Juliet AftandilianCOMMUNITY PROPERTY OUTLINE ~ FALL 2006 (POPOVICH)

CHAPTER ONE: DEVELOPMENT OF THE SYSTEM

I. Background & Overviewa. CL system was created in England and defines marriage property very differently.b. We are dealing with California CP which has lots of statutes; the underlying principles are the same as in other

states but there are substantial differences too. c. CA has the greatest body of CP law. d. CP Includes: real property, personal property, life insurance and things

II. Community Property v. Common Law Marital Systemsa. Common law System (important to know b/c relevant w/ QCP)

i. More popular (40+ states)ii. Derived from English common law; most all states until CP evolved.

iii. Includes Spousal protection mechanisms: the wife is entitled to a portion of the earnings; again, the trend is ½ if H dies intestate.

1. Equitable distribution: at death or divorce, the wife gets some of H’s money. The percentage depends on the state, but most do it 50/50 (and thus it starts to look like CPS).

a. Example: H died with a will in a CLS, giving everything to H’s sister and nothing to W; W will get a “forced share;” she can choose to get the elected share in the will or intestate share (varies by state; close to half)

b. Community Property System (followed by 8 states) i. Derived from Spanish-Mexico

ii. Uniform Marital Property Acts (UMPA)1. Has NOT been adopted very widely like other acts. 2. Basically a CP system3. mentions equal rights for H and W in the marriage4. Has been adopted in Wisconsin and parts of Colorado and Alaska (& a bit in NY)

Common Law Marriage System (CLS) Community Property Marriage System (CPS)From a marriage standard, they are still individuals. What each earns and subsequently keeps and buys is theirs alone, absent some affirmative action to create joint ownership.

Sometimes called a partnership during the marriage where spouse devote talents and resources to the common good; wages or property or wages from property from the labor or skill of either spouse is owned by each equally

What’s mine is mine & what’s yours is yours, and what’s ours is ours only if we make it ours.

Each spouse brings something to the marriage and it cannot always be quantified; spouses do a lot of things that they are not paid for

If I own it, I have the power to manage and control it. The other spouse cannot say what to do with it.

Present equal ownership. At the moment property is earned, it’s owned 50/50

Historically: marriage brought on a single unified property interest, with all being owned and operated by the husband, including property the wife owned alone before the marriage.

What each spouse earns and buys alone belongs to both spouses equally

By the end of 1800’s, all CL systems added the “Married woman’s property Act” (not responsible for this); it gave property rights to the wife and she owned and controlled any property she had before the marriage and everything she made once in the marriage (bringing on the modern concept of CLS)

What mine is ours, and what’s yours is ours.

This created problems though, so for instances of death or divorce, there is an equalizing mechanism to protect the non-wage earner in the event of such.

Both spouses have equal management and control rights over CP.

iii. Within CPS, there are mainly two types of property:1. Separate property2. Community property

Intestate Succession = dying w/o a will.

Juliet Aftandiliana. At marriage, immediately becomes the ownership of both.

i. Thus, no need for equalization mechanisms. b. Rule: The court has no power to allow a spouse to get anything less than ½. BUT parties

can make their own settlement of property rights, but it still has to be approved by a judge. If a judge doesn’t like it, they can say no and require 50/50.

iv. History of CP1. California Constitution of 18492. H had full management and control until 1975.

a. Now there is equal management and control AND equal ownership during the marriage.

III. Development of California Community Property Systema. Common law vs. community property systems

i. Spousal protection schemes1. Common law: what’s mine is mine & what’s yours is yours; $2M by husband is husband’s

alone.a. Divorce: equitable distribution doctrineb. Death: forced elected share (between 1/3 to ½)

2. Community Property: $2M is owned by H and W jointly. Each own 1 million.a. Spousal protection is built inb. Death:

i. Testate: H dies w/ will that says everything goes to brother.1. Brother gets ½: $1 million through vested ½ property rights

ii. Intestate: Dying w/o a will1. California Intestate Succession Scheme

a. CP: ALL of it goes back to surviving spousei. Relatives and kids are irrelevant.

b. SP: depends on the number of childreni. No kids:

ii. 1 child: split 50/50 to child & surviving spouse.iii. 2 or more children: 1/3 of the property to the surviving

spouse and 2/3 to the kids. iv. Basically, it’s absent a will so statute sticks in and does

what they think most people would do.ii. Management and control

1. CP: share2. CL: you manage and control your own assets.

iii. Divorce (ex: H own all prop)1. CL: equitable distribution doctrine – works out THE SAME!!2. CP: already split up and other spouse already has ½.

iv. Death1. Dying with a will

a. Example: H & W; H has a disability that prevents him from working so W is primary and sole wage-earner. H has 2 children from previous marriage and both have severe handicap. H also has parents that are in need of care. During marriage, W has earned and kept $4M. W dies.

i. Will: everything goes to my sister1. CP: $2M goes to H and $2M goes to sister. 2. CL: Spousal protection kicks in:

a. H gets some portion, most likely ½b. Sister gets $2M.

b. Example 2: same facts but H dies first wanting to leave something to his parents, kids, and charities

i. CP: $2M to parents, kids, and charitiesii. CL: parents, kids, and charities get nothing.

1. “Spousal” protection: are just that – mechanisms to protect the surviving spouse.

Juliet Aftandiliana. They only work in one direction: they take decedent’s property

and give it to surviving spouse. b. *Huge difference between the two systems*

b. Where do we find Community Property law? i. Sophisticated framework of statutory law (at end of the book)

1. Usually in one of two codesa. CFC: California Family Code (only codified since 1994; before then CCC) b. CPC: California Probate Code

ii. The cases we read tend to be very result-oriented1. Courts don’t like certain parties. 2. Sometimes, it seems like they are going out of their way to bend the law (dictionaries).

II. Fundamental Principles of the Community Property Systemsa. CFC §760: Statutory definition of community property

i. 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.

b. CFC §770: Separate property of a married person (see timeline)i. (a) Everything before marriage starts out as SP.

ii. (b) anything as gift, bequest, or devise, not including what is given as a gift by other spouse after the marriage begins

iii. (c) The rents, issues, and profits of the property described in this section (see Ransom & tracing principle).

C. THE TRACING PRINCIPLE i. George v. Ransom: W’s stocks owned before marriage, but dividends during marriage.

1. In California Constitution at time of this case (1850), rents and profits of SP were CP.a. But the court does not like this rule.

2. New Tracing Principle Rule: we are going to trace the earnings and the see where the money comes from. From where it came is how it will be classified.

a. Thus, the rents, issues and profits during the marriage of SP acquired before the marriage remains separate property.

i. Thus, H’s creditors cannot get the dividends of the stock b/c its SP.d. THE EQUALITY PRINCIPLE (§751)

i. Rule: the respective interests of the husband and wife in community property during continuance of the marriage relation are present, existing, and equal interests.

1. Only in respect to real CP, not quasi-community property (below).e. THE PRINCIPLE OF CONTRACTUAL MODIFICATION

i. Prenuptial agreements: not of focus in our class. 1. They are NOT to say what’s mine before the marriage is staying mine (already the law!)2. Real reason: to change the way the community property system is going to work during the

marriage, if it’s going to work at all; it’s more of an opting out or a redefining of the system.3. Statutory basis for prenups since the 1980’s:

a. §1500: may be altered by premarital agreement b. §1610: made in contemplation of marriage; property = present and future interests in

income and earnings.c. §1611: doesn’t need considerationd. §1612: right to buy and sell; lease & consume; can define what they want to do w/ their

property. They can basically say they don’t want the CP system to apply. They can adopt a CL system if they want. Can do whatever, except that which violated public policy, including child support rights.

i. Waiver of spousal support: allowed, but still some protections (i.e. need legal counsel).

4. Marriage of Bonds: had prenup that money he made from bball season would remain his; she claimed involuntariness

a. Holding: Sun had acted voluntary in signing the agreement, despite the fact that she did not have legal counsel.

b. But, CA legislature did not like the result of the case and added (c) to §1615.

Are we getting tested on these statutes?

Juliet Aftandilianc. Certain factors that must be met for the agreement to be voluntary (need to know; likely

a MC question)d. ALL must be met :

i. Had independent legal counsel OR waived in a writingii. 7 day cooling off period to review the agreement (between time presented with

agreement and when agreement is signed).iii. No language issuesiv. …and others (see page 35)

ii. Transmutations: contractual mutations or alleged changes during or after the marriage1. Historically, to change the character (from SP to CP, CP to SP, or SP of W to SP of H), it was

very easy to do so; by actions, conduct, or statements, it was more than enough to imply or create a transmutation; SOF was ignored.

2. Woods v. Security 1st National Bank: W orally declared her intention to transmute her SP to CP to H & friends. She also said she did do it, but upon death, didn’t say same.

a. Holding : for H; she said she did so she did! Valid transmutation! b. Later cases even affirmed implied in fact agreements (ex. how do you like our house?)

3. Then Transmutation States were created in the California Family Code: a. §850: During marriage w/ or w/o consideration.b. §851: not so important.c. §852 (CCC § 5110.730)

i. (a) NOT valid unless in a writing by an express declaration …1. Note: there does NOT have to be a signature; it just has to be joined in

and consented to by the adversely affected spouse. ii. (e) This law does NOT affect transmutations of property made BEFORE 1/1/85

(i.e. only prospective).4. Estate of MacDonald: pre 1985; H’s pension plan was CP; but he put it into IRA’s w/ kids as

beneficiaries; W signed the paper (according to law) but then died.a. Was the writing an express declaration giving up her interest in CP? No.

i. Did NOT meet §852 requirements.b. The purpose of the legislature was to make sure that the person was absolutely clear

about what they were doing and that there were no doubts as to what was being done.i. Needs to clearly say I am giving up my interest in this account.

1. But, the word “transmutation” doesn’t need to be used.c. Rule: the writing, itself, must clearly state that there is a transfer of interest.

i. Extrinsic evidence CANNOT come in to show parties’ intent.d. Here, W was just clarifying that she knew what H wanted to do w/ the property upon his

death. e. Note 3 on page 62: Non-probate transfer law does not override §852.

5. In re. Marriage of Barneson: big stock portfolio (SP); H suffered stroke and transferred his stocks over to his wife. At divorce, H claims ≠ valid transmutation.

a. Is there a writing? Yesb. Is there an express declaration? No; not a valid transmutation.

i. Does use the word, “transfer.”1. “Transfer” does NOT necessarily = “transmutation.”

a. Transfer for use or for purposes of management and control, but not equitable ownership.

c. Point: §852 is strictly construed and even if a reasonable person would think that a transmutation had taken place, it must clearly do so and “transfer” is just not quite express enough.

d. Rule: when it says express declaration, it has to be unequivocal; there must be no extrinsic evidence. The writing itself must show that the property interests are being transferred. Thus, VERY HIGH STANDARD TO MEET!

6. In re. Marriage of Benson House was CP from parents; but W’s dad asked H to give up his interest in house; he signed grant deed. H claims it was only in exchange for W giving up her interest in pension plan.

a. Is there a writing? No

If statement is made before 1985: probably a transmutation

If statement is made after 1985: need to satisfy §852.

If the date of the statement is not given: have to do both analyses!

Must be clear from the four corners of the document!

Ask: can we tell unequivocally that this person is giving up or changing their interest in this property?

Cannot look to some tangential document or extrinsic evidence

First date to remember: 1/1/85 – when express declaration became required for transmutations

Note: transmutation rules transcend death or divorce.

Juliet Aftandiliani. But H argues partial performance & promissory estoppel.

b. Rule: we don’t care about other concepts of contract law; all we care about is the statute and we need to find a writing. If there is not writing, there is no transmutation.

c. Rule: no concepts of part performance or promissory estoppel will be used to make an otherwise invalid transmutation valid.

d. Rule: Can undo transmutations w/ such concepts, but cannot MAKE one w/ such. Example??

7. Marriage of Steinberger: loose diamond (CP) then gave to W on 5th Wedding anniv. At divorce, each spouse claims it as their SP.

a. Is there a writing? Yes, the cardb. Is there an express declaration? No (court assumes but we would say on exam!)c. May not necessarily mean they want to give it away; it’s NOT unequivocal.d. §852(c): Express declaration rule doesn’t apply to gifts made by either spouse that are

NOT of substantial value, considering the circumstances of the marriage.i. Marriage-dependant test look at income, etc.

ii. Requirements: 1. Must be one of the items illustrated: yes, jewelry2. Must NOT be of substantial value: No!

a. Trial court & W conceded that it was substantial value.b. Thus, NO TRUE GIFT; the legislature was clear when it said

that there needs to be a writing when the value is substantial.e. Rule: No knowledge of the rule is NOT an excuse.

8. Estate of Bibb: H’s SP Rolls Royce; changed title to be in his or W’s name. H died; W put it in her name only. H’s son now claims it’s his.

a. Rule: Despite what will be heard in cases, there is no real state of title presumption.b. Rule: Just because it’s put in both names, its NOT presumed to be both of theirs for state

of ownership. It just changed registration at the DMV.c. Is there a writing? Yes (the DMV printout)d. Is it an express declaration? No.

i. It may be sufficient for joint tenancy for purposes of the vehicle code, BUT it is not clear and unambiguous of H’s intent to transfer his interest.

e. Point: very difficult to make an express declaration!f. Rule: the written declaration does NOT need to be filed or recorded.

CHAPTER TWO: THE CLASSIFICATION OF PROPERTY AS COMMUNITY OR SEPARATE

I. The significance of ClassificationII. Presumption That Acquisition During Marriage is Community Property

a. CFC §760: General CP Presumption – all property, real or personal, acquired during the marriage, while domiciled in this state [is presumed to be] Community property.

i. Rule: the classification of property as SP or CP cannot be made simply by reference to title documents.b. Popovich’s 5-Step Approach to classifying property

i. Are the parties w/in the system?1. Are they w/in some California CP system that has jurisdiction over them to bring in some CP

scheme?a. Is the couple married or deemed to be married for the purposes of the systemb. Couples coming into Cali or leaving it.

ii. Is the property capable of being classified?iii. Is there a classification presumption applicable?(presumptions set the BOP)iv. Can that presumption be overcome or rebutted?

1. Example: property acquired during the marriage is presumed to be CPa. How to rebut that presumption?

i. SP; acquired by gift, devise, or inheritanceii. A transmutation during the marriage

iii. Prenuptial agreementiv. Traces back to SP

IMPORTANT NOTE: They raised the presumption incorrectly here!!! Thus, what the point of this case, to tell us that length of marriage is irrelevant?

If it had been before 1985, it WOULD have been a gift; all the circumstances could come in and it would be implied that H was gifting it to W.

Thus, on exam: examine from BOTH SIDES

Always just say “transmutation!”

Juliet Aftandilianv. Is any form of apportionment appropriate?

c. Raising the General Presumption of Community Property i. Fidelity v. Mahoney: bought flight insurance for $1 then H died & named son as beneficiary; married

only few months.1. If this was gift to the son, there needs to be the wife’s consent, and there was none.

a. Rule: without the other spouses prior consent, the beneficiary assignment is only good for the other ½ of the property.

b. General rule: with life insurance (and other types of insurance), it cannot go to the named beneficiary w/o the other spouse’s consent.

i. Plays into transmutation rules in that w/o a valid express declaration, wife isn’t giving up her interest.

2. BOP should have actually been on son – to trace the dollar to SP!3. REAL RULE: The presumption has the same force whether the marriage is a day old OR 60

years old.ii. Wilson v. Wilson: Married from 1931-40. H&W bought a house during the marriage.

1. Indirect Tracing Principle: tried to trace the house to SP by saying that the family bills took up all W’s separate property funds.

2. This case was more to show how you initially raise the presumption of CP.iii. Estate of Jolly: Everything went to W when H died. Then W died, and now each spouse’s kids are

battling over property.1. Note: property is at issue due to CPC §6402.5 (Recapture provision).2. Issue : Was the property acquired during their marriage CP?

a. The court said that all the property had to have come before H’s death. 3. W could NOT definitively show that the property was acquired during the marriage.4. Point of case: BUT, they were married for a very long time, and we know they were not very

wealthy when they got married, and it doesn’t look like they got big gifts.a. Basically, the court was saying that the potentials for SP were not there. The stuff sitting

around their house was probably their CP. It can be inferred logically that the stuff was probably bought during the marriage.

5. Rule: If you’ve got yourself a long marriage, and you can pretty much rule out sources of substantial SP, its more likely than not that the court will infer that the property was acquired during the marriage.

d. Rebuttal of a General Presumption by Tracing i. First: Show that it was acquired during marriage

ii. Second: Trace back to some SP source1. Before the marriage2. During the marriage by gift, bequest or device

iii. Hypothetical: married 2002; bought some art during marriage; then died. What is the art?1. W/ no other evidence: CP, b/c acquired during the marriage.

a. But, if art is bought using money from watch that was bought in 2004, which was bought with proceeds from stock.

i. Where did stock come from?1. If it was in 2003, as gift from uncle.

ii. Adequately traced to SP.b. What if stock had been bought in 2001 with earnings?

i. Yes, adequately traced to SPc. What if stocks were bought with earnings in 2003 from current earnings that were kept

in separate account w/o her name?i. Earned during marriage, and thus CP.

iv. Freese v. Hibernia Savings & Loan Society:Prior to marriage, W had 2 properties; during marriage, sold & bought other property & put unknown money into accounts.

1. Issue : money in bank account SP or CP?a. If given these facts on an exam, where do we start?

i. Rule: Look at which property we are trying to classify: start with that!1. Thus, start with the bank account.

2. Presumption: it was acquired during the marriage, and thus is presumed to be CP.

We’ll never be tested on this statute!

BIG DEAL: Apply to any set of facts; when there are long marriages

Jolly stands for the proposition that to show that the property was acquired during the marriage, you can infer such w/o showing categorically it was acquired during marriage.

*No state of title presumption.*No blanket presumption in favor of CP.

Talk to professor about making gifts: what do we need to know

Juliet Aftandiliana. W’s heirs now have the BOP to trace where the money came from.

i. Standard of proof: preponderance of the evidence standard.1. Rule: tracing doesn’t have to be exact. As long as that is it more than

likely from where it came.a. Could not show perfectly that money was from house, but at

that date, most people didn’t have $1300 lying around.3. Thus, it traces back to the house, which is before marriage, and thus is SP4. Point: tracing doesn’t have to be exactly precise, and the more temporally close they are, the

better, but doesn’t have to be that way.

III. The Common Statutory Presumptions Respecting Separate Propertya. §770: Separate property of married person (page 81)

i. How to phrase:1. By definition, this is SP, OR2. The general presumption is that it’s CP, but easily rebutted because of the rule of what SP is (the

one that Prof. Prefers).b. §771: Separation and divorce

i. During the period between separation and death/divorce, there is a general presumption of CP, but § 771 allows for the presumption to be rebutted.

ii. What is a legal separation: (something we don’t need here in §771)1. A divorce, w/o being divorced; go to court, determine spousal and child support rights2. Court-adjudicated separation, but for whatever reason, they don’t want the divorce title.

c. Estate of Clark: Dad received settlement money from son’s estate who died before dad got married. W now says property is CP, and ½ hers, since money acquired during the marriage.

i. To trace the money back to SP:1. The right to receive the money was when the son died, which was before the marriage.

ii. Holding : the right to sue arose prior to the marriage, and thus traced back to a time before the marriage when son died. Thus, it’s SP.

iii. What if son died after dad’s wedding? 1. Rule: inheritance (“devise”) is also SP so it would be SP anyway.

a. But is a settlement the same as a devise?i. Yes, because typically, people file a will contest because they’re getting the

property some other way.1. Thus, settlement = similar to gift, bequest, or device.

d. Downer v. Bramet: H & W separated & signed an agreement saying certain property after 3/1972 would be their SP. 8/1972, H received 1/3 interest in Boss’s ranch; w found out when he sold it.

i. Issue : gift by boss (and thus SP) or something else (in lieu of pension plan & thus CP)?1. Requirements for a legal gift: met here

a. Deliveryb. Lack of consideration

ii. BUT Evidence showed that it WAS a gift in lieu of pension plan1. They never socialized outside of work2. They weren’t friends and they didn’t even play cards.

a. Not friends so not a gift. It was for the work he had performed for his boss for all the years that they were married.

iii. Rule: generally, pensions are CP; retirement accounts accrue while the person works, and thus needs to be apportioned based on how much time the couple was together during the time the pension/retirement plan was accruing.

e. In re. Baragry: H left W in 1971, but not divorced until 1975. 4 years of his earnings at issue.i. §771 Rule: Must be physical separation w/ some communicated intent not to resume a normal

marital relationship.1. Circumstantial evidence a lot of times; usually the date when people realized they were “over.”\2. Doesn’t have to be a legal separation (i.e. adjudicated separation).3. Point of separation forward, the property becomes SP forward.

ii. Evidence for separation:1. Wasn’t sleeping in the same house

Juliet Aftandilian2. Were no longer having sex

iii. Evidence against separation:1. Ate dinner at home every night2. Maintained his address there3. Took vacations4. B-ball games together5. Took his laundry there6. Bills/voting7. Wrote on daughter’s school’s paperwork that both parents lived at home w/ her (but this isn’t

necessarily determinative).iv. Rule: living separately, by itself, isn’t sufficient. One spouse must have the requisite intent, but the intent

must be communicated, and actions have to be consistent with that intent.v. Ultimate conclusion: not separated until 1975. Thus, earnings up until 1975 were CP.

f. Hypotheticalsi. One spouse says: I’m leaving.

1. Rule: Only one spouse has to have the requisite intent.a. We’re done, this is the end, we’re not getting back together = sufficient.

ii. H leaves with hidden intent; W thinks he is just going to clear his mind1. Rule: MUST be communicated, thus hidden intents don’t matter.

a. One exception: if separated for years but it was never communicated.i. But when the separation occurred is probably harder to determine.

b. Rule: But, even if you say it clearly, if you’re actions aren’t consistent, it’s NOT a separation.

g. Hardin (Note 4 on page 94): filed for divorce purely for the shock value.i. Logically, if someone is filing for divorce, it seems like that would be sufficient.

ii. BUT occasionally, it’s used as shock-value by those who DON’T want a divorce but instead use it as a wake-up call; they clearly have no intent to actually divorce.

1. Rule: That will not be separation for purposes of §771 (rare).h. Hypo : W leaves in 1971, no intent to get back together. H is holding on and wants to reconcile. H wins lottery.

Do we apply SP to the one who has the intent and CP to the other?i. Rule: If one party has the requisite intent, then the SP standard is applied to both spouses.

1. They’re separated the day W left w/ the requisite intent.

IV. Special Presumptions Based on the Form of TitleA. ACQUISITIONS BY A MARRIED WOMAN

i. §803: Married Woman’s Special Presumption (MWSP) – Property Acquired by Married Woman Before 1/1/75 (rebuttal presumption to CP Presumption)

1. If property given to W only = W’s SP, EVEN IF bought with community funds.a. Example : H and W; title to property just says “Wanda smith.”

i. It would start with CP presumption, and then W would rebut w/ this rule.ii. Note: there is NO married mans Special property presumption & no state of title

presumption.2. If acquired by W and someone else, presumption = her part is TIC.

a. Example : To Wilma Jones and to Wanda:i. Both are married women, so we’d want to apply the MWSP to both.

1. It IS there respective SP’s. They are ½ holders, but it’s their SP.3. If acquired by H&W as “H&W” = CP.

a. Why have this presumption? Prior to 1975, man was in control, so if property was in W’s name, must have been intentionally.

ii. Horsman v. Maden: H put property in W’s name, but told her not to record it.1. Step One: Acquired during marriage = CP.2. Step Two: MWSP kicks in; prior to 1975 & in W’s name alone, so W’s SP.3. Step Three: to rebut MWSP:

a. Have to show that H had no intent to make it W’s SP; intent IS relevant.i. Then, it would fall back into the CP presumption.

4. Examples :

Second date to remember: 1/1/75 – When MWSP was effective

Juliet Aftandiliana. H is involved in risky business ventures and thinks if stuff isn’t in his name, creditors

can’t get to it. Thus he puts everything in W’s name.b. It DOES show lack of intent to make the property SP, and courts have NOT held that the

fact that H was doing something bad or illegal doesn’t take away from showing H’s intent.

i. Rule: Tracing to H’s CP or SP IS NOT ENOUGH. There has to be intent.5. H is on a business trip. While H is gone, W uses CP to buy RE in her own name. They get

divorced, and H finds out about the property.6. H would bring up that he didn’t even know about the property, thus could not have had the

requisite intent.a. But, if the evidence shows that he did know about it, and didn’t do anything about it, that

is usually not enough.7. Case Rule: Where it is claimed that an instrument in writing, executed by the H to the W,

constituted a gift to the W and changed the status of CP to that of SP of the W, the question of the intention of the H in executing such instrument becomes the all important and controlling question.

8. Case Rule: In determining this question of intention, the declarations of the alleged donor, made either before or after the transfer, are admissible and such declarations need not have been made in the presence of the adverse party.

9. But if H knew about it before 1975, and didn’t do anything about it, that doesn’t necessarily show he had an intent.

10. If he didn’t know until after 1975, just said didn’t know, but if it was after 1985, have to ask if he made an implied transmutation.

iii. In Re Marriage of Ashodian: W flipped houses; H said he didn’t want to be bothered w/ the business; W then titled houses in her own name (pre-1975).

1. Application of MWSP: Yesa. We do have the presumption: it’s before 1975, and it’s in her name.

2. Rebuttal of MWSP: tracing is not enough, so H has to show no intent or knowledge.a. Didn’t understand the business & didn’t want to be bothered w/ it, i.e. he had abandoned

the property & arguably gave her a gift.i. Knowledge: did he know or should have known?

1. There were two properties which he signed the grant deed to, and there was tax problems that he stayed out of.

3. Holding : SP of W; H couldn’t rebut because he didn’t show lack of intent because he abandoned his rights and he sort of knew about them too (but not best case to illustrate).

4. We don’t need to find sufficient evidence of gift. The presumption already makes it her SP, so we just need to find sufficient evidence of lack of intent.

5. Standard of Proof: (not in case but by CA SC) a preponderance of the evidence standard to show lack of intent to make it W’s SP.

6. You can abandon your rights in property, but once time passes 1975, the transmutation analysis comes in.

iv. Donze v. Donze: Property acquired by H &W. Title says “to W, as her SP” upon the direction of H and his parents.

1. Semi-conclusive MWSP: when the face of the document shows intent to make it W’s SP, thus to rebut the MWSP, more than a lack of intent needs to be shown.

a. What if this was done w/o H’s knowledge?i. Then it wouldn’t be the super presumption and then only lack of intent would

have to be shown.2. Rule: The only option H has when the title says “as her SP” is contract avoidability issues:

fraud, duress, or mistake: do we need to know elements of these??3. So do you need knowledge & approval?

v. Hypothetical: H and W are both working. They are from CA but like to ski in Vermont. W is on a business trip in VT and finds a property .She writes to her H that she found a great cabin and wants to buy it. H says he cannot come to see it, and for W to put it in her name, since it’s more convenient right now to do it that way.

1. Title reads: “To W”

Thus, can rebut by showing:(1) Lack of intent to make it W’s SP.(2) Unethical excuses [to defraud creditors](3) No knowledge

When is knowledge sufficient intent?!?!

Juliet Aftandiliana. H could probably show lack of intent; it was out of convenience; no intent to make it her

SP.2. Title reads “to W as her SP”

a. H could still rebut because he didn’t know that it said SP: he didn’t direct W to put it as her SP.

b. It would not give rise to the super semi-conclusive presumption.vi. §803(b): When Property become TIC interests

1. Example given before: two married women’s names are on the titlea. Prior to 1975: MWSP as to each of them, and each gets ½ TIC. b. Attributes of TIC

i. No right of survivorshipii. Each has undivided ½ interest

iii. Can be devised2. Example 2: title reads “W and Hal Jones.” Both married, but not to each other.

a. As to W : during her own marriage and prior to 1975, so MWSP applies. She is ½ TIC with Hal; the ½ is her SP.

b. As to Hal : General CP presumption because it was purchased during his own marriage, and was purchased with their CP funds. The analysis ends there: the ½ interest is the community property of both H and W Jones.

vii. §803(c): When it’s CP1. Example 1: Title says “W Smith and Hall Smith as W&H”

a. Presumed to be CP since described as husband and wife . b. But why do we need 803(c) since the regular CP presumption also kicks in?

i. Example: Title reads Wanda Smith and Hall Smith. They are married but the title doesn’t say they are H and W.

1. Analysis w/o 803(c): goes back to 803(b) and WMSP kicks ina. W would have ½ TIC; other ½ would be CP of both, and in

effect, W would have ¾.2. Example 2: if we don’t know if they married:

a. They have to be described as H & W; otherwise, they could just be brother & sister.i. Hal Smith, and his wife Wanda = sufficient description

ii. Hal Smith, and Wanda Smith, his wife = sufficientB. CONCURRENT ESTATES

i. Ways of holding property in joint form:1. Community Property2. Tenants in common

a. H & W can hold property as TIC, usually by titling it as such.i. Character of TIC:

1. Similar to CP, but different creditor issue2. Different alienation provisions3. Usually 50/504. At divorce, it remains 50/50.5. At death, it goes to wherever it got willed to.6. NO right of survivorship.

b. Not as much as focused on here, but will be tested on slightly. What exactly?3. Joint Tenancies

ii. Introduction to Joint Tenancies 1. Example: H &W buy a house and they title it as “H & W as joint tenants” (usually at direction of

realtor).a. Most people like JT because of the ROS (doesn’t go through probate).

i. Probate = court supervised procedure to make sure the property is getting administered the way it’s supposed to be; disliked because time & $$.

b. If the will says: “my ½ of the house goes to Nate”i. Nate actually gets nothing b/c of the ROS. The will is ineffective because:

1. Rule: you cannot devise Joint Tenancy property.

The typical problem we are going to have is whether or not it’s really a joint tenancy or community property. It’s a big problem: the landscape is good, but the case law is messy.

Favorite testing area of Professor!

So this would be the analysis we do, or no?

Juliet Aftandiliana. Hence, the reason for lots of conflict; most people don’t know

what JT is.2. Joint Tenancies (assuming it’s real JT) versus Community Property

a. DURING MARRIAGE: i. Ownership

1. CP & JT: Undivided 50% interestsii. Right to sever property: (usually not an issue though)

1. JT: Can one spouse terminate the JT?a. Rule: One spouse can unilaterally go to court & petition to get

their ½ divided, alienated.iii. CP: can one spouse do such a thing?

1. Rule: They cannot go to court unilaterally to sever it. Both spouses have to agree to transmute it to their divided ½’s.

iv. There are also some creditor differences1. More or less protection depending on a CP or JT (but we’re not getting

into this right now.)B. AT DIVORCE:

i. JT: 50/50 (done in divorce proceedings)ii. CP: 50/50

1. Can it be split differently by a judge? NO! C. AT DEATH:

i. JT: If all property is in JT, the dead spouse’s ½ goes to the other spouse (through right of survivorship).

ii. CP: Biggest issue:1. With a will: to whoever you willed it to.2. Intestate: would go to the surviving spouse (and kids, if any).

iii. What if the will says all my property goes to my spouse?1. It wouldn’t seem to matter which cotenancy it is b/c property will go to

spouse either way, but it does matter because of creditor, tax issues, and estate planning issues.

c. Four Scenarios (the key to classifying property is defining the proper scenario).i. FIRST APPROACH: Common Law/Case Law Approach (before Cali Leg. Got involved):

1. Lovetro v. Steers: H had partnership; sold it & took out note that said H&W, as JT’s; issue is what the classification of the note is.

a. Rule: Having the title in JT overrides the General CP presumption, and it becomes a joint tenancy.

i. Case Law Rule: But, despite being the title, it can be rebutted. It can be rebutted back to CP (or SP, or combo of both) oral or written by an agreement or understanding to the contrary.

ii. In this case, though, W wanted it to be CP, and there was no agreement with H (oral or written).

b. Rule: conduct (ignorance) is also sufficient to show a lack of intent to make a JT.i. W’s ignorance as to JT’s effects AND the tracing of the proceeds to CP was

enough to make an implied agreement that it was still CP and didn’t mean to change it. (Tracing alone is not enough.)

2. Estate of Levine: House was titled in JT “for convenience only;” wanted to be able to give to kids if he died first, but to take ROS if W died first, i.e. for his convenience.

a. Rule: the agreement must be understood or known by BOTH spouses; a hidden intent is not sufficient.

i. Even if the whole world knows, if W doesn’t know, not sufficient.ii. Cannot be a unilateral agreement; must be an agreement of the couple.

b. Case Rule: There must be an agreement of some sort; the presumption may not be overcome by testimony about the hidden intention of one spouse, undisclosed to the other spouse at the time of the conveyance.

ii. SECOND APPROACH : Single Family Residence Presumption 1. Introduction

Note: This CL approach is historical BUT still applicable in certain situations today

* There is NO state of title presumption but this approach serves like one.

Courts don’t like JT’s b/c it takes away the rights of a cotenant; they cannot dispose of it at death.

85% of California Couples’ property is in JT.

JT Issues:(1) Is it really a JT?(2) Creditor issues(3) Separate property contributions

Juliet Aftandiliana. The legislature basically said the public doesn’t know what they’re doing when they put

their prop in JT so they enacted legislation that undoes/overrides the JT presumption of title.

b. The SFR presumption was in effect between 1965-1983 (inclusive).i. These are dates when the SFRP was in effect but not related to when we’ll

classify property according to this: whaaa???2. In re. Marriage of Lucas: Couple bought home in 1968 & then got divorced.

a. SFR Presumption: when a single family residence of a husband and wife is acquired by them during marriage as joint tenants, for the purpose of the division of such property upon divorce or separate maintenance only, the presumption is that such single family residence is the community property of said husband & wife.

i. Thus, if it’s a SFR titled in JT, it’s confirmed (by statute) to be CP.1. Note : we won’t use this approach to classify; only to rebut.

b. Can this statutory presumption of CP be rebutted to make the SFR really joint tenancy or each of their respective SP?

i. Yes , but not by tracing. Have to show that there was an agreement or understanding between the spouses (backwards to CL approach).

1. Can be written, oral, or implied.iii. THIRD APPROACH : CFC § 2580, 81 (and CCC §4800.1) (pg. 118) (From 1/184 & on)

1. §2580: the law has been very confusing and they have a compelling state interest for enacting this legislation (so ok to be applied retroactively).

a. Retroactive as when property was acquired; not retroactive divorces.i. If the property was acquired before 1984, the statute is applied.

2. §2581: Does NOT deal with death.a. Elements:

i. ALL propertyii. Upon dissolution of marriage (divorce!)

iii. During marriageiv. In joint formv. Presumed to be CP

3. Application: the general CP presumption applies (since during marriage) CP despite being in JT title (because in the date of the statute).

a. It’s just like the SFRP but it’s expanded to all property.4. How to rebut statutory presumption:

a. Must be written agreementi. Must be expressed & clear that it’s NOT CP but instead in JT or SP.

ii. Can also be a clear statement in deed1. Saying something like: this is JT and not CP.

b. The deed just saying, “joint tenancy” isn’t enough; it must say, “it is NOT community property.”

iv. HYPOTHETICALS:1. H&W bought stock in 1983 and titled it in JT, but oral agmt that it’s really HER SP. Now getting

divorce:a. Ignoring §2581: we’d be under CL approach (b/c that’s all that’s left)b. It would start as CP, then title would rebut it, and then it would rebutted to SP through

oral agreement.c. Thus, would be W’s SP.

2. H&W buy a home in 1983 and titled in JT, but oral agmt that it’s HER SP. Divorce:a. Ignoring §2581: we’d be under SFRP. b. Presumed to be CP, and statute affirms CP.c. But oral agmt is sufficient to rebut to W’s SP.

3. Same fact pattern (w/ either property)a. H’s argument: §2581 applies retroactively and that all property in JT is CP.

i. It can only be rebutted by a writing, and there is none here.b. W’s argument: It’s not fair; at the time we had oral agmt, it was, in fact, my SP.

Two issues but for right now, we’re just focusing on the SFR presumption issue.

Note: book says effective date as 1987, but for our purposes it’s 1984.

Creates problem: do we or don’t we apply it retroactively??

Juliet Aftandilianv. In re. Marriage of Buol: Married 1943-77; W had wages and had an oral agreement that it would be her

SP (effective transmutation pre 1985). 1963; bought home w/ her SP and titled in JT; then they divorced. On appeal, went past 1/1/84 & issue = whether to apply retroactively.

1. Rule: if the spouse had a vested property interest taking into the law of that time, (that was valid at the time) then the law cannot be applied retroactively.

a. It is NOT important that the statute says it’s a CSI; it still needs to actually cure such a rank injustice. Do we have facts for when such rank injustice is?

vi. In re. Hilke: Married 1955-1989; they purchased a house in 1969 and titled it in JT. Sought a divorce, granted the divorce & before property issues resolved, W died.

1. Divorce rules apply because they got divorced first.a. Analysis: General CP presumption Title in JT Presumption of CP by statute

Rebuttable only with agreement in writing or clear statement in the deed that it is to remain JT.

2. Rule: a right of survivorship is NOT a vested interest, and thus the statute CAN be applied retroactively b/c it’s contingent upon the spouse’s death.

a. But if he had argued that the property was his SP, then it WOULD NOT be applicable retroactively!

3. How do we know they had a vested right?a. Must have a valid agreement re. some property interest.

i. Here, his whole interest was only in the ½. He didn’t have interest in the other ½ until W died.

d. Review of the Three Approaches FOR DIVORCE : i. Common Law

1. CP (Presumption) JT (CL/title) SP/CP (any agreement, understanding, or implication)ii. SFRP (1965-1983)

1. CP (Presumption) CP (statute) SP/JT (any agreement, understanding, or implication)iii. §2580/2581 (1/1/84)

1. CP (presumption) CP (statute) JT/SP (rebut – written agreement: that it’s NOT CP, or clear statement in the deed.)

2. Supposed to apply retroactively:a. When it can: not taking away a vested interestb. When it cannot: when it IS taking away a vested interest

e. Classifying Joint Tenancies FOR DEATH : i. SFRP and § 2581 don’t apply to death; the only thing left is the CL approach.

1. But the CL’s approach of rebutting the JT back to CP = transmutations.a. Thus, post 1/1/85, express declaration rule kicks in.

ii. Hypo: H & W take property in JT. H dies, giving his kids all his property. Kids say that notwithstanding title, it’s CP and they get ½. However, W says it’s JT and all hers.

1. Common Law Approach:a. CP (presumption) JT (CL/title) CP/SP (any agreement, understanding, or

implication)2. Transmutations Approach

a. Estate of Blair: Married 1965-85; had home bought during marriage that was titled in JT. Then filed for divorce. W died before it was final.

i. Rule: If applying the CL approach to an agreement made POST 1/1/85, it has to be a writing with an express declaration changing the nature of the property.

b. Hypo: H &W buy home in 2006 with CP. If you title something in JT, does that need to be a valid writing w/ an express declaration to be a valid transmutation as well?

c. Estate of Bibbi. Rule: title documents are valid transmutations b/c it IS an express declaration.

1. It’s not a tangential writing; it’s not a beneficiary form; it related directly to the property, despite being short; it’s to the point.

ii. However, if you’re after 1/1/85, once you have JT then you’re stuck until you have an ED saying otherwise.

f. CCC § 682.1: Community Property with Right of Survivorship (effective 7/1/01)i. Rule: only applies title that says, “CP with right of survivorship” occurring on or post 7/1/01.

Remember: this is still only regarding DIVORCE cases

Every time we see a fact pattern where the court bifurcates & immediately grants the divorce, the divorce rules apply. On the other hand, if one dies before the divorce is finalized by the court, the death rules apply.

Note: different from divorce statutes where title needs to say, in the 3rd approach, that we really mean for this to JT, NOT CP. Here, there is no presumption that JT =CP, so if you have title that say “this is JT,” this is enough.

SEE FLOWCHART!

SEE FLOWCHART!

Juliet Aftandilianii. Reasoning: the legislature didn’t want people to be disadvantaged by tax rules

iii. In effect: When one spouse dies, it immediately goes to the surviving spouse, w/o the need for probate, but for tax purposes, it’s community property.

1. Read how the spouse can prevent the title from taking effect.

~~~~~~~~~~~~~~~~~PRACTICE WITH PROBLEM SET! (ANSWERS IN CP FOLDER)~~~~~~~~~~~~~~~~~

CHAPTER THREE: LIMITATIONS ON THE CLASSIFICATION PROCESS

I. Property within the System (Is the property capable of being classified?)a. Education and Increased Earning Capacity

i. Pre-CFC Rule1. Todd v. Todd: character of legal education & legal practice property at issue.

a. Rule: an education is NOT an asset capable of being classified.i. Technically possible but would result in battle appraisers.

ii. California Family Code §2641 (same as California Civil Code §4800.1)1. Enacted for all DIVORCES (post 1/1/85) (but we won’t need to know this date).

a. IS applied retroactively, and always okay.2. Recognized the practical problem of valuing a legal education, so it provided for reimbursement

to the community for the community expenditure rather than division of the education asset.a. REMINDER: if $100,000 is spent on the education, the working spouse only gets

HALF. 3. What is required for this reimbursement? §2641(b)(1)

a. The education or training MUST: substantially enhance the earning capacity of the party. (For ex: was a student at the outset; not just a change in = career)

i. Point: must have contributed to something they will reap the benefits from.4. The reimbursement will also be paid plus interest (CA = 10%)5. RuleX: If spouse doesn’t take advantage of their higher earning potential, still have to reimburse,

generally.a. Rule: But courts have discretion [ONLY] to reduce the reimbursement amount if they

wish (for ex: if educated spouse has legit reason for not taking advantage).6. §2641(b)(2): Student Loans

a. Generally non-student loans acquired during the marriage and treated as community debt the same way as assets are.

b. Rule: a loan incurred during marriage for the education or training of a party shall not be included among the liabilities of the community for the purpose of division pursuant to this division but shall be assigned for payment by the party.

7. §2641(C): Reduction & Modification ~ Discretion of Judgea. Rebuttable Presumption: if the divorce is w/in 10 years [of the time of payment for] of

the education, it’s presumed that the community has not benefited from the education. 8. §2641(e): Subject to Agreement

a. Rule: Subject to the express written agreement by the parties to the contrary.i. Must have a WRITTEN waiver (could possibly be letters, emails, etc).

9. ALWAYS subject to court discretion to decrease.10. In re. Marriage of Watt: H&W married 1972-81. H went to school & paid for his own books,

tuition, etc., but W paid all living expenses. H also had loans in his own name.a. What does “costs associated with education or training” mean?

i. Rule: the costs have to be directly related to the education process; NOT living expenses, because such would be incurred anyway.

1. i.e. school parking, books, tuition, etc.2. NOT meals, living costs.

b. In respect to the loan assignment, the court SHOULD HAVE SAID: only the loans that were used directly for the education should have been assigned to H, and the rest remained the duty of both.

iii. What applies upon DEATH ? 1. Rule: Todd v. Todd applies

Testable material: READ through the statute!

Read other reasons for judge’s discretion: page 129!!

Good case in that it defines what education & training expenses are, but it doesn’t properly divide up the loans.

Juliet Aftandiliana. Two situations and Todd v. Todd applies in both:

i. Educated spouse dies; surviving spouse gets zero; no earning potential realized.ii. Educated spouse survives; working spouse dies, devising the ½ interest he or she

thinks she has in the education; the devisee gets zero. 2. Rule: A degree and education is not capable of being classified, and thus is not an interest than

can be devised.b. Legal Practices

i. Todd v. Todd: Practice was started during their marriage, and thus raised CP presumption.1. Rule: a legal practice IS generally classifiable; most everything except above fits in. 2. Rule: The CP presumption applies as usual, & it is CP unless traced to something else.

ii. Marriage of Lopez: practice started in 1953 (SP); got married in 1957.1. How do we value such an asset upon dissolution?

a. If there is a community interest in it, the higher the community interest, the greater the community share.

2. Rule: good will is an asset capable of being classified w/in the CP system, and thus it is included in the valuation of a business practice.

a. Good will: value of the patronage, the reputation3. Just because the practice started before the marriage, doesn’t mean that the WHOLE practice is

SP. Spouse is contributing community efforts once they get married.a. The good will was acquired during the marriage

i. Apportionment is then required.c. Life Insurance (see mini life insurance lesson)

i. Rule: life insurance and its proceeds ARE an asset and capable of being classified. The insurance is divided differently depending on whether it is whole or term life insurance.

ii. Basic issue : one spouse takes out life insurance for a $1M policy, spouse names someone other than surviving spouse as beneficiary, then surviving spouse and beneficiary argue over it. SS says that it was bought & paid for w/ community funds, and w/o consent of beneficiary assignment, SS gets ½ interest in the policy.

iii. WHOLE LIFE INSURANCE (ex. $1000/year)1. Hypo 1: Policy marriage death.

a. Between marriage & death (8 years): CP paid for premiumsb. Between policy acquisition and marriage (2 years): SP paid for premiumsc. Rule: must apportion based on time.

i. We have 8000/10000 which is SP, and 2000/10,000 that is CP. Thus, 80% is SP and 20% is CP.

ii. Thus, since the policy is for $1M, H (his beneficiary) gets $800,000 & $100,000 (1/2 of CP share) and W get $100,000 (1/2 of CP).

2. Hypo 2: Marriage policy non-legal separation a. Between policy & separation (9 years): premiums paid for by CPb. Between separation & death (1 year): premiums paid for by SP.c. Apportionment

i. SP: 1/10 =10%ii. CP: 9/10 = 90%

1. Thus, beneficiary gets ½ of community & all of separate share:a. SP: gets 10% of million = $100,000b. CP: gets ½ of 90% = $900,000/2 = $450,000, i.e. $550,000 tot.

iv. TERM LIFE INSURANCE DIVISION: 1. Either the policy was paid for before marriage with SP funds, or it was bought during marriage

with CP funds; term insurance is only good for that term.2. General Last Payment Rule: the character of the last payment that kept that policy in force

controls how the policy is classified.a. Thus, as to hypo 1:

i. Last payment was CP, the policy = CP and beneficiary gets ½ the policy.b. As to hypo 2:

i. Last payment was SP, the policy = SP and beneficiary gets all the policy proceeds.

If it was 1985, and there was a valid transmutation to beneficiary, it would all be H’s SP to the ben; but this is not the typical case.

Ask professor to go through this

Juliet Aftandilianii. As to argument that CP paid for 9 years: they got what they paid for; they only

paid for that particular year’s coverage and they got what they paid for, but insured just didn’t die during that term.

v. UNINSURABILITY (TERM INSURANCE ONLY)1. Policy (2 yrs B4 marriage, insured gets cancer) marriage death

a. Policy until marriage: paid for with SP.b. Marriage until death (5 years): paid for with CP.

2. General rule: with term life insurance, if you get a terminal illness, you have the right to renew. The insurance company cannot say no they don’t want to insure you because you have an illness.

3. Hypo: Insured dies and has E named as beneficiarya. Beneficiary says last 8 years were paid by him, and he kept it insurable through his SP

payments so last payment rule shouldn’t apply. i. Rule: If you have an illness and then try to go get insurance, they CAN deny

you insurance; you become uninsurable.4. Rule: the right to renew has value (contrary to what Spengler said).

a. Rule: Some of the proceeds should go to the SP contribution that kept the right of renewability in force.

5. In re. Marriage of Spengler: Marriage policy uninsurable separation death.a. Rule: applied the last payment rule (paid with SP so it would all be SP) despite the

insurability rule above.b. Contrary to outlines and this case : uninsurability DOES matter in regards to classifying

life insurance policies.c. So why do they say that?

i. If it was his policy, he would have had that right of renewability, but the company gave him this life insurance as a fringe benefit, so they had the right of renewability; it wasn’t his own life insurance; he didn’t go buy it. The employer did it.

ii. Thus, they said that the right of renewability didn’t belong to the insured, thus it doesn’t matter, and thus the last payment rule applied.

d. On the test: if it’s an employer policy, can ignore the uninsurability.i. But if it’s a personal policy (which is more likely), have to factor in the

uninsurability of the insured. However, apportionment wouldn’t apply; experts would come in to show how the assets get divided.

I. Persons within the Systema. Bottom line : True community property can only be obtained through either a legal marriage, OR through a valid

CA domestic partnership. (Professor will tell us if we have a legal marriage or not).i. Common-law marriage (living together after 7 years)

1. Rule: There is NOT such a thing in California, and thus it is NOT a valid marriage in CA.ii. Rule: California DOES recognize someone who is validly married in another jurisdiction

1. 14 states do allow common-law marriages. Thus, if they have a common law marriage in one of those states (both CP) and then come to CA, CA does recognize it.

b. The Valid Marriage Requirement: Putative Marriages i. Bottom line: TRUE CP is the exclusive domain; can only arise in situations where there is:

1. Legally married husband and wife2. A valid CA domestic partnership.

a. Have exactly the same rights of CP as to married H & W’s; basically the terms are interchangeable.

b. Cal. Fam. Code §297: definition of domestic partners (DP’s) [use LN’s version]i. Big deal : what changed on 1/1/05: created community property for DP?

ii. Retroactive issue: no case law has decided conclusively yet.1. Proponents of retroactivity (R/A):

a. Point to how legislature was enacted. It was passed in 2003, effective in 2005. During this time, there was a “warning letter” sent to all DP’s saying that saying 1/1/05, the laws are changing dramatically regarding what you have, and what you had all this

Note: there are no statutes in California that allow for valid marriages between people of the same sex.

Ways to create invalid marriage or DP:(1) 2 wives at one time(2) Person didn’t have authority to marry couple(3) Lack of capacity, etc

Juliet Aftandiliantime, and if you do nothing, you’ll still be DP’s but the law is applied retroactively.

b. Notion was that they had received a lot of warning.2. Professor thinks there are a lot of problems if it were R/A.

c. Cal. Fam. Code §297.5: subject to same rights & responsibilities as spouses.d. Note : 2007 tax year for CA taxes, DP’s will be able to file joint tax returns.

ii. Putative relationship (can exist for both a married couple or a DP1. Definition: At least one spouse has a reasonable good faith (RGF) belief in the validity of the

marriagea. Versus: a Meretricious relationship (on essay or MPC?)

i. Neither spouse has a reasonable good faith belief in the marriage.1. They know or should know that there was no legal marriage or DP.

ii. Rule: community property rules DO NOT apply.1. Marvin: might have rights thru K law but not tested on.

2. UPON DIVORCE: a. Coates v. Coates: marriage was invalid b/c W was infertile and divorced.

i. Courts used equitable principles to give wife ½ of H’s property since she had a RGF belief that their marriage was valid.

b. CFC §2251: Status of Putative Spouse (pg. 160; arose from Coates)i. Prop acquired during a putative relationship = quasi-MARITAL property.

1. QMP is treated the same as CP, as if they were valid H&W.3. UPON DEATH:

a. Estate of Leslie: marriage invalid b/c not recorded properly; one spouse died. i. Deceased spouse’s CP: subject to § 2251 above.

ii. Deceased spouse’s SP: the same as in CP intestate succession rules (above).1. For death & divorce, intestate succession rules for spouses same.

b. What is a reasonable good faith belief?i. Rule: Look at the facts & circumstances.

1. Ignorance of the law is not RGF belief.2. Thus, does NOT include those who think they have valid CL marriage.

4. SUCCESSIVE BIGAMOUS RELATIONSHIPS a. Estate of Hafner: H&W not divorced; H remarries but said he was divorced; 2nd wife had

a RGF belief that H was divorced. H received settlement during 2nd.i. Rule: divide the otherwise deserved interest by the # of competing interests (i.e.

not necessarily just 2).1. The law did not tell them whose claim was superior; thus, they used

equitable principles to resolve the issue, and gave ½ of what they would have received otherwise.

Helen W KidsW’s Perspective

( = H’s SP b/c they were separated)

n/a 1/3 (by intestate succession rules)

2/3 (divided by 4 kids)

Helen’s Perspective( = QMP b/c GFB in legitimate marriage)

Helen’s own ½ of the QMP, and

H’s ½ (kids get nothing from CP)

n/a 0

TOTAL: 200% 100% 33% 66%

Appellate Court’s Decision 50% 1/6 1/3

1. HYPOTHETICALS a. If there was a divorce instead of a death (divorced W after marrying Helen)?

i. From Helen’s perspective: QMPii. From W’s perspective: would be SP that was acquired after the separation;

all the SP would be H’s and there would be no competing claims.

Thus, it’s only because H died intestate that we had these competing claims!

There is no def. in the probate code for death : does this matter>purposes

Side Note (re. Hafner below) : if H and Helen were legally married and there were no other spouses, the tort action recovery would be considered CP if acquired during the marriage. Damage awards may receive different treatment upon divorce.

NOTE: Whenever there is a putative spouse, look for another spouse (be it a legal spouse or another putative spouse).

Juliet Aftandilianb. What if H died WITH a will that said he wanted to give everything to X?

i. From W’s perspective: SP, and it CAN be devised to whoever he wants, thus all SP goes to X. No competing interest & same answer as above.

c. What if H left Helen, got divorced, and then got remarried?i. There would be three competing claims, figure out as to each of them

separately, and then divide by 3 (b/c now there would be 300%).d. If Helen died and H was alive (who obviously didn’t have the GFB) then it would

probably be held against him in dividing property.e. H legally married to W (3 kids); @ same time, had 2nd W (w/ 4 kids). Went on for 24

years, and neither wife knew about the other (Vargas/Bar Question).i. From each spouse’s perspective

1. W1: true CP; both ½’s to her.2. W2: all QMP; both 1/2’s to her.

ii. Each got ½ of what they should’ve received (following logic of Hafner).c. The Domicile Requirement

i. Definition of domicile: the place where a person lives, a place a person plans to return if they’re absent, and where they plan to stay; where they really consider home; means you’re resident there (registered to vote there; banking; ties; family, etc) (but Prof. will tell us).

ii. Issue 1 : Domiciled in CA but buy property outside of CA. 1. Problem: CA has in personam jurisdiction over the parties, but no in rem jurisdiction over

the property.2. CFC § 760: all property…wherever situated (countries/states)…is community property.3. UPON DIVORCE: CFC §2660 (page 706) use the in personam jurisdiction to make parties

take certain action:a. (a): Hypo: two properties in two other states, one in W’s name, one in H’s name,

each worth $100K. They are both still CP, because they were acquired during the marriage. The court just splits it up in such a way as to not affect the nature/interest in the property; court has such authority.

i. Note: still saying its CP, but just dividing it more easily.b. (b): if such a division cannot take place…

i. Hypo: H&W have one property in Idaho in W’s name for $100K.1. (b)(1): use in personam juris. to make W to execute a deed, before

the divorce, deeding ½ the property to H, and then H can take deed to Idaho recorder.

2. (b)(2): Or could require the W to pay out $50K to H.4. UPON DEATH:

a. Hypo: H&W have property in another state; W dies first, devising her property to her sister.

i. §2660 doesn’t apply to death, and there is an in rem jurisdiction problem. There is also an in personam jurisdiction problem now b/c there is no more person.

b. What to do: go to the other state and open an ancillary probate (with a local lawyer) for the decedent. The local courts would then divide the property.

i. First question that state will ask is choice of law:1. Most states : choice of law rules at death that say if you have

property of a person not domiciled in the state, will use the law of the domicile state (thus, CA = CP).

c. Note: personal property is never at issue upon death or divorce.iii. Issue 2 : Couples migrating to California

1. Hypo 1: couple married for 38 years in Kansas. They retire, come to CA, to live the rest of their lives there. Kansas is a CL jurisdiction, and W has worked, earned salary, bought property ($2M which is thus all W’s SP in Kansas). If they divorce in Kansas, some sort of equitable distribution doctrine kicks in and H would likely still get ½. If W dies, willing everything to her sister in Kansas, H would still get a forced elected share: could choose what’s in will or his share. Here, he’d pick his elected share because will says he gets

Note: buying the out of state property while out of state while domiciled still in CA doesn’t change the analysis.

This is all review from first weeks!!

This is NOT QCP! It’s CP!

Note: we won’t be tested on choice of law rules; we just need to know that if they are using laws of domicile state, use CP for CA.

How to get around this problem: Do a revocable trust instead of a will and then you can state what law applies; the courts don’t get involved; and your property is applied according to your trust (but we won’t be tested on trust principles).

Juliet Aftandiliannothing. If H dies in Kansas, spousal protection schemes only apply to spouses and thus, H’s heirs would get nothing.

2. Hypo 2: Same couple get to California. Now whose property is it?a. Rule: property is STILL all W’s (See Addison v. Addison).

3. Classification of Property Upon DIVORCE: a. Cal. Fam. Code § 125 (CPC §66, 101): Quasi-Community Property (pg. 214)

i. QCP = all property that would have been CP had they been in CA becomes QCP UPON DIVORCE, the property changes from W’s SP to their QCP, and is treated like CP.

ii. Result: puts them back on par w/ their own jurisdiction.iii. Rule: Tracing rules still apply normally.

b. Cal. Probate Code § 66c. Not exact same language as § 125 but same effect; just recognizing the in rem

jurisdictional issue; still apply QCP to out of state property.4. Classification of Property Upon DEATH :

a. Hypo 4: W&H come from Ohio. W had $2 million in assets; they move to CA and then W dies. Upon death: was all earned during the marriage, and thus would have been CP had they been in CA. Thus, H gets ½ and W has ½ to devise.

b. Paley v. B. of A.: H had SP during marriage. Moved to CA, then W diedi. § 101: The QCP does not just change to QCP when they cross the border. It

only applies to decedent’s property that would have been CP.1. In this hypo, W had no property so there was nothing to be CP.

c. Rule: CP doesn’t work to take away property from surviving spouse to deceased spouse.

i. Thus results in same result they would have had if they stayed in Ohio.d. Rule: Normal tracing rules apply.

CHAPTER 4: SELECTED PROBLEMS IN CLASSIFICATION(To fit in classification of property in Popovich’s scheme)

I. COMMINGLED FUNDS (Mixing together different types of property (very common)).a. Hypo 1: Bank acct opened during marriage (presumed CP); W adds $5000 of her SP; H adds salary (CP) of

$5K. Easy to trace – would be ½ W’s SP, ½ their CP.i. Same bank account, nothing’s been added but now interest makes it $20K

1. Account was made during marriage so presumptively CP; but again can trace that ½ came from SP and thus W would get $10K.

a. Most accounts don’t happen this way though: funds aren’t usually put in on the same day and then never touched.

b. Hypo 2: Same b/a; but lots of deposits are made along the way and it ends at $20K. If there are details of when the contributions were made, then could commingle (would take a lot of work, probably by an accountant, but it could be done). Note: no w/drawals yet.

c. Hypo 3: Same b/a; made lots of deposits AND lots of withdrawals. At this point we are hopelessly commingled unless all the D & W’s have been noted. One last withdraw takes place and goes to buy some real estate in cash and the RE appreciates in value and now divorce and need to classify.

i. Presumptively: house = CP because acquired during marriage; account is also presumed CP.1. Typical question: classification of what has been purchased w/ the funds in the account.

a. Tracing issue: hard to do; lots of couples fail. d. Option 1 to Resolve Commingling Issue: Direct Tracing

i. In re marriage of Mix: b/a w/ W’s SP & CP; bought property w/ b/a money. Divorcing.1. Court’s found W adequately traced the funds back to SP by:

a. DIRECT TRACINGi. 1st step: show an accurate accounting to show that there were enough SP

funds to pay for the asset (most people fail this step).1. Rule: An accurate accounting, alone, is not enough.

ii. 2nd step: show that it was your intent at the time of w/drawal to w/draw SP funds to purchase the asset.

If you have a death with a migrating couple: always ask who is dying. QCP only applies to the property of the dying spouse

Juliet Aftandilian1. Intent isn’t always believed; what would help:

a. Note in the memo line of check saying SP.b. How contemporaneous things area. Deposit of SP & w/drawal for same/similar amount.b. Letter to other spouse saying what they’re doing.

ii. In re Marriage of Frick: B/a w/ H’s SP from hotel & CP; made regular w/drawals to SP loan.1. Rule (later): If you pay off SP loan w/ CP funds, then CP is contributing to the SP (i.e.

buying a share of it).2. H didn’t show step 1 (accounting) and thus argument automatically failed.

a. Have to show that there were sufficient SP funds at all times to make those w/drawals. Have to show every day & every dollar between the deposit & w/drawal.

e. Option 2 to Resolve Commingling Issue: Indirect (Exhaustive) Tracing i. Generally: the CP funds were exhausted, so what’s left is SP.

ii. Family Expense Presumption (just in this tracing area): available community funds are presumed to be used for family?? expenses. Separate funds are deemed to be used for community expenses only when community funds are exhausted.

iii. Hypo 1 (handout): the $5000 w/drawal has to have come from SP because the $10,000 w/drawal exhausted all of the CP funds.

iv. See v. See: acct w/ CP and SP; H brought property w/ funds and couldn’t directly trace.1. Hypo 2: H then tried to apply indirect tracing by saying that over the entire marriage, family

expenses > CP.a. Rule: cannot show it based on total period of time; have to keep a running total.

v. What if we have a little piece of something that has been CP?1. If there is just one week’s worth of CP funds, the presumption that the whole thing is CP

doesn’t really apply and they would probably carve out that CP amount maybe + interest and then grant the rest as SP.

II. BUSINESS PROFITS (apportionment)a. Hypo 1 : W started business then got married (bus. Worth $50K; assume W is sole bus. Worker & no

w/drawals from bus. profits) 5 years later, bus. Worth $500K divorce or death.i. Side-note: what factors make a business grow?

1. could be the underlying business itself (SP)2. Efforts during marriage (CP)

b. Pereira Approach (solves for the underlying asset (SP) and then remainder is CP)i. HYPO: solve for W’s SP (with 10% as rate of return, not compounded) only use if given no

other#??1. $50K = SP to start.2. Fair return = $50K + 10%/year ($5000 x 5 years = $25,000) = $75,000 = SP3. Remainder = $500K - $75K = $425K = CP (divided in ½).

c. Van Camp Approach: (approaches it from the other side; fair value to community efforts)i. Note: In this case, prof. WILL give us a number.

1. Here, assume FMV (fair market value) for services are $30,000/year.a. How much is community entitled to, assuming no salary yet?

i. $30K x 5 years = $150K. Thus, $150K = CPii. Remainder: $350K = SP

d. When do we use each method i. If this is a law firm & the chief contributing factor is likely the efforts of the spouse during the

marriage (versus the desks, chairs, books, etc):1. Use the Pereira approach b/c most CP share.

ii. If the chief contributing factor (growth in spite of the spouse’s efforts) was the underlying asset: had to be in the right place at the right time and it grew by itself.

1. Use the Van Camp approach b/c most SP share.iii. On EXAM: DISCUSS BOTH AND MAKE A PLAUSIBLE ARGUMENT FOR ONE SIDE

BASED ON THE FACTS, EVEN IF NOT GIVEN VC #’S; STILL EXPLAIN BOTH.iv. Note: having good will doesn’t change how which approach to use.

a. What do we do if we have salary withdrawals?

Pereira: gives greater amount to CP!

Van Camp: gives greater amount to SP!

Juliet Aftandiliani. Van Camp (fair salary still $30K/year).

1. What if W had w/drawn $30,000/ year?a. Then the community had already benefited from their efforts, and had nothing left to

claim from the business. 2. What if salary w/drawals were $20K/year?

a. Subtract the salary w/drawals from the FMV determined, and the balance is separate.

3. What if W had w/drawn MORE than the efforts?a. CP has again received all they’re supposed to; but wouldn’t get reimbursed.

ii. Pereira: not an issue in Pereira b/c the remainder is CP anyway. b. Reverse Pereira & Van Camp Approaches (Imperato)

i. Marriage business is started with CP funds separation (NOT a divorce); bus. worth $10K 4 years go by where H works on bus. alone death or divorce; bus. worth $50K.

ii. Reverse Pereira Approach:1. $10K at separation = CP. But what about everything afterwards?

a. Solve for the underlying asset.i. Fair return: 10%/year = $1000 x 4 = $4000.

ii. Community share is $10,000 + $4000 = $14,000i. Remainder: $50,000 - $14,000 = $36,000 = SP.

ii. Reverse Van Camp Method1. Value the separate efforts during the 4 years of separation

a. Fair salary was $7000/year.i. The efforts are SP b/c during period of separation.

1. $7000 x 4 years = $28,000.ii. The remainder is CP: $50,000 - $28,000 = $22,000.

iii. How to choose: again, on EXAM, do both and decide which is bestiv. Rule: Imperato has NOT been overruled by Duncan v. Duncan.

1. Valuing of assetsa. Death : always valued at deathb. Divorce : value assets as closest to date of divorce.

2. Facts : was a law firm business; made argument that asset should be valued as of time of separation rather than divorce.

a. Made sense in the case, because H successfully argues that the business was all to do his efforts and had not value other than him, and thus no growth had to do with the underlying asset.

b. Basically said the fair rate of return was zero.

CONTRIBUTIONS TO OPPOSITELY CLASSIFIED ASSETS (NOT IN BOOK)(NOTE: Every time we see a business, DON’T use this: use Pereira and Van Camp. This is for all other assets.

I. Separate Property Contributions to Community Property Assetsa. All-Cash Examples (where property is purchased with all cash)

i. Hypo 1: 1970, house is purchased for $100K cash during the marriage (CP) but the house was purchased with $20K cash of W’s SP and $80K cash CP. House is titled in CP/JT. 2006: worth $400 & death or divorce. H argues all CP, and W wants 20% of $400K as her SP. Lucas rule applied: $400K = CP; Each spouse gets ½.

ii. Issue: What happens to W’s separate property cash contribution?1. UPON DIVORCE

a. Lucas Rule (pre 1/1/84 Rule):i. Rule: If a spouse contributes SP to an asset which is titled in some joint from of

ownership (JT OR CP), absent an oral, implied or written agreement to the contrary, there is no reason to believe that such spouse retains a SP interest in the jointly held property. The contribution disappears and is deemed a gift to the community.

ii. W Should say: I’m putting this SP in, and I’m getting it back, right?1. What about if spouse didn’t answer one way or another?

What about if there is a marriage & then bus. started w/ SP?

What to know from Duncan?

Juliet Aftandilianiii. Note: §852 (tough transmutations) doesn’t apply.

b. Legislative Response (1/1/84 & on) § 2640i. Opposite Lucas rule: spouse who made SP contribution receives that money

back (only that exact amount!!). Balance is CP, absent a written waiver of the right of reimbursement.

1. Also applies to down payments & improvements (but we’ll see this later).

ii. Heikes Rule: § 2640 CANNOT be applied retroactively despite what the statute says. To do so would be taking away a vested property right.

2. UPON DEATH a. Rule: Lucas applies, since there are no statutes saying otherwise.

i. Regardless of the date, if there is an oral, written, or implied agreement, then the agreement is upheld, but if no agreement, the contribution disappears.

b. Rule: §852(d) does NOT apply for commingled or otherwise combined funds. Thus, even after 1/185, oral agreements are valid in this situation.

b. Loan Examples (where property is purchased with loan & cash) i. Hypo 1: property acquired during marriage (with $20K cash and $80K loan)

ii. Issue 1: classification of the loan & proceeds therefrom1. General CP presumption applies. Loan acquired during marriage so deemed CP.2. Presumption rebutted by: Intent of Lender Test

a. If you acquire loan during marriage, the proceeds from those borrowed funds will be classified according to intent of lender.

b. Look to what the lender intended to get paid from in okay the loan (SP or CP)i. Typically, lender is going to base their decision on salary (= CP)

1. SP example: salary actually comes from dividends from SP.c. Rule: do NOT look to what is securing the loan to determine classification; thus tracing

principle doesn’t work in the same way here.d. Note: if court says “we’re relying on personal credit of W to secure this loan”

i. Credit = earning capacity = CP.iii. Issue 2: Assuming one spouse makes SP contributions to CP loan, what is state of such contributions?

1. UPON DIVORCE a. §2640 applies: loan = a SP contribution to a CP asset (the loan)

i. Cannot be applied retroactively so same as above:1. Pre 1/1/84: Lucas applies; the contributions are gift and disappear.2. On/After 1/184: §2640 applies; spouse receives reimbursement.

2. UPON DEATH: Lucas applies?

II. COMMUNITY CONTRIBUTIONS TO SEPARATE PROPERTY ASSETa. Loan Example (SP when loan acquired but CP contributions to loan post marriage)

i. Hypo: H buys asset for $10K but NOT w/ all cash. H paid $1000 first marriage H then makes 9 $1000 payments to loan.

1. Presumption : the 9 payments after marriage are deemed CP (then current earnings). But it started out as SP, but then had CP contributions to SP asset.

ii. UPON DEATH and DIVORCE: 1. Rule: the CP contributions are NOT gifts to SP; community gets pro rata share absent an oral

or written agreement (regardless of date?)a. Rather, they buy into the asset (pay for some of it) :

i. In hypo: the asset is owned 1/10 by SP and 9/10 by CP.1. If the asset now is worth $500K, CP = $450K and SP = $50K.

a. (also saw this in life insurance)b. Determine how much principle was paid off with CP funds; community owns that %.

2. Moore/Marsden Rule (takes into consideration appreciation of asset before marriage):a. Other spouse does NOT get value of appreciation before marriage.b. Don’t need to know calculations; just make mention of it on exam.

III. IMPROVEMENTS MADE TO EXISTING ASSET

See problem handout

Lucas and §2640 DO NOT apply!

Juliet Aftandiliana. Community property asset improved with SP

i. If SP is used for improvement (most common: one spouse gets their inheritance):1. DIVORCE :

a. Before 1/1/84: improvement is gone; becomes a fixture; deemed a gift.b. On or after 1/1/84: improvements get reimbursement (§2640)

i. Regardless of improvement increases in value.ii. Rule: ABSENT written waiver to contrary.

2. DEATH: No statutes apply so Lucas applies:a. The improvements are deemed a gift and are gone, ABSENT any (oral or written)

agreement to the contrary.b. Separate property asset improved with SP of other spouse

i. H has a SP house before marriage (inherited it; paid it all of before marriage; whatever)1. If W uses her SP to improve

a. DEATH : Statute doesn’t apply; Lucas applies & it’s gone.b. DIVORCE : new section § 2640(c) (since 7/9/04)

i. Before 7/9/04 does NOT apply retroactively so SP contribution to other spouse’s SP asset is deemed gift.

ii. On or after 7/9/04 apply §2640; reimbursement.c. Separate property asset (of either spouse) improved with CP assets

i. Hypo: W’s separate property house is improved with CP.ii. Issue: Does community property get an interest?

1. DEATH and DIVORCE: a. Wolfe Rule: the community IS entitled to some form of reimbursement ABSENT any

agreement to the contrary.i. But what kind of reimbursement?

1. Law is unsettled:a. Straight reimbursementb. How much you put in OR how much the improvement

increased overall value, whichever is greater.iii. Very different than CP assets BUYING INTO SP assets; does NOT work same as loans.

§2640 does NOT apply (same rule but not according to statute??)