Marital Property – Review Session
Cutoff for questions: Day of final
Logistics: 20 MC, 2 fact patterns and within those there will be a total of 9 questions (some short
some longer)
- Some of the essay questions are designed to not have a specific answer – so when you
read it just explain both ways (hedge on both sides)
- Some will have an exact answer
Formulas: Be familiar with:
- Huge/Nelson rules (when you use and how you calculate)
- Moore/Marsden calculation
- How to value a business and how to calculate goodwill
- How to do the time rule (re: pensions/deferred compensation)
- There are about 4 or 5 formulas you need to know
You don’t need to know:
- When 2581 was adopted it referred to JT and not specific type of CP and then legislature
fixed it a couple of years later – don’t need to know what happens during that interim
period (when 850 transmutation statute came up)
- Apportionment at acquisition (BonVino case)
Week 1:
Steps:
- Characterize
- Valuation
- Divide
- Reimbursement
- Taxes (didn’t spend too much time on this – primarily in the context of what happens
what someone wants to home & capital gains taxes)
Basics of Characterization:
- Community or Separate (or Quasi-community) Property
Most important codes to know:
- FC 760 – CP Presumption – most of the class was about establishing and rebutting it
- FC 770/771 – SP codes
Week 2:
Issues re: Characterization:
- Has the CP presumption been rebutted
o Evidentiary presumptions
o Standards of proof
- Title to property
o 1 persons name:
 Wont rebut just on the fact that title in 1 person’s name
 Exception: women pre-1975
 If it is in 1 spouses name, then FC 2581 does not apply
o Jointly titled:
 Acquiring pre-1984 – Lucas
 Oral agreements or conducts could be used to rebut CP
presumption
 Tracing cannot be used to overcome gift presumption when SP is
used to acquire or improve CP – presumed gift and can only be
rebutted by an oral, implied, written K (no tracing)
o So need agreement for reimbursement
 Acquired post-1984 – covered by 2581
 Tracing cannot be done
 Needs to be an agreement in writing or clear statement in a
deed/title to rebut CP presumption
 Also no more gift presumption – partially protect person who made
SP contribution by giving a reimbursement IF its to an acquisition
(down payment, reduction of principal on loan, improvements that
increase value of property)
o Partially protected because no compensation for increased
value to property (its $ for $) any increase is CP
o Reimbursement is automatic unless there is a waiver – no
agreement necessary for reimbursement (vested property
right)
 Common scenario that triggers FC 2640 and 2581:
 I have a house before marriage, get married, and I choose to
change title into JT with spouse
 (1) 2581 (joint title) now applies
 (2) Spouse who had SP asset before it was converted, the CP
acquired this interest the day the new deed was signed
o so I as SP spouse have a right to reimbursement under 2581
for my contribution to the acquisition to the property (the
equity the day I gave it to the community)
 FC 2640 only applies in 1984 and after for SP  CP
o and only applies in 2005 for SP  SP
Week 3:
Actions that could impact characterization/rebut CP presumption:
- Premarital K
o before 1986 – K law governed
o 1986-2002 – UPAA which said they had to be in writing and determination of
unconscionability would be determined on the date of execution
 BUT Zucker – judge has discretion to find unconscionability on the date
of enforcement (so date of execution is not the case anymore) – at
divorce/dissolution/punitive spouse/nullity
-
-
 Applies to all times after 1986 (despite UPAA)
o 2002 – burden is now on the party seeking enforcement to show it was voluntarily
entered into (statutory requirements)
 7 day period
 Represented by counsel or waiver etc.
o 2020 – clarified that the 7 day waiting period applies even if have a lawyer
o Support limitations – no consensus . . . just don’t overreach and it should be ok,
stingy likely unconscionable
Marital agreements/post marital agreements – completely unclear if law will allow it
o highly suspect even if permitted by statute even if it is a very equal transaction
Transmutations
o interspousal agreement to change the character of property to SP or CP
o always determine characterization first before you can decide if its been changed
o As of 1985:
 (1) Is it valid as to form: clear statement in writing to change the character
– no magic words just has to be clear you’re changing it
 wills are not transmutations
 trusts can be
 (2) Fiduciary duty: should it be set aside because it advantaged one spouse
unfairly
 Presumption of undue influence that will arise if one spouse has
gotten an advantage over the other
 Rebut: show other spouse entered into transmutation freely and
voluntarily, with full knowledge of the facts, and an understanding
of the effects
o FC 2640: if see transmutation, determine if any 2640 if going from SP to CP
Gifts
o FC 852(C) – transmutation with different rules (narrow gifts)
 No necessity of a writing
 Acquired during marriage (probs CP)
 Tangible articles of a personal nature used only/primarily by the spouse it
was given to and not of a substantial value taking into account the
circumstances of the marriage
Valuation/Division:
- Valuation:
o Equal division absence an agreement to the contrary
 Unless exception for debts
o Value unless dividing in half:
 Typically requires an appraiser
o Court will only consider immediate and specific cost of sale and tax consequences
when dividing CP
 Immediate and specific is subject to argument but typically means right
now
o Date of valuation: as near as practicable to the time of trial

-
Unless you can show there’s good cause for early valuation date
(necessary to accomplish an equitable division of the estate)
 Most common reason: CP business where my efforts have caused
value to go up  value at the time of separation
Division:
o Equal unless you agree otherwise
o Can’t divide unless you’ve characterized it
o Confirms SP, awards CP, and can order reimbursements
o If parties so request, court can determine SP issues
 Ex. Both jointly own a property before marriage and never put in CP and
now disagreement about how it should be divided
 Not necessarily 50/50
o Exceptions to equal division:
 CP PI damages
 Educational loans
 Tort liabilities (depending on what you were doing and why)
 Post separation debts (necessaries and common necessaries of life)
 If CP debts > CP assets
 Ct finds CP weas deliberately misappropriated and mismanaged – high bar
(conscious thievery)
 Negligence doesn’t apply
o But if you said to me you can take $1M and invest it and I
lost it so then if you invest the rest of savings without me
knowing, then that is calculated thievery
Week 5:
Fiduciary duties:
- 4 specific circumstances, when need to be aware of fiduciary duties:
o Premarital agreement
 Fiduciary duties of being married don’t apply but the ones for confidential
relationship may apply
o Management and control issues
 FC 1100 et seq
 As of 1975 – equal control (includes power of disposition)
o Exceptions:
 Don’t have equal control when it comes to gifts or
disposing of CP for lower than FMV (need written
consent to do so or they must be jointly given)
 Cant without written consent, sell, encumber, or
convey certain types of CP (home, furnishings,
clothing/apparel of spouse or children)
 Primary management control of business – can act
alone but must give written notice to other spouse
for major actions (like disposing of assets of the
company)

-
CP real property when written joinder is required to
sell it or lease it for > 1 year
o Interspousal transactions
 FC 721 (including 3 corp codes – need to know them)
 You can enter into transactions with each other if you’re married
but general rules of fiduciary duties will apply
o Highest GF and fair dealing
o Same rights and duties as for corp Ks
 Access to books records
 Upon request vs. Without demand – not
clear which applies
 Other rules
o Post-separation disclosures
 FC 2100 acts in conjunction with 1101 & 721
Remedies for breach of fiduciary duties: FC 1101
o 100% remedy: if found guilty of malice oppression or fraud by CCE for impairing
my right to my ½ interest in CP
 **not sure if applies to all above**
o Fiduciary Duties apply until asset is divided – could be years after divorce (ie.
pension)
 Fiduciary duties will continue until then
Tracing:
- A key tool to rebutting CP presumption
- When have commingling you can trace
- Reminder: not available in certain situations
o 2581 situation (JT during marriage)
o Lucas (pre-1984 when agreements controlled)
- Available in JT deposit accounts
- 2 methodologies:
o Exhaustion methodology:
 Start with presumption of family expenses paid with CP – then see was CP
on hand when this purchase was made
 No, then rebut CP presumption
o Direct tracing methodology:
 At time of purchase see if was there CP available – if was then have to
prove intent to withdraw SP funds to buy the property claiming was SP
 Got to have the records
Family Home:
- Absent court order n either can be excluded from the home dwelling
- Family home
o Characterize it
o Value it (exception where homeowner can prove value don’t need expert)
o Speculative expenses – most often when tax issue comes up

If we are going to divorce today, we will equally divide the cost of sale,
brokers fee, capital gains tax if any
 But if you want the property, then it’s yours (all things includedincluding capital gains tax)
o Divide – sometimes asked to divide at some point before the judgment
 Can do it if you can prove there is a risk
CP contribution to SP asset:
- Acquisitions:
o Moore/Marsden reimbursement:
 Applies to anything the same way 2640 can
 But typically see when comes to homes
 Apportionment issue:
 Determine the reimbursement: CP entitled to reimbursement for
payments made on behalf of SP
 % of Interest in increase in value
 Add the 2 together
 KNOW THE CHART
 Only applies to payments that increase equity
 Don’t forget refinance – when having during marriage, getting a new loan
 First thing that happens is that you pay off the old loan
 Drastically changes the calculation in favor of the community
o Possible new loan can be found as SP (wont impact
calculation)
 Highly unlikely because the “lender intent doctrine”
says have to prove that lender was not relying on
the community to pay off the loan – and unless you
have a premarital K saying wages are not CP that
isn’t gonna happen (because every lender first asks
how much do you make)
- Improvements with CP to SP:
o Have to figure out issue of fiduciary duties and consent
o If use CP to improve own SP:
 Without consent – reimbursement (highest number)
 With consent – as late as 1986 gift presumption applied absent agreement
to the contrary
 2001 – said that’s ridiculous because no reasonable person would
think they’re making a gift
 No guidance so go both ways
o If use CP to improve other spouse SP:
 As late as 1986 gift presumption applied absent agreement to the contrary
 2001 – said that’s ridiculous because no reasonable person would
think they’re making a gift
 No guidance so go both ways
- No improvements:
o Ex. Insurance, paying for gardner, taxes
-
o No reimbursement if the community benefited from the use
 “benefited” unclear have to convince the judge but its fact by fact
o Possible reimbursement if the community did not benefit from the use
 Was there consent/no consent
 Who knew
 How much
 What’s reasonable
Equitable remedy: Watts
o Ex. I leave, you’re in the house, we could be renting it but instead you’re living in
it – its just equity
 What’s fair?
 Make any equitable argument about whats fair
o Whos paying mortgage?
o Are there little kids there?
o Have I offered to pay the mortgage?
o Paying support?
 Make the other party look bad basically
Businesses:
- Businesses just like any other asset are presumptively CP if acquired during the marriage
o When formed - operating as a business
o Characterize first
- How to value:
o Start by looking at fixed assets
o Liabilities, minority interest, accoutns receivable etc.
o Goodwill
 Expectation of continued public patronage
 How do we value?
 Most common way: normalize the income (which includes figuring
out the right time frame, adding back bogus tax reductions, to
determine what business actually earned during a representative
period) and then deduct the reasonable compensation of a similarly
situated person
o Take that number and capitalize it based on risk (between
1-5 in CA)
 Can convince its higher but that’s traditional
- Can rarely divide a company
o Typically given to operating spouse even if doesn’t want it
- What if the business is SP?
o Community efforts towards SP will be compensated
o
Don’t use Moore!!
o Use Van Camp or other one because those are for efforts
 Equitable apportion for increased value
 If no increase, this doesn’t matter
 If primary reason for increased value was community efforts – use Pereira

If primary reason is external factor is primary contributor to increased
value – use Van Camp
Employee benefits & stock options:
- Vested or unvested is immaterial to the characterization
o All that matters is that community’s share of the benefits reflects the community
efforts to that contractual right
- Use Time rule to determine what % community gets of that contractual right
- Exceptions
- Main thing to keep in mind – if enhanced benefits are derived from benefits earned
during the marriage, CP
o If not SP
- Disabilities and severance pay may be different if job is to replace post-separation income
(SP)
o If replace retirement then may be CP
- Stock options:
o 2 formulas : Houge & Nelson (not limited to these 2 but primary)
 Nelson: when primarily incentive for future services
 Houge: primarily compensation for future services
 Know calculations!
Additional reimbursements (exception to equal division rules):
- Before marriage – nothing without an agreement
- Student loans (know the 2 rules)
o Presumption 1: assigned to spouse that incurred
o Presumption 2: community will be reimbursed for contributions that substantially
enhance the spouses earning capacity
 With interest at the legal rate (10%)
o Exception to general rule
 Community substantially benefitted
 10 year rule presumptions
o Subject to express agreement to the contrary
- PI awards assigned to injured party unless justice interest to the contrary
- Debts
o Presumption 1: CP liable for debt incurred before or during marriage
o Presumption 2: SP liable for own debt before or during marriage
o Exception:
 Necessaries of life before separation & common necessaries of life after
separation
 Shield earnings FC 911(a)
 Spousal support obligations – treated as premarital debt that CP liable for
 Tort – if acting in benefit of community (CP first SP second) if not for
benefit of community (SP first CP second)
- CP debts after separation – probably get reimbursed unless circumstances make it
unreasonable (gift, discharge of support obligation, if Watts)
Punitive spouse doctrine:
- Fraud issue ??
- Need to have good faith belief in valid marriage (need license)
Domestic partnerships:
- 2000 and 2005
- By 2005 – treated as marriages for property
o Likely retroactive to before 2005
Marvin agreements:
- Ks between unmarried persons written oral or implied that deal with support and property
division
- Is it a maritricious situation?
o Gotta be cohabiting at-least part time because this is an exchange of money for
services
 Need be for household services and acting like a family