Dissolution of Marriage - Community Property - Solved Past Exam, Exams of Property Law

Download Dissolution of Marriage - Community Property - Solved Past Exam and more Exams Property Law in PDF only on Docsity! Willet ID: CommProp_LS1_Willet_Final_2011FL ID: {Exam Number) Exam Name: CommProp_LS1_Willet_Final_2014FL Instructor: Willet Grade: _k Page 1 of 1 Exam taken with Soffest v10.0 a 21, ID: CommProp_LS1_Willet_Final_2011FL 32-willet Ae 1) s=xcccs= Start of Answer #1 (3084 words) ======== California is a community property state. Certain presumptions apply. Property v” purchased by the spouses when they are married is presumed to be the community property (CP) of the parties themselves and is subject to equal division on divorce. Property purchased before the marriage, after dissolution, or during the marriage by \ gift, bequest, devise, or descent, or the rents, issue, and profits thereof, are considered to be the separate property of the spouses (SP) and is not subject to division on divorce. Also, certain statutory presumptions may apply. Along with the statutory presumptions, the it is important to keep in mind the source of the funds and whether any subsequent changes to the property, like transmutation, have altered its character. Additionally, after 1/1/1975, both husband and wife have an VA equal right to management and control over community property. In a dissolution proceeding, courts have jx to classify the CP and the SP, and then they have continuing jx to divide the CP. They have to divide the CP equally, and can do so v, in-kind (50/50) or through a value distribution where assets are divided on a roughly equal basis. The court will use this power to divide the assets in this dissolution proceeding as follows: 1. The Massachusetts Condo Page 1 of 11 {Question 7 continued) ID: CommProp_LS1_Willet_Final_2011FL Willet within the 10 year timeframe, then the spouse who has the education not only is assigned the loan as SP without any offset, but also that spouse must reimburse the community with interest for the value of the money spent on paying off the loan and the other education-related expenses. To rebut the presumption, the spouse who received \ the education must show that s/he received such a valuable job with such a great salary that it allowed the other spouse not to work if s/he chose to do so. Unfortunately for W here, the loan expenses are all going to fall on her and she will have to reimburse the community for a fairly significant sum. Here we learn that she finished her degree in 2008. She got a large law firm so we can assume she held a lucrative position because big firms usually pay large salaries. As a result, W could try to rebut the presumption that the education loans are hers alone because within the first year of her graduation, she acquired a job that in theory would have allowed H not to work and the community would have been substantially benefitted, so to speak, such that her obligation to reimburse the community with interst would have been discharged. However, W lost her job at the large law firm before the divorce. In fact, she lost her job on December 5, 2010, a little over 2 years after she got it. As a result, the community - likely would be seen NOT to have substantially benefitted because she's still within the 10 year window, the loans are still outstanding, and we're not told in the facts that she's unemployed. She was only employed for about two years, and her H worked anyway, so the presumption won't be rebutted. W will have to repay the community (of which ¥ 1/2 will eventually be given back to her anyway in the dissolution) 1/2 of the value of the Page 4 of 11 (Question 1 continued) ID: CommProp_LS1_Willet_Final_2011FL Willet loans and other expenses associated with her education with interest. Sh started school in 2005, the same year they were married. The expenses are from 2005 to 2008 and a reasonable interst rate is 10%; moreover she will have to pay the community back the $18,000 on the loan ($40k down to the $22k remaining) plus 10% annual interest. The loans have been outstanding from 2008 through 2011 when the couple divorced and the economic community ended. That's roughly $1800 per year “ times 3 years for a total of $5400 interest and then the $18k paid off. Ultimately half of that number is about $11,700 that W will owe H. And with these loans, the commingling issue doesn't matter. The condo was already seen to be CP. The profits from it were CP. W's salary is CP. Everything in that account is CP, so there is no commingling issue for what parts of the loans were already paid back, and comminglling wouldn't affect the analysis of the loans. 3. The Ducati Motorcycle The Ducati Motorcycle was purchased by W and titled in her name only. We're told tha tthe money to purchase the motorcycle came from a severance that W received at her ‘job, thus the court will apply tracing to determine the source of the funds themselves and characterize those funds, and then ultimately characterize the motorcycle. The general presumption with money from effort, talent, and skill applied by a spouse to work during marriage is that funds from that work are then CP. However, with a severance package, the general presumption can be rebutted and it can be shown to Page 5 of 11 (Question 1 continued) ID: CommProp_LS1_Willet_Final_2011FL willet be SP if the party can successfully argue that the money was not intended as consideration but instead as a sort-of future payment given the difficulty of the job market and how hard it is to be unemployed and searching for a job. Here, W is likely to convince the court that the motorcycle is actually SP. The future payment / unemployment aspect would tend to show that the money is actually SP because we are told that the severance given her was from the lawfirm downsizing. At that time, in around 2009 or so, we know generally from what was happening in the legal landscape that many firms were downsizing as the economy hit rock bottom. This generally accepted fact tends to buttress Ws argument that the severance package was not part of her compensation, but was rather given to her as SP severance to help her get, in the future, to her next job. What she chose to do with those SP funds was buy the Ducati. She could trace the funds to the motorcycle directly to show that it was her SP. This argumen is likely to persuade the court that the Ducati is Ws SP. The first, albeit weak, argument for H is to try and argue through the exhaustion method of tracing that the motorcycle should be CP. Exhaustion is the preferred method of tracing, so he may get some traction with the court, but ultimately this argument will lose because the tracing method with the funds shows that the motorcycle is W's SP. _ ihe argument would be that W did not show that CP funds were exhausted when the motorcycle was purchased, so even though she purchased it with traced SP funds, the motorcycle would still be at least some percentage CP depending upon whatever money was in the joint CP accounts at the time. We havfe no facts to argue this, and the court already would see the tracing method directly goes against the exhaustion Page 6 of 14 (Question 1 continued) ID: CommProp_LS1_Willet_Final_2011FL willet appreciation value, and that difference represents the CP of the business. In this case, the initial $20k will be muitiplied by 10% and then by 2 years. This calculation will be $4k total. This $4k is subtracted then from the appreciation value of the business. We;re told it was started with $20k and it was valued as close to trial as the court is supposed to do at $400k. thus the appreciation value is $380k. When $4k is taken from $380k, we have $376k. That is the CP. 1/2 goes to each spouse, and H, after receiving his 1/2 of $376k would get back his initial SP payment into the company . PLUS the interest it produced of $4k over 2 years. However, Van Camp benefits SP more and may also be applied here. Van Camp is used when the character of the business itself is the reason for the increase in the value of the business. Like the case we read of the car salesman in 1948 when the car dealership was booming, the dealership did so well because so many people were buying cars after WWII, not just because he was a great salesman. In Van Camp analysis, a fair salary is assigned to the spouse who worked at the business and that salary is multiplied by number of years worked (2). Community expenses are then calculated if they were taken out as well, and they are also multiplied by the number of years worked. Both the fair salary and the community expenses represent the CP value put in to the business, so they are combined, and that number is subtracted from _ the TOTAL FMV of the business. The leftover is then seen to be the SP. The Van Camp analysis might apply here, given how it is designed, because we are Page 8 of 14 (Question 1 continued) ID: CommProp_LS1_Willet_Final_2011FL Willet told that there was a solar energy "gold rush" just after SDS was opened and it grew by feaps and bounds. This is just like the car dealership case. Unfortunately, we're left without a fair salary number for the H. If we make up a safe assumption that he should get $40k a year and community expenses were something like $10k a year, then in total the community value of the business would be $100k and the remainder would be H's SP ($225k) His likely to argue for Van Camp analyusis, and although his precedent argument based on the car salesman case is strong, he'll lose because oddly he was so talented as a salesman and as a contractor that his business grew becasue of the community skill he possessed, and the community benefits more in these situations through pereira analysis so that is the way the court will go, even in the face of the precedent. however, if the court sees it the other way, then the H will get $225k through Van Camp analysis. 5. The general presumption is that money acquired after separation but before end of _ the community is CP. An economic community ends when the spouses no longer intend to be together and when they are not living together anymore. And in CA, the only reasons for divorce are irreconcilable differences or insanity. Here, we are told that H moved out and filed on Feb 14, 2011, valentines day. He met the test and the economic communit ended that day becasue filing papers shows intent not to resume the marriage and he cited irreconcilable differences for the divorce which is one of two ways to divorce in CA. Page 10 of 11 (Question t continued) ID: CommProp_LS1_Willet_Final_2011FL Willet Unfortunately for H, however, the ticket was purchased before the economic community ended so it's not his SP but it would be seen as CP. This is becasue even after the end of the marriage by dissolution, the parties are still fiduciaries to each other and H won the money 1 month after the separation when he rediscovered the ticket. He purchased the ticket when the parties were still together, so the general presumption is that the $500k winnings would be CP. BUT even worse for H, the general presumption that the $500k was CP would be rebutted further. The lottery winnings are going to be all given over to W likely, because of a precedent case we read. Although H will aruge that CP funds were used to purchase the ticket-which they were-- and thus the funds are going to be given to W becasue a precedent case, very similar, showed that if someone fradulently or with intent hides lottery winnings that should have een CP, then they are all given to the «~ other spouse as SP. Here, we know H fradulently concealed the money becauser he told the lottery to send the money to his mon in MA, just like in the precendent case, and hid it from W, so all the money even though initially CP because of his fraud and t-~ the precedent would go to W. =see==== End of Answer #1 ======== Page 11 of 11 (Question 2 continued) ID: CommProp_LS1_Willet_Final_2011FL Willet between the 1991 filing and the 2008 marriage b/t A and B. Mayube the J just got lost in the mail? The probate would likely see it as a completed dirorce even without the J because of the time lapse frim 1991 to 2008, Or the Probate could look it up in the records. Either way, this will likely be a small issue and A and B will be validly married or domestic partners. Even if the court doesn’t buy the time argument, however, or look it up, there's another way to show that they are married validly. If one party believes in good faith (IGF) that they are married, then they are considered putative spouses and their property is evaluated as Quasi-Marital Property (QMP). A has no reason to believe he's not legally married (ceremony at SF City Hall in 2008, old marriage “ended” in 1991) so he wouldn't be on notice that his marriage to B was invalid. Moreover B had a good faith belief that they were married. so even if they are not seen as domestic partners, the IGF QMP rules would apply and QMP is evaluated . like CP. SO D is out and will receive nothing, and the property then needs to be divided between A, B and Camille (C) in probate. PRE-ISSUE: the pre-marital agreement. According to the UPMAA and after the anti-BONDS case statutes, a pre-marital _agreement is valid only if it is in writing or the other side is represented by an attorney, that party has 7 days to review it, the terms and conditions are fully explained, and it doesn't encourage divorce like in NOGHREY. Here, the probate is llikely to see the pre-marital agreement as invalid and the parties Page 3 of 8 (Question 2 continued) ID: CommProp_LS1_Willet_Final_2011FL Willet eamings once married would be CP. This is because while it was in writing and B reviewed it with a lawyer, he only had 3 days, AND A himself didn't sign it. Thus, the test isn't met for the pre-marital agreement and the parties income is all CP once they were married. 4. The Dale Chihuly sculpture. The general rule is that property purchased by parties while married is CP. The general presumption specifically for gifts is that if it is purchased with CP and is of nominal value relative to the couples, it is seen as a CP asset even if called a "gift" from one to the other and there is no transmutation. However, if SP funds are used for the purchase of a gift of sutstantial value relative to the couples themselves, the gift could be SP or CP depending upon where the funds came from. Here, we're told that B was a broker and owned properties in the city of SF. They were purchased before the marriage in 2008 and owned by B. he sold one of them to get the money for the sculpture. It was SP property and the funds produced from SP are SP. So the funds were SP. Is the sculpture an SP gift? Given the rules of a gift, and because of the value relative to the community here, a $100k gift is a HUGE deal (would be for almost all people but the super-rich) and will be seen as still CP, disregarding the card stating it was a gift, if the rules of transmutation aren't met. Probate is likely to look to the transmutation rules and the statutes that there has to be a writing, signed by both parties, w/o consideration for it to be a gift. Page 4 of 8 (Question 2 continued} ID: CommProp_LS$1_Willet_Final_2011FL wWillet Here there was a writing but it wasn't signed by both parties. There was no consideration. The test to transmute the $100k gift from Bs SP over to As SP wouldn't be met. This is an invalid transmutation and would be still Bs SP. In probate, B gets the sculpture. 2. As super savings account. From 1990 until he died in 2011, A deposited money in his own account from his work. He never commingled the funds, we're told. These funds would be presumed generally to be CP given the laws of community earnings being CP BUT can be rebutted if itis shown that the funds were kept separate. We have no enough information for D to make a claim on the funds for 1 year. She was still married to A at the time, all we know is that A deposited his salary in the account. We're not sure how much was previously his, but it would be CP to split between As estate (intestate succession will dispose of it later) and D. Get gets 1/2 his salary value from 1990-1991. From 1991-2008, assuming that entire time the test above for ending of the economic community b/t A and D is met, As account would be his SP. He kept the money separate. BUT after 2008, since the pre-nup he "signed" with B was invalid, all the money deposited in the accout that is As salary would be CP. We're not told exactly ’ how much that is, but its safe to say that B has a valid claim for 1/2 the value of As Page 5 of 8 (Question 2 continued} ID: CommProp_LS1_Willet_Final_2011FL Willet 4. Macy's Insurance Policy. ,.- The general rule with Insurance policies is that they are SP if they are term-life policies c-and CP if they are whole life policies with a cash out value. If the policy is disability, we generally see it as reimbursement for work, a CP asset of the spouses, and thus it is presumed CP but can be rebutted if the intent at time of disability purchase and at time of policy renewal itself were shown to be SP. Here, the insurance policy was never changed. !t was a whole life policy becasue we're not told it ever had to be renewed as it would have to be to be a term life policy. Thus, then the fight is between D and between B for the value because D was named. the court could use a QDRO and change the beneficiary because D was named but is no fonger the pouse, BUt won't likeloy do this becasue its on the parties to change the beneiciaries themselves. Thus D would get the value of the $150k whole life policy as her SP. se====s= End of Answer #2 ======== Page 8 of 8 ID: CommProp_LS1_Willet_Final_2011FL Willet END OF EXAM Page 1 of 0