CA Marital Property Law Exam: Law 281.2 - Transmutation & Community Property, Exams of Property Law

Download CA Marital Property Law Exam: Law 281.2 - Transmutation & Community Property and more Exams Property Law in PDF only on Docsity! UNIVERSITY OF CALIFORNIA COURSE EXAMINATION SCHOOL OF LAW Fall 2009 LAW 281.2: CALIFORNIA MARITAL PROPERTY INSTRUCTOR: HERMA HILL KAY TIME ALLOWED: 22 HOURS OPEN BOOK EXAMINATION NUMBERS: Please be sure to put your correct Fall exam number on each page of the exam (if typed) or on each blue book. COMPLETION: DO NOT CONTINUE WRITING AFTER TIME HAS BEEN CALLED. Please do NOT leave your bluebook or typed answers on the desk. Exams MUST be turned in to the person in charge. If you finish early, you must turn your exam in to the Examination Headquarters in Room 123 Boalt Hall. There are no space limits. QUESTION I. 40% CREDIT H and W married in California in 2005. At the time of the marriage, H was a successful businessman who was possessed of substantial real and personal property, while W had recently graduated from college with a degree in Psychology and was employed by one of H’s business as a receptionist. After a whirlwind courtship and a society wedding, the newlyweds established a home in an exclusive residential area in Marin County, just north of San Francisco. W did not work outside the home, as H wanted her to be available to travel with him on his business ventures in other countries. LAW 281.2: CALIFORNIA MARITAL PROPERTY FALL 2009 FINAL EXAM Page 1 of 6 In 2007, H and W undertook their estate planning. H consulted a lawyer who specialized in decedents’ estates and trusts who advised both of them. The lawyer told them that it would be advisable for tax purposes to convert H’s separate property holdings into community property so that, upon the death of one of them, the other would obtain a full stepped-up basis in the market value of the property (which had greatly appreciated since it was first acquired). He also said that it would be advisable to retain the property as H’s separate property so that, in the event of divorce, the property would not be within the jurisdiction of the divorce court for purposes of division between the parties. Such an arrangement, he advised, would leave them freer to negotiate their own dissolution agreement in the event of divorce. The lawyer then prepared three documents: the first document was identified as a Spousal Transmutation Agreement; the second was a Trust Amendment; and the third was a Will for each party. The Transmutation Agreement contained, among other provisions, the following four sections: Section A provided that “all property, real and personal, of the parties, regardless of the form in which title is held, is the community property of the parties, each party having a present, existing, and equal interest in said property.” Section B provided that “all of the property, real and personal, held in the name of Husband and acquired by him prior to the marriage of the parties is hereby converted to community property of the Husband and Wife, and shall hereafter be the community property of the parties for estate planning purposes, each party having a present, existing, and equal interest in said property.” Section C provided that “this Agreement is intended as a LAW 281.2: CALIFORNIA MARITAL PROPERTY FALL 2009 FINAL EXAM Page 2 of 6 1, 2001 (and set out in full at the bottom of page 794 in the Statutory Appendix to your casebook), community property with right of survivorship “shall, upon the death of one of the spouses, pass to the survivor, without administration, pursuant to the terms of the instrument, subject to the same procedures, as property held in joint tenancy.” Would this strategy have achieved the dual goals the parties seem to have had in mind in 2007? QUESTION II: 60% CREDIT H and W were married in California in 1960 and have lived here throughout their marriage. Last week, W discovered that H is having an affair with a woman twenty years younger than he. W immediately consulted you about a dissolution of the marriage. In reviewing W’s description of the assets currently held by the parties, you learn that they include the following items: (1) the family home, acquired by H prior to marriage for $100,000, using a $20,000 down payment and an $80,000 loan. The loan was paid off after marriage entirely from H’s earnings as an engineer. In 1985, H changed the title to the home, which had been held in his name alone, deeding it to “H and W, husband and wife, as joint tenants.” (2) a vacation home at Lake Tahoe, California, acquired in W’s name alone in 1970 for $60,000, using a $12,000 down payment from funds W had inherited from her grandmother, and a $48,000 loan made to H. H paid off the loan from his earnings as an engineer. (3) stock options in the Computer company where H worked, which he elected to receive in lieu of monthly cash LAW 281.2: CALIFORNIA MARITAL PROPERTY FALL 2009 FINAL EXAM Page 5 of 6 LAW 281.2: CALIFORNIA MARITAL PROPERTY FALL 2009 FINAL EXAM Page 6 of 6 payments upon his retirement in 2005 at the age of 65. The options were valued at $1million on the date of his retirement, and were exercisable in equal amounts on December 31 of each year for the next 10 years. In 2008, the value of the options had decreased by 30%. (4) payment to W in early 2009 of the amount of $100,000 in unclaimed property which W discovered listed under her name while monitoring the California State Controller’s on-line Unclaimed Property Site. The sum represented four uncashed checks made payable to W in 1958 from investments made in her name by her grandmother that W had not known about and had never received. (5) a ski cabin in Vermont purchased in 1986 for $50,000 by H and his sister as tenants in common. The cabin now has a fair market value of $200,000. Draft a memo advising W of your professional opinion as to her community or separate property interests in each of the listed items, and also of any claims she might make against H with respect to any of the items. END OF EXAMINATION