Matt Vandermyde Community Property Outline TEST HINTS: -Even if transmutation fails under the tough transmutation period,

look to see if the property was already transmuted by discussions, etc. before 19851!!! -If the couple divorce, and one spouse dies before the assets are divided, the divorce rules apply!!! INTRODUCTION Common law system (VAST MAJORITY): Husband and wife own all property individually except that which they expressly agree to hold jointly. History: Husband controlled pretty much all propertyeven that which the wife brought to the marriage. Then the Married Womans Property Acts changed some of this. Spousal protection: All states have some protection for dissolution. However, note that it only protects the spouseand not the devisees of the decedent. Equitable distribution doctrine: Protections were set up for death and divorce so one spouse is not precluded from getting some money. Divorce: Generally spouse gets . Death: Forced/Elective share (choosing either what is in the will or their forced shareprobably somewhere beween and 1/3 depending on the jurisdiction) Community property system (MINORITY): Husband and wife own significant portion of their property jointly unless they have agreed to hold it separately. Property obtained during marriage is presumed community property. Separate property: A married person may convey his separate property without consent of the spouse; including: all property owned before marriage. all property acquired after marriage by gift, bequest, devise, or descent, rents, issues and profits of separate property, all earnings and accumulations while living separate and apart from the other spouse Community property: Any other assets acquired during marriage, real or personal, while domiciled in California may be deemed community property, owned equally by both spouses. Equitable distribution:There is no real equitable distribution system anymoreits already built into the system because each gets their half the moment that one earns the money. Divorce: Each spouse gets his half of community property and keeps his personal property Death: Each is entitled to dispose of her share of community property. If no will, 100% of the community property goes to other spouse, then the separate property goes through intestate succession. Comparisons: During marriage: COMMON LAW: the person who earns the property has management and control over that property. COMMUNITY PROPERTY: Each spouse both spouses have equal management and control over all of the community property At divorce: COMMON LAW: Generally each spouse gets half COMMUNITY PROPERTY: Each spouse gets his half If spouse who earned property dies: COMMON LAW: Generally surviving spouse will end up with half (forced share), and decedent can devise his half COMMUNITY PROPERTY: Each spouse gets his half, and can devise his half. If spouse who did not earn property dies: COMMON LAW: If the spouse that did not earn the money dies, surviving spouse keeps alldecedent cannot devise anything because he had nothing!!! Heirs or devisees get nothing!!! COMMUNITY PROPERTY: If the spouse that did not earn the money dies, he can still devise his half away FUNDAMENTAL PRINCIPLES Community Property (760): All assets acquired during marriage, real or personal, while domiciled in California is presumed community property, owned equally by both spouses. Separate Property: 1. All property owned by the person before marriage 2. All property earned or acquired after marriage by gift, bequest, devise or descent 3. All rents, issues, and profits of separate property 4. All property acquired while living separate and apart Community property with right of survivorship: As of July 1 2001, if a husband and wife expressly declare property as community property with right of survivorship, writing, initialed, shall pass to survivor. The right of survivorship may be severed in the same way that joint tenancy may be severed. (if on exam property is titled this way before July 1, 2001, it is not really titled this way Equality Principle: Each spouse has present, existing and equal ownership interests and management rights in community property immediately on acquisition during continuance of marriage relation.

POPOVICHS 5 STEP CLASSIFICATION PROCESS:

1. 2. 3. 4. 5.

ARE THE PARTIES WITHIN THE SYSTEM? (legally married, etc.) IS THE PROPERTY CAPABLE OF CLASSIFICATION? (some are noteducation, good will?) IS THERE A CLASSIFICATION PRESUMPTION? (presumptions set who has the burden of proof) CAN THE PRESUMPTION BE REBUTTED? (by tracing, transmutation, premarital agreement) IS ANY APPORTIONMENT APPROPRIATE? (if community property was used to improve personal property, etc., apportionment may be appropriate)

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1. ARE THE PARTIES WITHIN THE SYSTEM? Union Issues True community property: Legally married (recognized by California): NOTE: CA does not recognize common law marriage. But,, if legally married (by common law, but not same-sex!) in another state, it is recognized in CA. Registered domestic partners: Same property rights, protections, benefits, rights upon death and divorce, putitive domestic partnerships, etc. Retroactivity: Although this was not law until 1/1/2005, this may be applied retroactively (controversially) to parties that have filed a Declaration of Domestic Partnership before then. Quasi-marital property: Putitive marriages: Where at least one spouse enters into a marital relationship with reasonable good faith belief that a marriage existed, and it is later found to be void, the protections are the same. What could void marriage: Lack of consent, under 18, incestuous marriage, bigamous and polygamous marriage, annulment, etc. No tricks here on test. Rights of putitive marriage: Same as if they were legally marriedfor distribution of community and separate property, and for division on death and divorceall property purposes. Good faith/common law marriage: There is no such thing as a good faith common law marriage! That would undermine the law, and hence is not a reasonable good faith belief. Can guilty spouse use this statute to his advantage?: It is unclear, but most commentators think that it does not apply because it seems unfair. If there is both a putitive and a legal spouse: Determine from each point of view. If both are entitled to property, split it. EXAMPLE: EXAM QUESTION!!! Estate of Hafner: H and W1 were married with 3 kids. Then they separated and lived separate and apart. H then tells W2 that he is divorced and marries W2 (also married, but thought she was divorced, divorce not valid). Hence, W2 has reasonable good faith that she is married to H. H gets in accident and is awarded $1 million then dies intestate. The estate of H and W2 was worth $416,472.40. FROM W1s POINT OF VIEW: Because W1 is still legal spouse, Hs marriage to W2 is not valid, and so all of the $416,000 is Hs separate property, and hence through intestate succession of separate property she would get 1/3, and kids would get 2/3. FROM W2s POINT OF VIEW: Because W2 is putative spouse, the $416,000 is quasi-marital property, and W2 has her half, and by intestate succession W2 gets Hs . Hence, both W1 (W1 entitled to 1/3 and kids together are entitled to 2/3) and W2 are entitled to 100%. Hence, because both had legal rights, the court divided the estate. W1 got 1/6, the kids in the aggregate got 2/6, and W2 got 50%. EXAMPLE: If H would have died with a will, W1 (and kids) would not have received anything because they would not be entitled to any separate property. W2 would have gotten her , and H could devise his . EXAMPLE: If W2 had divorced H, W2 would get , and H would get his because W1 (and kids) would not be entitled to any separate property. EXAMPLE: H is married to W1. At same time, H marries W2, not valid. This continues for 24 years, and H has 3 kids with W1 and 4 kids from W2. H dies. The court divided equally because each were entitled to 100% under intestate succession. So both W1 and W2 got . EXAMPLE: If H gets divorced from both W1 and W2, then H would get 1/3, W1 would get 1/3, and W2 would get 1/3. Maritritious marriage: When neither spouse has good faith belief that marriage existed, NO. CP protections do not apply. There are no marital property rights. Implied contract: However, there may be an implied contract for services (but not sexual services), and court could award quantum meruit recovery for the services performed. Jurisdiction Issues All property, real or personal, wherever situated, acquired by a married person, during the marriage, while domiciled (reside with intent to stay) in this state is TRUE community property. Spouses domiciled in California purchase land in another state: Note that California does not have in-rem jurisdiction over the property. However, they still have in personam jurisdiction. Dissolution: If possible to divide property without changing nature of property: Do it. If not: Court may require parties to execute conveyances with respect to property, sale share of property to other spouse, give money find other ways to divide. EXAMPLE: H and W live in CA, buy home 1 in North Dakota worth $100 (in Hs name) and home 2 in Kansas worth $100 (in wifes name), both with husbands earnings while married and domiciled in CA (so, community property). H and W divorce. First, it is true Community Property. To divide: Because each property is worth same, it is possible to divide without changing nature of property by giving each one of the properties. If it were not possible however, find other ways. Death: Here CA does not have in personam jurisdiction either because hes dead. So, while CA deals with the probate issues, they must initiate an ancillary probate proceeding in the other state. Choice of law issue: MAJORITY: Most states will apply the law of the state of the decedents domicile. MINORITY: Choice of law where property sits. In this case, it will be decided under its own rules, such as common law, and not community property system. Couples migrating into California: Quasi-community property: How the system applies to couples migrating into California: The reason we treat the property like community property is because common law jurisdiction, money earned during the marriage is separate property of the spouse who earned it. If they moved to California, upon death or divorce, there would be no spousal protection because the property is separate property. However, we cannot call it community property or treat it as such until spousal protection is necessary because the person who earned the money would automatically be deprived of his separate property rights, which is unconstitutional. So, we dont take it away from them until divorce, or the death of the person who earned the property, because only then is there a sufficient state interest to protect the spouse. Remember, real community property means both spouses have present, existing, equal ownership and management rights of the property immediately upon acquisition. However, quasi-community property is only treated as community property at the end of marriage. Quasi-community property is treated as community property.

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Dissolution: If the property would have been community property (or traced to community property) if acquired while domiciled in California, it is quasi-community property Death: WAGE EARNER DIES: If the property would have been community property (or traced to community property) if acquired while domiciled in California, it is quasi-community property OTHER PERSON DIES: It is still separate property of surviving spouse. It would be unconstitutional to take separate property away. No estate protection. LOOK WHO IS DYING!!! EXAMPLE: H and W come from Ohio, W earned the money. NOTE: Even if they purchased the property in CA, if it was acquired while domiciled in Ohio, it is Ws separate property. W dies, leaving everything in will to A. Because this property would have been community property had it been obtained while domiciled in California, W gets half, and A gets half. EXAMPLE: Same as above, except H dies, and leaves everything in will to A. A gets nothing, all belongs to W. This will be on exam. Dont forget who is dying! EXAMPLE TRICK QUESTION: So, during time between the time the couple became domiciled in California and divorce, that money is community property. Hence, there will be both community property and quasi-community property involved. EXAMPLE FRAUDULENT CONVEYANCE: If a spouse gives property away before a divorce to keep the property from becoming quasi-community property, it is like a fraudulent conveyance and is recaptured and distributed as quasi-community-property. 2. IS THE PROPERTY CAPABLE OF BEING CLASIFIED AS COMMUNITY PROPERTY? Education: NO. Education is not capable of being classified as Community Property. EXAMPLE: W gets education with community funds. After graduation, W divorces H Reimbursement upon dissolution only: Absent written K to the contrary, contributions to education, training or student loan payments (not living expenses only tuition, books, etc.) from CP must be reimbursed: (1) To the community, (2) With interest at legal rate, if it (3) Substantially enhances the earning capacity (regardless of whether the party takes advantage of the enhanced earning capacity, though in such a situation the court may reduce amountsee below) (4) The amount can be reduced (cannot be increased) if necessary, such as if other party has also received contributions for education, or has substantially benefited from the contributions

There is a rebuttable presumption that the community has not substantially benefited from the contributions if it has been less than 10 years since education.

There is also a rebuttable presumption that the community has substantially benefited from the contributions if it has been more than 10 years since education. NOTE: An outstanding student loan is assigned to the student spouse upon dissolution Goodwill: YES. Name recognition, reputation, continued patronagegreater than the value than the some of its parts. Companies are worth more than just its tangible assets. Get appraiser to determine how much. EXAMPLE: H grew his partnership while married to W. Company assets not worth much, but its goodwill was worth a lot. H sold his interest for $100,000. That gives good idea how much goodwill is worth here. Life insurance coverage: YES. Apportionment on death: Depends on type of life insurance. NOTE: If the type if insurance (term or whole life) is not specified on exam, talk about both!: Term life insurance: Last payment rule: Apportionment is proportionate to amount of community contribution on last term only. EXAMPLE: H obtains term life policy payable to O without Ws consent (written consent required after 1985tough transmutation period). 8 years paid with H separate property, last 2 years with community property. H dies, $100 payout. O gets $50, W gets $50. The last payment was community property. Uninsurability: However, if the person becomes uninsurable, i.e. sick, the previous term payments that kept the policy renewable are now worth something, and should be apportioned! EXAMPLE: H & W1 marry, H obtains term life insurance policy. H then gets cancer, then divorces W1. He remarries W2 then dies. The last term paid by community property of H & W2. W1 would be entitled to some apportionment for the period when the policy was kept renewable with community funds. EXAMPLE: Same as above, except H did not buy his own policy, but the policy was provided by his employer, and therefore the policy is contingent on employment. He doesnt have the right of renewable aloneit is up to his employer. The benefit (policy) was earned during the last term. Here W1 would not be entitled to anything. Whole life insurance: This also accrues valuekind of like a bank account, and can be redeemed before death. Upon death, the apportionment is proportionate to the amount of the community contribution. EXAMPLE: H obtains whole life policy payable to O without Ws consent (written consent required after 1985tough transmutation period). 8 years paid with H separate property, last 2 years with community property. H dies, $100 payout. O gets $80 + of community contributions, so O gets $90. W gets $10. Apportionment for dissolution: Term life insurance: If dissolution occurs in middle of a term that has already been paid for with community funds. Spouse will get reimbursed for half of the unused portion of policy payment. Very little. Whole life insurance: Apportionment is proportionate to amount of community contribution. Here you are dividing the cash surrender value.

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3. IS THERE A CLASSIFICATION PRESUMPTION? 4. CAN THE PRESUMPTION BE REBUTTED? General Community Property Presumption: All property (capable of classification) is presumed community property if: 1. Acquired by a married person 2. During the marriage (may be inferred by circumstances when it cannot be shown when the property was acquired) 3. While domiciled in this state (where you intend to stay) Rebuttals: Once the 3 elements are met (pretty easy), the property is presumed community property and the other party has the burden to rebut. Contractual Modification: Operation of the system may be modified or limited by agreement between the spouses. They can agree how property will be classified. Premarital agreement (Maybe multiple choicenot big): The property rights of husband and wife prescribed by statute may be altered by a premarital agreement or other marital property agreement. Writing: Premarital agreements executed on or after January 1, 1986 must be in writing Child support: The right to child support may not be adversely affected by a premarital agreement (public policy) Spousal support: The right to spousal support may be adversely affected so long as it is fair (normal contract stuff). Effect of a void marriage on agreement: If a marriage is determined void, the premarital agreement is only enforceable to extent necessary to avoid an inequitable result. Avoiding a premarital agreement: A premarital agreement is voidable either if: 1. One part did not voluntarily consent to the agreement. It is presumed that it was not voluntary unless: a. The party had independent legal counsel or expressly waived representation b. The party had at least 7 calendar days between receiving agreement and signing the agreement c. The party, if not represented by independent counsel, was fully informed of the terms and effect of the agreement, was proficient in the language in which the explanation of the partys rights was conducted and in which the agreement was written 2. Unconscionable AND a. the party did not have a fair, reasonable and full disclosure of the property or financial obligations of the other party AND b. that party did not expressly waive in writing any right to disclosure AND c. that party could not have had an adequate knowledge of the property or financial obligations of the other party Transmutation: Statutory property rights of spouses may be altered by agreement. No consideration needed. Critical date: January 1, 1985. (LOOK FOR THIS ON EXAM! Analyze under both!) Easy transmutation period (before January/1/1985): Oral transmutations were the rule of the day. This is still good law for any transmutations made before January 1, 1985. NOTE: It was a bit more difficult to transfer community property to separate property than from separate property to community property, but both were easy. This is ours is enough. Tough transmutation period (after January 1, 1985): A transmutation of real or personal property is not valid unless: It is in writing (statute of frauds exceptions such as part performance, etc. do not applyabsolutely must be in writing!) (NOTE: Titling property in joint tenancy is enough)

1.

2.
extrinsic evidence is permitted)

Express declaration: Expressly states that the characterization of property is being changed/relinquishing all interest in the property. (No That was made, joined in, consented to or accepted by spouse whose property is adversely affected. (NOTE: This does not necessarily

3.
require a signature)

1. 2.

Gift exception: These tough transmutation period requirements do not apply to gifts between spouses that are (must meet these requirementsno such thing as a true gift): Tangible personal articles (clothing, jewelry, etc.) Used exclusively or principally by the spouse Is not substantial in value taking into account the circumstances of the marriage. Gift, bequest, devise or descent: Property acquired during marriage was a gift, bequest, devise or descent Tracing: The property acquired during marriage was acquired using separate property: 1. All property owned by the person before marriage 2. All property earned or acquired after marriage by gift, bequest, devise or descent 3. All rents, issues, and profits of separate property Giving up rights: Property acquired by compromise of a partys right (such as a chose in action resulting in a settlement) is separate property if the right that the party compromised was solely his Standard of burden: Preponderance of the evidence. However, courts are not consistent. Some use clear and convincing, some make up their own standard somewhere above preponderance. 1. Separation (WILL BE ON EXAM): Property earned by spouses during period of separation is separate property. In order to qualify as separation for this rule: Physical separation

3.

At least one spouse has no intent to ever resume normal marital relationship (demonstrated by actions and circumstancesno inconsistent actions) Only one spouse wants to end: Only one spouse must intend to end permanently. However, were usually looking for some expression of an intent to end permanently (and no inconsistent actions) Changing mind: Of course spouses can change their mind, but the property acquired during period when there was an intent to end permanently is separate property. However, the more that one spouse says its over, the less indicative it is of an intent to end permanently. More likely a reality check. Page 4 of 7

2.

Filing for divorce/court adjudicated separation: This is separation. However, might be just reality checkto shock other spouse, and no intent to end permanently. Look for facts on this point. Married Woman Special Presumption: If these elements are met, the property is presumed wifes separate property

1.
2. 3.

Acquisition of titled property (only the womans name is on title) By a married woman In writing Before January 1, 1975 (because prior to this year the management and control rights were in the husband) Rebuttal: Lack of intent to transmute (title in wifes name for convenience, to avoid credit problems, etc.) Standard of proof required: Courts are all over the place here. Probably higher than preponderance. NOTE: Tracing does not rebut this. The presumption assumes that the husband intended for the property to be separate property of the wife. Other rules: If acquired by the married woman and any other person, the property is presumed to be owned as tenants in common unless a different intention is expressed in the instrument If acquired by husband and wife and in title are described as husband and wife, the property is presumed community property unless a different intention is expressed in the instrument EXAMPLE: Title reads: W Smith and H Jones. W owns as separate property because the married womans special presumption applies. H owns as community property with his wife, because the General Community Property Presumption applies, and there is no Special Married Mans Special Presumption. EXAMPLE: Title reads: W Jones and H Jones as husband and wife. H and W each own as community property. EXAMPLE: Title reads: W Jones and H Jones. W owns has her separate property, and H and W own the other half as community property. So, W owns . Super Married Woman Special Presumption: If the above elements are met, AND:

4.

5.
6.

Title reads In Ws name as her separate property Husband knows about it, directs it, or does the titling himself. Rebuttal: This super presumption is semi-conclusive and can only be rebutted by showing duress, fraud, mistake, etc. Titling Property in Joint Tenancy: Husband and wife title property in Joint Tenancy. Is it really Joint Tenancy or is it Community Property? Or something else? Why it matters: Most people put property in joint tenancyeach spouse owns half as separate property with right of survivorship. But, there are tax benefits to holding property as community property. For Death (Common law): Titling property in joint tenancy rebuts the General Community Property Presumption and the property becomes Joint Tenancy.

NOTE: Titling property in joint tenancy after 1/1/1985 is a valid transmutation (in writing, express declaration, consented to by parties) from Community Property to Joint Tenancy Rebuttal: If an agreement is made before 1/1/1985 purporting to hold property as Community Property, it is Community Property if:

1.

Agreement or understanding: Oral, written, or implied (Ignorance + Tracing. Party did not know what Joint Tenancy meant, and the funds can be traced to Community Property.) Rebuttal: If an agreement is made after 1/1/1985 purporting to hold the property as Community Property, it is Community Property if (as per the tough transmutation period):

1. 2. 3.

It is in writing Express declaration: That was made, joined in, consented to or accepted by spouse whose property is adversely affected. For Dissolution (this overrides any transmutation rules that may apply): California CFC 2580/81 confirms the Community Property presumption. It is still Community Property. This statute was enacted in 1984, and is applied retroactively so long as there was no vested property right as shown below. NOTE: A dissolution will destroy the joint tenancy. That way, if one spouse dies after divorce, but before property issues have been resolved, the right of survivorship is destroyed. Rebuttal: If one spouse claims the property is his own separate property (or he has a greater share) due to an agreement made before 1984, above statute cannot be applied retroactively: Single Family Residence Presumption: If the property is (1) a single family residence (2) acquired between 1965-1984: It is confirmed Community Property. Everything else (Common law): If property is acquired before 1965, or is not single family residence: titling as Joint Tenancy becomes Joint Tenancy Rebuttal: For both of the above presumptions, the property becomes the separate property (or greater share) of that spouse if:

1.

Agreement or understanding: Can be oral or written Rebuttal: In all other cases (agreement is made after 1984, or before then and one spouse doesnt claim it is all his (or greater sharae), the property becomes Joint Tenancy only if:

1.
2.

Clear statement in the deed that property is Joint Tenancy and NOT Community Property, OR A written agreement stating that it is Joint Tenancy or Separate Property

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5. IS APPORTIONMENT APPROPRIATE? Comingled funds: Separate property and community property have been combined into one account. How to determine the classification of withdrawals used to purchase other property. Direct tracing: To rebut the general community property presumption that the property was acquired with separate property, and not community property, the other party must show: 1. Specific schedule showing adequate separate funds (deposits, withdrawals, etc.must be VERY specific! Once commingled, very rarely can you show that the property was acquired with separate funds ) 2. Intent to use separate funds (by testimony, writing from separate property funds on check, closeness in time or similar amounts between deposit and withdrawal of separate funds, etc.jury decides) EXAMPLE: H and W deposit $5000 of community property and $5000 of Hs separate property. The $10,000 is presumed CP because the account was acquired during marriage. H took out $3000 to invest in a boat now worth $1 million. The boat is presumed community property because it is acquired during marriage, but can H trace it back to his separate property? Only if he shows that the separate property is still there, and that he intended to use separate funds. EXAMPLE: H had a hotel which was his separate property. During marriage, he uses funds to reduce principal owed on the hotel mortgage. He made those payments 3 days after he received his income checks from the hotel rental (separate property). Though he showed closeness in time, he did not adequately show that separate property funds were there by specific accurate accounting. He likely needed also to show that no other withdrawals occurred between the time he deposited his separate funds and the time he made his withdrawal. Indirect tracing/exhausted tracing (see handout): If you can show that you exhausted all community deposits, by elimination, the withdrawal must have been separate property. Family expenses presumption: For purposes of indirect tracing of a commingled account, there is a presumption that family expenses (rent, food, etc.) were acquired with community funds. -Separate funds are presumed to be used for family expenses only when community funds are exhausted. NOTE: So, if direct tracing does not work, you can use this. You still need to come up with an accurate accounting to show that community funds are exhausted, but no need to show intent. De minimus principle: If extremely little commingling has occurred, the court presumes the funds had the same classification as the account as a whole. The minimal contribution will be reimbursed with interest. Business profits: When a business was started with separate property, and the business grows, how the growth is classified (NOTE: Some growth is attributable to the market (SP), and some to community efforts (CP)): Pereira method (efforts): Start with known separate property. Assume it would earn 10% simple interest per year. The additional growth is attributable to community efforts and is community property. Salary withdrawal: If one spouse withdraws a salary, the business is already worth less, so no change in the analysis. Van Camp method (market): Determine a fair salary for a comparable person in another business doing the same type of work. That amount is owed to the community (and hence is split). Salary withdrawals: If one spouse withdraws a salary, subtract that from the amount owed to the community. EXAMPLE: H purchases business with SP ($10,000). H gets married to W, and at marriage the business is worth $50,000. After 5 years, marriage ends (death or divorce), and business is worth $500,000. Under Pereira method, start with $50,000. Add 10% per year $75,000 total separate. The rest of the growth ($425,000) is attributable to efforts and hence is community property. SP = $75,000. -If spouse had taken out $20,000 per year during that time, the business is already worth less, so no change in analysis. In this example, business would only have been worth $400,000. Under Van Camp method, assuming a fair salary is $30,000, five years = $150,000 which is CP, each spouse gets half, and the rest ($300,000) of the growth is separate property. SP= $350,000. -If spouse had taken out $20,000 per year during that time, subtract that from the amount owed to the community. How to determine which one to use: Depends somewhat on the type of business. If it is a personal service business, such as a law firm, the efforts are likely the chief contributing factor, and hence, use Pereira, because it results in a higher community share. If the business is more dependant on the market such as McDonalds franchise, etc., use Van Camp because it results in a smaller community share. HoweverNote that courts are not bound by either of these methods! Courts may use something else if they want! Also, some courts have rarely used compound interest, or less than legal interest if interest rates are low, etc. EXAMPLE: Person didnt know much about business, and it grew a lotlike an espresso business. Goodwill? Be carefulgoodwill can greatly increase by efforts. Reverse situation example: H starts a business after marriage. H and W separate. Business is worth $10.000. 4 years later, business is worth $40,000, marriage ends. Use Pereira and Van Camp in reverse. Motion to value at separation: A party may rarely move to value the property at separation instead of divorce (i.e. when ALL growth is attributable to efforts), in which case no apportionment is necessary.

Congributions: NOTE: Contributions include down payments, payments to principal, improvements but NOT taxes, interest, etc. Separate property contributions to Community Property (see problem set, answers on TWEN). First classify the property (if determined JT, then it may be CP contributions to SP). Then do the following apportionment: At divorce: Before 1/1/1984: (Lucas) Absent agreement or understanding (oral or written) the contribution of SP to CP is deemed a gift. (Titling property in joint form inconsistent with intent to keep SP separate) NOTE: Be careful! There may be post-1984 SP contributions to loan principal, in which case CFC 2640 applies. After 1/1/1984: (Anti-Lucas statute :CFC 2640). Absent a written waiver, separate property contributions are automatically reimbursed (without interest, no appreciationjust reimbursement) NOTE: Although this statute tries to apply itself retroactively, it may not do so because it would take away a vested right. Hence, there is the other rule above. Page 6 of 7

At death: (any date): (Lucas) Absent an agreement (oral or writteneven if after 1985!) or understanding to the contrary, contribution of separate property to community property is deemed a gift. Pro-Rata apportionment agreement: If there is an agreement requiring pro-rata apportionment, spouse gets an apportioned share proportionate to contribution NOTE: Any written agreement after 1/1/1984 acts as a waiver of automatic reimbursement. But, it must be in writing for divorce purposes to apply after 1/1/1984 Community property contributions to Separate Property: Absent agreement or understanding (oral or written) Community gets automatic buy inis entitled an apportioned share proportionate to contribution. NOTE: However, for improvements, community only gets reimbursed, no interest or appreciation. NOTE: Contributing spouse should not be entitled to any pre-marriage appreciation NOTE: Here the loan balance will likely be attributable to the separate propertynot to the community Separate property contributions to separate property of other spouse: CFC 2640 was amended in 1/7/2004 to include SP contributions to SP of other spouse. Absent a written waiver, SP contributions are automatically reimbursed (no interest, no appreciationjust reimbursement). This is only for divorce. Again, the statute tries to apply itself retroactively, but the parties will argue that it may not do so because it would take away a vested right. Borrowed funds: 1. First must classify the loan proceeds. If H gets loan before marriage, it is SP. If H is married and gets loan, it is presumed CP as per General Community Property Presumption. Must be rebutted. Intent of the lender test: If hes looking at community earnings to determine eligibility, loan is a community loan (most common). It is rare that the lender will rely solely on SP to expect repayment. 2. Award each spouse their share of value of home 3. Subtract the loan amount (from community if it was a SP contribution to CP, or from separate property if it was a contribution to SP) EXAMPLE: H puts down $20,000 separate property down payment on a house before 1984, and obtains a loan for $180,000. There is $100,000 left on the loan, house is now worth $400,000 the rest was paid off with community funds. Because the $20,000 SP contribution was made before 1984 for divorce, or for death, no reimbursement to SP. There is $300,000 equity, all CP, split in half. What if all of this happened after 1/1/84, and were talking about divorce? H will get back his $20,000, there is $280,000 left in equity that is CP.

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