COMMUNITY PROPERTY

A. Basic Presumptions
I. Community Property Presumption: Guiding Principle
a. California is a community property state. All property acquired during the course of marriage is
presumptively community property (CP), irrespective of which spouse’s name is on title.
Earnings/wages are deemed CP when earned during the marriage.
b. Separate property (SP) includes:
1. Property acquired prior to marriage or after separation
2. A gift, devisee, or bequest
3. Property acquired with separate funds; and
4. Profits from separate property
c. To determine the character of any asset, courts will trace back the source of funding used to acquire
the property. A mere change in the form of a property will NOT change its characterization.
d. At divorce, all CP is divided equally between the spouses, and a spouse’s SP remains his own
II. Quasi-Community Property
a. Quasi-Community Property (QCP) is property acquired in another state that would be considered
community property if it were acquired in CA
b. QCP retains its SP nature (and may be transferred) until
1. Dissolution/divorce of the marriage; OR
2. Death of the acquiring spouse
c. At divorce, QCP is treated like CP. At death, the surviving spouse has a ½ interest in QCP titled in
decedent’s name. However, the decedent DOES NOT have any rights in QCP titled in the surviving
spouse’s name
III. Married Woman’s Special Presumption
a. The married woman’s special presumption gives the wife a presumption of SP if:
1. title is taken in her name alone; AND
2. the property was acquired before 1975.
IV. Illusory Transfer of Quasi-Community Property
a. The surviving spouse may compel an inter vivos transferee of Quasi-Community Property (QCP) to
restore 1/2 of the property value when an illusory transfer exists.
b. An illusory transfer exists when: (1) the decedent died while domiciled in California; (2)
consideration of substantial value was NOT received; (3) the transfer was made without the
surviving spouse’s written consent or joinder; AND (4) the decedent retained some interest or
control of the property – where decedent (i) had a possession, enjoyment, or the right to income from
the property, (ii) had a power to revoke or to consume, invade, or dispose of the principal for the
decedent’s own benefit, or (iii) held property with another that had a right of survivorship.
B. End of the Economic Community
I. End of the Economic Community
a. The economic community ends when:
1. Either spouse dies, OR
2. There is permanent physical separation – when the spouses are permanently living apart and do
not intend to continue the marriage
C. Right and Duties of Spouses
I. Equal Rights of Spouses to Manage Property & Transfers to Third-Parties
a. Each spouse has equal rights to manage and control CP. Thus a spouse MAY sell, encumber or
otherwise dispose of CP without the other’s consent.
b. HOWEVER, several exceptions exist:
1. Personal property transfers of CP for less than fair and reasonable value (written consent is
required)
2. If one spouse is managing a business, he is given primary management and control over the
business. But, that spouse is obligated to provide prior written notice to the other spouse of any
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 sale, lease, exchange, encumbrance, or other disposition of all or substantially all of the
property used in the operation of the business.
3. Transfers of Community Real Property require both spouses to join the transaction – if one
spouse sells or encumbers community real estate without consent, the non-consenting spouse
may void the transaction (must be voided within one year if sold to a bona-fide purchaser,
otherwise it is avoidable at any time).
4. Inter Vivos Gifts of CP require written consent. Where one spouse gifts CP to a third-party
without consent, the other spouse may void the gift during the donor’s lifetime, or may void half
of the gift after the death of the donor.
II. Fiduciary Duties of Spouses
a. Marriage is a confidential relationship which imposes a duty of the highest good faith and fair
dealing on each spouse, and neither shall take any unfair advantage of the other.
b. The following are a breach of this duty:
1. An intentional, grossly negligent, or reckless dissipation or destruction of property;
2. A gain in financial advantage at the expense of the other spouse.
c. In such instance, the responsible spouse’s SP can be used to reimburse the community
d. The spouse who obtained the advantage will have the burden to prove that the transaction was entered
into by the other spouse freely and voluntarily, with full knowledge of all the facts relevant to the
transaction, and the basic effect of the transaction.
D. Marriage & Alternatives
I. Putative Spouse
a. A putative spouse is one that has a good faith reasonable belief that he/she is married. The putative
spouse is entitled to “quasi-marital” property (QMP), which is treated like CP at death or divorce. The
right to QMP ends once the person learns he/she is not lawfully married, BUT the person retains
rights to previous QMP acquired while the person had the good faith belief.
II. Unmarried Cohabitants
a. Under the Marvin case, courts may enforce express agreements between cohabiting couples that
are not married (a meretricious relationship), as long as they are not expressly based on performance
of illicit sexual acts. Courts may also consider factors that indicate implied agreements in order to
protect the parties’ expectations. All funds kept in a separate account of a person in a meretricious
relationship (that are not commingled), are deemed separate property.
b.
E. General Characterizations of Property
I. Jointly Titled Property & Anti-Lucas Statute
a. Under the Anti-Lucas Statute, jointly titled property acquired by a married couple (from 1987 to
present) is presumptively CP at divorce, BUT any SP used for the purchase is entitled to
reimbursement (the reimbursement is the fair market value at the time of purchase). The CP
presumption may be rebutted by a writing.
b. At death, SP used to acquire jointly titled property is presumed to be a gift (no reimbursement is
allowed), UNLESS otherwise agreed.
II. Property Acquired with Comingled Funds (The Moore Principle)
a. When property is acquired with commingled funds (both CP and SP) AND there is no title
presumption, courts will apply the Moore principle.
b. Under Moore, CP and SP are apportioned based on their respective contributions. If tracing is not
possible, the entire asset will be treated as CP.
c.
F. Specific Characterizations of Property
I. Personal Injury Awards & Settlements
a. Cause of Action Against Third-Parties: If the cause of action arose during marriage, personal injury
awards and settlements are CP. At divorce, they are assigned entirely to the injured spouse,
UNLESS:
1. The funds were comingled
2. Or there is economic hardship to the other spouse

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 b. If the cause of action arose either before marriage, after marriage, or after permanent separation,
then the award is SP of the injured spouse.
c. Cause of Action Against Spouse: Personal injury awards/settlements against a tortfeasor spouse are
always SP of the injured spouse.
II. Separate Property Business (Van Camp and Pereira Tests)
a. If a SP business is enhanced by community labor during marriage, courts will determine CP and SP
interests at divorce using either Pereira or Van Camp methods
1. Pereira Method: Courts apply this when business growth is mostly due to the spouse’s labor
and abilities. Here, the owning spouse receives the original principal value of the business,
PLUS an annual rate of return calculated at 10%, and the remaining value of the business is
CP.
2. Van Camp Method: Courts apply the Van Camp method when business growth is mostly due to
the character and nature of the business itself. Here, the Community receives a reasonable
salary in return for the community labor, REDUCED by any community expenses, and the
remaining value of the business is SP of the owning spouse.
III. Goodwill of a Business
a. Goodwill is the intangible value of the business’ reputation beyond personal skill or value of the
assets. When goodwill is generated by community labor, it is deemed CP.
b. Goodwill is valued by either:
1. The Market Value Method – the price the goodwill in a sale of the business OR
2. the Capitalization of Excess Earnings Method – the present value of the future stream of
income that the goodwill developed during marriage.
c. Buy/sell options in a Partnership Agreement created by a spouse’s firm will NOT control the
valuation of that spouse’s interest at divorce because of the risk of abuse.
IV. Stock Options
a. Stock options are a form of employee compensation, and are entirely CP only if they become
exercisable during marriage.
b. If they are awarded during marriage but become exercisable after marriage, then their character
depends on how they were earned and the intent of the employer.
1. If the options were awarded primarily to reward for past services, then the CP value is
apportioned as follows: The time employed during the marriage DIVIDED BY the time
employed until the date the option becomes exercisable.
2. If the options were awarded primarily to encourage the employee to remain with the company,
then the CP value is: The time from the date the option was granted to the date the economic
community ended DIVIDED BY the time from the date the option was granted to the date the
option becomes exercisable.\
V. Credit & Acquisitions of Property Using Credit
a. The personal credit of a spouse belongs to the Community during the marriage.
Thus, a loan taken out during the marriage is a community debt UNLESS the
lender’s primary intent for giving the loan was the spouse’s SP used as collateral.
b. Similarly, property purchased with credit from a lender is presumptively CP
UNLESS the lender’s primary intent for giving the loan was the spouse’s SP used
as collateral.
VI. Life Insurance
a. Whole Life Insurance: In order to determine the CP interest in a whole life insurance policy that was
paid for with CP and SP funds, courts use the Buy-in Rule. Under the Buy-In
b. Rule, the CP value is apportioned using the following formula: The number of premium payments
made with CP DIVDED BY the total number of premium payments.
c. Term Life Insurance: Term life insurance is designated CP or SP according to the characterization of
the last payment made under the Final Payment Rule.
G. Agreements that Change Characterization of Property
I. Transmutations
a. A transmutation is an agreement between spouses during marriage to change the character of an
asset (either from SP to CP or vice versa). No consideration is necessary for transmutation to occur.
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 b. Starting in 1985, a transmutation is valid ONLY IF:
1. It’s in writing
2. It’s signed and consented to by the spouse whose interest is adversely affected; AND
3. It expressly declares a change in ownership
a. Gift of Insubstantial Value Exception: However, CP can be transmuted into SP by gift
from one spouse to another if the gift is:
(i) Tangible property of a personal nature;
(ii) Used solely by the recipient spouse; AND
(iii) Insubstantial in value considering the lifestyle of the parties.
c. Prior to 1985, oral and written transmutations were valid.
H. Rights of Creditors
I. Property Creditors May Reach to Satisfy Debts
a. Generally, creditors MAY reach CP to satisfy debts incurred before or during the marriage,
including debts for child and spousal support. BUT, a non-debtor spouse’s earnings (generally CP) are
protected if:
1. The debt occurred before the marriage; AND
2. The earnings were held in a separate account to which the debtor did not have access and no
comingling occurred
b. Generally, a person’s SP can only be reached to satisfy their personal debts, including debts incurred
after marriage.
c. However, there are exceptions where both CP and SP may be reached to satisfy debts, including
1. Necessities: the community is obligated to pay for a spouse’s necessities (food, shelter, and
medical expenses) during marriage. When separated, the community is ONLY obligated to pay
for a spouse’s necessities in emergency situations
2. Tort Liability: If the debtor was acting to benefit the community when the tort occurred, then
CP must be used before reaching SP. If debtor was not acting to benefit the community, then
SP must be used before reaching CP.
d. Creditors CANNOT reach CP awarded to a spouse after divorce UNLESS:
1. That spouse incurred the debt; OR
2. Was assigned the debt by the court.
e. A debt is incurred at the time the obligation to pay arises.
I. Reimbursements
I. Reimbursement for Property Acquisitions & Improvements
a. Acquisitions of Property: Under the Anti-Lucas Statute, any SP used to acquire jointly titled
property is entitled to reimbursement (the reimbursement is the fair market value at the time of
purchase).
1. The reimbursement includes: (1) down payments; (2) payments for improvements; AND (3)
principal payments (but not mortgage interest, taxes, insurance, or maintenance payments).
b. Improvements:
1. When CP is used to improve the other spouse’s SP, there is a split in authority. Traditionally, it
has been presumed a gift, in which the presumption may be rebutted by an agreement to
reimburse. However, some courts have held that the community is entitled to reimbursement
(even without an agreement to reimburse).
2. When CP is used to improve a spouse’s own SP, the community is entitled to reimbursement
for either the cost of improvement or the increase in value of SP.
3. When SP is used to improve CP, the spouse is entitled to reimbursement for either the cost of
improvement or the increase in value.
4. When SP is used to improve other spouse’s SP, the spouse is entitled to reimbursement for the
amount of contribution made.
II. Professional Degrees & Reimbursement for Education Expenses
a. Professional degrees acquired during marriage are SP of the acquiring spouse. However, the
community is entitled to reimbursement when: (1) CP funds are used to pay educational expenses
(including loans); AND (2) the education enhanced the spouse’s earning capacity.

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 b. However, reimbursement is NOT REQUIRED where: (a) the community has substantially benefited
from the education (after 10 years a benefit is presumed); (b) the other spouse received community
funded education; OR (c) the education lessens the need for spousal support.
III. Reimbursement for Child Support & Alimony Payments
a. CP should NOT be used to make child support payments from a prior marriage unless SP is not
available. When CP was used to make payments, and SP was available, the community is entitled to a
reimbursement upon divorce.
IV. Reimbursement for Medical Expenses
a. A spouse is entitled to reimbursement when he/she expends SP for the medical expenses of the other
spouse if: (a) CP was available; OR (b) if the debtor spouse had available SP.
V. Pro-Rata Rule – Community Property Funds used to Pay Separate Property Loan
a. When payments are made with CP to pay loans for SP, the community is entitled to a pro-rata
ownership share of the property for amounts that reduced the principal debt on
b. the asset. Upon divorce, the community is entitled to reimbursement for its pro-rata share of the SP.
This situation commonly occurs when CP is used to make mortgage payments on a spouse’s SP
residence acquired before marriage.
c. The pro-rata share DOES NOT include payments of mortgage interest, taxes, and insurance.
J. Agreements that Change Characterization of Property
I. Prenuptial Agreements
a. Prenuptial agreements allow parties to contract out of community property laws, and are VALID if
in writing and signed by both parties. However, oral agreements are
b. enforceable if: (a) made orally and fully performed; OR (b) if the party detrimentally relied on the
agreement.
c. Agreements concerning spousal support are not per se unenforceable.
d. A prenuptial agreement will be deemed unenforceable if it is
e. (a) involuntary, (b) unconscionable, OR (c) encourages divorce.
1. Unconscionable: A prenuptial agreement will be deemed unconscionable if: (a) the terms are
unfair; OR (b) if a spouse did not know the extent of the other spouse’s property before
signing the agreement.
2. Involuntarily: A prenuptial agreement will be deemed involuntarily UNLESS the court
finds ALL of the following: (1) the party against whom enforcement is sought was
represented by independent legal counsel (or expressly waived legal counsel in a separate
writing); (2) the party had not less than 7 days to review the agreement; (3) if unrepresented
by legal counsel, the party against whom enforcement is sought was fully informed of the
terms, basic effect, and rights and obligations of the agreement, and was proficient in the
language used in the agreement (the explanation of the rights and obligations relinquished shall
be memorialized in writing and delivered to the party prior to signing the agreement); AND (4)
the agreement was not executed under duress, fraud, undue influence, or lack capacity.
K. Distribution of Community Assets & Debts Upon Divorce
I. Distribution Upon Divorce
a. Upon divorce, each spouse gets 1/2 of each community asset UNLESS the court determines that the
interests of justice require a different division.
b. Additionally, certain statutory and economic exceptions apply that will change the division of
assets, including: (1) misappropriation by one spouse; (2) separate debt (debt incurred before or after
marriage, or incurred not for the community’s benefit); (3) educational debts are assigned to the
spouse who received the education; (4) tort liabilities are assigned to the tortfeasor spouse if the
liability was not for the benefit of the community; (5) the family home may be awarded to the person
who is given custody of the minor children; and (6) closely held corporations.

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