or separate #e%ts an# community property is responsi%le "or community #e%ts.
%. Tra#itional rule! ommunity property is also responsi%le "or premarital #e%ts o" the other spouse$ even though
they are separate #e%ts.
(') I" property e1ists that may %e %etter suite# to satis"y that #e%t$ there may %e a reim%ursement.
(a) /hen the community pays "or o%ligation %ut separate property was availa%le to pay "or the o%ligation$
then community woul# get a reim%ursement
EXAMLE!
3pouse has a support #e%t "rom a previous marriage an# community pays support o%ligation. I" spouse
who was o%ligate# ha# some separate property that was availa%le "or use$ the community can %e
reim%urse# "or that #e%t o%ligation payment.
EXAMLE!
ollowing separation$ hus%an# continues to pay the community cre#it car# #e%t$ the house payment
an# chil# an# spousal support out o" his post separation earnings 7us%an# is paying community
o%ligations with his separate property. 7e woul# %e entitle# to reim%ursement "rom the wi"e "or her hal"
o" the community cre#it car# #e%t. I" he is living in the house$ then he is getting the %ene"it o" the
community resi#ence an# woul# not li-ely have a right to reim%ursement. I"$ however$ the wi"e is living
in the house$ with the hus%an# paying %oth support an# the house payment$ he will li-ely get
reim%urse# "or the "ull amount o" the house payment as he is servicing a community #e%t without the
%ene"it o" living in the house. The result may %e #i""erent i" he is not paying support as the post
separation payment o" the house while the wi"e an# chil#ren (or wi"e alone) live there can %e
consi#ere# support an# not a payment o" a community o%ligation.
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P*+E+,CAL
7 an# / were marrie# in '
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X. EFFECT OF DEATH OF A SPOUSE
A. haracteriDation o" property #oes not change$ it is 5ust a matter o" allocation.
B. The #eath o" a marrie# person terminates the community character o" any o" his or her property. (OL IX.A.)
'. One hal" %elongs to surviving spouse an# the other hal" %elongs to #ece#ent. This hal" o" the #ece#ent property can
%e given to another through will.
a. 7al" o" the property that was "ormerly community property will pass through the estate o" the #ecease# marrie#
person$ in a##ition to his or her separate property.
C. Community Property 9it a 0it o1 Sur'i'orsip (OL IX.A.)
'. arties can now ta-e title as *community property with a right o" survivorship.+ The property is still treate# as
community property #uring the marriage an# at #ivorce$ %ut woul# pass to the surviving spouse outsi#e o" the estate
at the time o" #eath o" one o" the parties.
D. Quasi-Community Property(OL IX.A.)
'. A putative spouse is treate# the same as a legal spouse with respect to succession to the #ece#entBs separate
property an# quasi6marital property
E. Disposition o1 Community Property in ,ntestay(OL IX.A.)
'. In intestacy$ there is a #i""erent #istri%ution scheme "or the #ece#entBs hal" o" the "ormer community property than "or
his or her separate property.
a. The #ece#entBs hal" o" the community property an# quasi6community property goes to the surviving spouse$
regar#less o" whether there are issue
/. Lia$i%ity 1or Community De$ts(OL IX.A.)
'. issolution o" the community %y #eath #oes not relieve community property in a spouseBs estate "rom #e%ts incurre#
prior to #e%t.
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BAR EXAM APPLICATION
Uuestion =
Applicants were as-e# to #etermine the rights o" each spouse an# Ann$ an# to assess the a%ility o" cre#itors to reach the
separate an#Nor marital property to satis"y /en#yBs #e%t.
In 'i/
y>tem, ?here all the ri;ht> and obli;ation> of e
Bou;ht from durin; marria;e% !t ?ould ha=e been o
it i> ua>i ue i> ?hen ) and H >eparated% !n order to pre=ail on eepin; the >eparate property, Herb ?ould need to >ho?
that pured in 200 ?hen he mo=ed out% Ho?e=er, >in> prereui>ite> of >eparation he
>ee> ) on ?eeend> and i> ;oin; to elin; / he i> >till ?ith ) until >he file> for di=or pa>t
due for @4000 on the ban before the >eparation of H and )% (he ban mu>t fir>t loo to the >eparate property that )endy
o?n> but if that i> not enou;h, the ban
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BAR EXAM APPLICATION
Uuestion @
Applicants were as-e# to #etermine hus%an#Bs rights to reim%ursement "or wi"eBs me#ical e1penses.
7arvey an# /en#y marrie# in '