Personal Injury Recovery - Community Property - Solved Past Exam, Exams of Property Law

Download Personal Injury Recovery - Community Property - Solved Past Exam and more Exams Property Law in PDF only on Docsity! CommProp_1S1_Kosel_2010SL Janice ID: Name: Exam Name: Instructor: Grade: CommProp_LS$1_Kosel_2010SL Janice QO + Page 1 of 1 Exam taken with SofTest v8.9 -- CommProp_LS1_Kosel_2010SL Janice 1) Dear Wanda, I'm really sorry to hear of your recent loss. The good news is we can find a way to make sure Harold's heirs do not get what is entitled to you alone. First, of all California is a community property state. All real and personal property acquired during marriage is presumed to be CP. This means that you and Harold each have 1/2 undivided interest in the CP. However, the CP presumption is rebuttable. It is up to the spouse claiming SP to rebut the CP presumption by a preponderance of evidence. (Marriage of Ettefagh). Furthermore, title does not characterize property. In order to determine the character of property the court will trace the assets to the original source of funds used to purchase that asset. Property is presumed to be SP upon the following circumstances: (1) acquired before marriage; {2)acquired after permanent separation or divorce (CA its called dissolution); (3) gift or inheritance; (4) Rent, income, and appreciation from SP is SP (George v. Ransom); and (4) Married womens SP presumption. In the first situation, property acquired before marriage is your sole and SP. In the second situation, we need to figure out if there has been an irrevocable intent to end the martial relationship and Harold and you are physically living apart. In the third situation, in order to determine if property is an unusual acquisition during marriage we have to look to the donor's intent upon giving the gift or inheritance. In the last situation, prior to January 1, 1975 if a married woman took title in her name only the property is presumed to be her sole and SP. This is a unusual situation when title does matter when characterizing Page 1 of 13 (Question 1 continued) CommProp_LS1_Kosel_2010SL Janice spouse unless there is commingling of accounts and the interest of justice requires otherwise. It seems here you are in a marriage of devlin kind of situation (H became __ parapelgic used CP award $ to purchase home, courts said it is 100% his). Because H is now a parapalegic and his dreams of being a firefighter are basically shot to hell {mind my language) he will get to keep the Pl award ($3.2 million) as his sole and SP upon divorce. However lets see if we can get you reimbursements. Had the injurty occurred after separation but before a final divorce there is a SP with a twist. Basically upon divorce the PI award still goes to the injured spouse onyl after the SP of other _—————— spouse is reimbursed and CP is reimbursed for costs spent to benefit the injured spouse. Therefore, we can possibly get you reimbursed for any costs you spent on _—__ your SP on supporting H during his depression (ie. medical expenses on Zanax, etc.) Therefore, we can get you a fractional share for reimbursement in the Pl award of $3.2 million. Defined Contribution Plan of W Retirement beneits are considered deferred compensation for earnigns that occur during marriage. it seems you have a DC plan with National Company. Before we get “to the specifics you need to know that vested or non-vested pension plans are treated as CP when earnged during marriage. According to marriage of brown, non-vested pension benefits are considered a contingent interest in property. Furthermore, although the court cannot force a spouse to retire, once the earning spouse reaches an eligible retirement age the other spouse is entitled to share in the benefits. (Marriage of gilmore). Therefore you cannot prejudice your spouse by timing your retirement against Page 4 of 13 (Question 1 continued) CommProp_LS1_Kosel_2010SL Janice your spouse's advantage. Under a DC plan both ER and EE bare the risks of investment. | would recommend you look at your SPD (summary plan document) to see your plans rules for vesting and distribution. Also, DC plan has an ascertianable value. Courts will use the apportionment rule to figure out how much of the DC plan was attributable to CP labor and how much to SP labor. First, we need to trace the ee contributions either to SP source or CP source. It seems we need more information how much individual contributions you made to the plan since you started working at National company. Second, we need to give each estate its fair rate of return based on its ownership interest in the plan. The CP wil get its contribution during marriage and the investment return. Therefore, H's estate will be entitled to 1/2 of the CP contributions you made to the plan during marriage and in addition the plan has appreciated $200,000 since marriage thus, he gets 1/2 of the appreciation. Upon divorce, courts can do a couple of things to divide a pension. One cash-out the non-earning spouse by assigning the entire pension to the earning spouse and give the non-earning spouse community asset of equal value from the divorce settlement. It is important to keep in mind you cannot cashout a non-vested pension plan. The IRS will come after you! Also, you will be subjected to tax consequences if you cash out a pension plan before your eligibility to get distributions. The court can also maintain in- kind division of the plan. They will retain jxn over the planand once the earning spouse becomes eligible to retire court will supervise payments. In your situation | would suggest you take the cash-out method therefore you get to keep your entire pension and just give H's estate equal offseting value. Page 5 of 13 (Question 1 continued) CommProp_LS1_Kose1_2010SL Janice To avoid this situation, you should have NOT commingled your account and opened an 401k plan solely in your name. Whole Life Insurance Policy it seems here H has whole life insurance policy now worth $100,000 that is parents purchased for him when he was a baby. Whole life insurance policy is more expensive and has a cash-surrender value. Therefore, to determine how much the CP and SP gets in the policy courts will use the traditional Gray rule to apportion it. Upon death pene Cee and divorce, the proceeds are apportioned based on the character of all premiums paid. CP has an interest in the whole life insurance policy to the extent the CP paid the premium. SP has an interest in the whole life insuarance policy to the extent the SP paid the premium. We do not need to use the Judge King-estate of logan rule (which estate paid last premium) since that only applies to Term Life Insurance. It seems to me b/c H's parents purchased the policy for him H's executor is going to argue that the insurance policy was a gift to him alone and therefore ihs SP. Therefore; H's heirs/estate will get a fractional portion of the premiums paid before his marriage to you. But the good news is premiums were paid during his marriage to you in the whole life insurance policy. Thus, you still get 1/2 share in premiums paid during your 15 years of marriage with him. Also, upon divorce the spouse cannot defeat the other spouses 1/2 interest in the insurance policy by naming another beneficiary. H cannot write a will leaving everything in the life insurance policy to his niece and nephew. Courts will treat ——____. life insurance designations as a will. Thus, 1/2 of the life insurance policy goes to you niente cane and the other 1/2 goes to H's heirs. | can definitely foresee possible future litigation on Page 6 of 13 (Question 1 continued) CommProp_LS1_Kose1l_2010SL Janice situation. If CP and SP are commingled in an account there is a CP presumption. This is rebuttable and it is up to the SP proponent (you) to prove otherwise. We can do this by the family expense doctrine and direct tracing. Basically, under the family expense doctrine community expenses are presumed to be spent first to the extend there is CP funds available at that time for that purpose. We do not want you to be in a Mr. See's situation where SP contributions are presumed a gift if it is untraceable to SP. Under the direct tracing principle, we can untangle the bank account by tracing the source back to SP. The SP proponent must maintain adequate records and prove that SP was withdrawn solely for SP expenditures. Therefore | need to know if you kept any bank statements in order for us to prove at that time you made certain purchases you intended to keep your SP separate from family expenditures. Furthermore, there is some great news for you because according to the marriage of mix the direct testimony of the SP proponent spouse can also untangle the commingled bank account. Also there may be a credibility issue here. The judge might now believe you since H is a parapalegic and spouses have a statutory duty to support each other. It wouldn't look good if you weren't supporting H during your marriage to him. Unauthorized Gift Generally, both spouses have equal undivided management and control over CP assets. However, there are exceptions and this is more of a theory because in the real world couples are breaking this rule all the time and they don't even know it. The first exception is the unauthorized gift. A spouse may not give a gift of CP without the written consent of the other spouse. It seems H has broke this rule by giving checks for ___-_- ova Page 9 of 13 (Question 1 continued) CommProp_LS1_Kose1_2010SL Janice $10,00 from the CP savings account to his niece and nephew. Upon divorce (had H not died) you could reclaim 100% of the total $20,000 ($10,000 from each) back from the donees or cash-out value. But because H died, you can reclaim 1/2 of the total $10,000 ($5,000 from each) back from the donees or cash-out. Stock Investments in H's name alone It seems here there is a family business interest issue. Generally, income from SP is SP but if a spouse contributes their labor during the marriage to enhance the SP investment the community is entitled to a share. Courts will use the Peireira/Vancamp formula to determine each estates share in the appreciation of the investment. The Peireira formula is used when the person is the success in the investment and this maximizes the CP! This gives the SP its initial value and its fair rate of return which is usually multiplied by interest rate and the remainder of the appreciation goes to the CP. In your situation we need to know what was the intial value of the stock investments during marriage multiply that by 10% to get the SP amount given to H. We then take whatever that amount is and subtract it from the appreciation to give the CP its fair share. The Van camp formula is used when the success of the investment is due to the SP estate itself , not labor of spouse. This usually maximizes the SP (CP will be less than 1/2). This gives the CP its fair salary of the spouses labor during marriage deduct it by any salary already taken and community expenses paid from the business. The remainder then goes to SP. This looks like good news for you W. It seems you are in a Mr. Beam situation in which court will use the Peireira formula. Basically, if a spouse —_——_ spends a signficiant amount of time handling a portfolio during marriage the courts will Page 10 of 13 (Question t continued} CommProp_LS1_Kose1_2010SL Janice treat itas CP. H's attorney might argue that H was being a passive investor and did not contribute his time, effort and skill during the marriage. However, | beleive you have a stronger case since his accident he has become a day trader. We can argue he spends most of his time investing in stock index mutual funds. He is a sophistacted investor therefore the community is entitled to 1/2 of his stock investments (based on formula discussed before). Furthermore, H cashed in his retirement plan when he moved from Maryland. Remember the community is entitled to share in retirement benefits if earning durin marriage. We need to figure out what type of retirement plan H had. Because he was a school teacher I'm assuming it was a DB plan. Under a DB plan an ER will promise EE monthly payments for life time at a state retirement age. We can get a actuary to make a present cash value of the plan to determine how much money must be set aside today in order to generate the monthly payments. The court will also use the time rule if earnings were made before and during marriage to see which is attributable to CP and which is attributable to SP. The CP share is determined by dividing the number of years pension is earned while working during marriage from the total number of years until earning spouse is eligible to retire. In your case we need to find out how long H had till he was eligible to retire- this is not the actual amount of years work, just eligibility. And it seems to me H was trying to time his retirement to prejudice you. He cannot do this! You will be entitled to 1/2 of the retirement money that H cashed out retroactive to the date he was eligible to receive distributions. Education Also know that education and professional degrees are not subject to CP divison Page 11 of 13