California is a community property state.

All property acquired during the marriage is presumed to be CP, while all property acquired before marriage or after permanent separation, or by gift or inheritance is presumed to be SP. Property acquired in a SP state by either H or W before they became domiciled in CA is quasi-CP. pon death or di!orce quasi-CP is treated as CP. "he characteri#ation of an asset as either CP or SP depends on three factors$ %&' the source of the asset, %(' any actions by the parties that may ha!e altered the character of the asset, and %)' any statutory presumptions that apply to the asset. "o determine character of any asset, Cts will trace back to the source of funds used to acquire the asset. *ere change in form of an asset does not change characteri#ation. %capital gain from the sale of SP is SP.' Personal injury awards CP if cause of action arose during marriage, but awarded to in+ured spouse , di!orce Personal injury liability SP of the tortfeasor spouse unless occurred while acting for the benefit of the community Retirement benefits CP if earned during the marriage - apply the time rule to apportion between CP and SP. Disability pay/workers comp CP if ta.en in lieu of retirement benefits - apply the time rule. SP if intended to replace future earnings. Severance pay Split in authority - CP b/c result of wor. done during marriage. SP b/c replaces future wages Stock options CP b/c form of employee compensation. - apply the time rule Business/professional good will CP to the e0tent earned during the marriage Education and training 1ot property. Comm. is entitled to reimbursement for educational e0penses paid by CP funds if the educated spouse2s earning potential increased as a result of the education. 3ut, no reimbursement if %&' the comm. substantially benefited from the education %&45 years' or %(' both spouse recei!ed comm. funded education. ssets purc!ased on credit during marriage CP. 3ut, loo. to the primary intent of the lender Business owned before marriage" w!ic! Community labor used to enhance !alue of a SP business - the community entitled to a share of the increased !alue. "wo ways to calculate the community2s increased in value during marriage# share Pereira accounting - increased !alue primarily due to community labor. 6alue of business at beginning 5 fair rate of return 7 SP, the rest is CP 6an Camp accounting - increased !alue due to the unique nature of SP asset 8air salary for community labor 0 years of marriage 9 salary already recei!ed 9 amounts already paid to community e0penses 7 CP, the rest is SP. $%& ltering t!e '!aracter of an sset iii. Whole life insurance purchased before marriage, premiums paid w/ CP a. Pre(marital agreement$ must be in writing, !oluntarily signed by both parties b. Reimbursement Rules$ i. 6oluntary: 3onds case !. (44& statute i. CP used to impro!e SP - impro!ements become part of the SP. *ay see. ii. nconscionable: 8ull, fair ; reasonable disclosure. Wai!er of spousal support - must reimbursement for greater of cost of impro!ement or increased !alue attributable to CP be represented by counsel. unless one spouse uses CP to impro!e other souses SP, then usually presumed a gift. b. )ransmutations$ ii. SP used to impro!e CP i. Pre-&<=> - oral permitted &. At death - Fucas rule - presumed gift - no reimbursement unless contra ii. Post &/&/=> - must be in writing, signed by the party whose interests affected, e0press agreement $*& Effect of +ow )itle is )aken (. At di!orce - anti-Fucas statute - reimbursement for C@P a. ,arried -omans Special presumption $ Property ta.en in W2s name alone pre &<?> 7 c. 'ommingled Bank ccounts$ her SP unless %&' H shows other reason or %(' w/out H2s .nowledge or consent. i. Coes not transform or transmute SP into CP, but burden on spouse claiming SP to show i. Property ta.en as H ; W pre &<?> 7 SP, "@C that each asset acquired was purchased w/ SP funds %tracing or e0haustion' ii. Property ta.en as H ; W post &<?> 7 CP ii. 8amily e0penses presumed paid w/ CP b. Property taken in joint title$ $2& ,anagement 3 'onveyances of 'P i# t deat!. /ucas provisions apply a. Curing the marriage, each spouse has equal management and control of all community &. Property ta.en in +oint title 7 CP, unless contra agreement %oral or written' assets. "hus, each spouse has full power to buy or sell CP and contract debts w/out the (. Any contribution of SP 7 gift - no reimbursement other spouse2s +oinder or consent. 1ote$ does not apply to quasi-CP. ii# t divorce. /ucas provisions do not apply b. D0ceptions$ &. Pre-&<=A$ Property ta.en in +oint tenancy 7 SP of each spouse B interest each i. Spouse managing 'P business has primary management and control (. Post-&<=A$ ' family law applies - property ta.en in +oint title 7 CP unless ii. Gne spouse cannot encumber personal property used in t!e family dwelling or clothing w/out written consent from other spouse. "r0 is !oidable at any time. contra written agreement *ay see. reimbursement for contributions of SP to iii. 3oth spouses required to con!ey community real property. %& yr SoF if sale to a 38P. C@P. @f not a 38P, !oidable at any time. *ust refund purchase price'. ). A spouse who deeds SP into +ointly titled property is entitled to a right of i!. 1either spouse can ma.e an inter vivos gift of CP w/o other spouse2s consent. reimbursement for the fair mar.et !alue of the property at the time it was deeded 6oidable until death of gifting party, then non-consenting spouse may only reco!er B into +oint tenancy. 1ote$ conflict with transmutation rule. CP. c. Property taken in separate title %post &<?>' - source rule. D0haustion or direct tracing. $4& 'P 3 'reditors $0& Effect of Parties ctions on '!aracteri1ation a. All CP and the debtor2s SP are liable for the debt of one spouse incurred before or during a. Pro rata rule$ community ta.es a pro rata portion of the property measured by the E of the marriage. D0cept earnings of the non-debtor spouse cannot be reached for premarital principal debt reduction attributable to CP. Applies to$ debts if held in a separate account and not commingled w/ CP funds. i. @nstallment purchase made before marriage, and subsequent payments made w/ CP ii. Fand inherited during marriage, mortgage paid off w/ CP

SP of non-debtor spouse can only be reached for satisfaction of the necessary debts of the other. $5& Distribution a. At di!orce$ >4/>4 unless the interest of +ustice requires otherwise. b. At death$ i. *ay de!ise all SP and B CP by will ii. 1o will, sur!i!or entitled to all CP, &/) 9 all of SP. c. Huasi-CP treated as CP ; Huasi-marital property %putati!e spouse' treated as CP %?' Preemption Supremacy clause - fed law preempts inconsistent state law. @n some instances, fed law preempts CA from applying community property principals to certain assets$ S sa!ings bonds, federal homestead claims, military life insurance benefits.

b.