CAS Bar Community Property — Questions and Answers
Question 1: During their marriage in California, Husband inherits $50,000 from his father and uses the funds to purchase stock. At divorce, the stock is best characterized as:
- Community property, because it was purchased during the marriage
- Husband's separate property, because it originated from an inheritance (Correct answer)
- Quasi-community property, because it was acquired in California
- Community property, because the funds were commingled with marital assets
Correct answer: Husband's separate property, because it originated from an inheritance
Under California Family Code § 770, property acquired by gift, bequest, devise, or descent is the acquiring spouse's separate property, even if received during marriage. The inheritance retained its separate character when Husband used it to buy stock, so the stock remains his separate property.
Question 2: Before marriage, Wife owns a home worth $100,000 in California with a $60,000 mortgage. After marriage, the couple uses community funds to reduce the mortgage principal by $30,000. The home is now worth $200,000. At divorce, which statement best describes the community's interest?
- The community has no interest because the home was Wife's separate property before marriage
- The community owns the entire home because community funds paid the mortgage
- The community is entitled to reimbursement for the $30,000 in principal paid, plus a proportional share of appreciation (Correct answer)
- Husband is entitled to a 50% interest because marital funds were used
Correct answer: The community is entitled to reimbursement for the $30,000 in principal paid, plus a proportional share of appreciation
Under the Moore/Marsden rule, when community funds are used to pay down the principal on a separately owned property, the community acquires a pro-rata interest in any appreciation proportional to its contribution. The community can recover the $30,000 paid plus the proportional gain in value, while Wife retains her separate property interest in the remainder.
Question 3: During the marriage, Husband earns $90,000 per year but secretly deposits all of his wages into a bank account held solely in his name, telling Wife nothing. At divorce, those deposited funds are:
- Husband's separate property, because they are in an account bearing only his name
- Community property, because wages earned during marriage are community property (Correct answer)
- Husband's separate property, because Wife had no knowledge of the account
- Quasi-community property, because they were concealed from Wife
Correct answer: Community property, because wages earned during marriage are community property
California Family Code § 760 provides that all property, real or personal, acquired by a married person during the marriage while domiciled in California is community property. Wages earned during marriage are community property regardless of whose name appears on the account, and concealment does not change the characterization.
Question 4: Husband and Wife each own 50% of a community property business worth $400,000. Husband dies, leaving a will that purports to give 100% of 'all his assets' to his brother. Regarding the business, which outcome is correct?
- Brother receives 100% of the business because the will controls all of Husband's assets
- Wife keeps her 50% interest; Husband's 50% passes to Brother per the will (Correct answer)
- Wife receives 100% of the business by operation of California community property law
- The court splits the business equally between Brother and Wife regardless of the will
Correct answer: Wife keeps her 50% interest; Husband's 50% passes to Brother per the will
Each spouse owns an undivided one-half interest in community property and may freely dispose of only their own half at death. Husband's will validly transfers his 50% interest to Brother, but it cannot transfer Wife's 50% interest, which she retains outright.
Question 5: Before marriage, Husband owned a landscaping business worth $80,000. During the 10-year marriage, Husband worked full-time in the business, growing it to $600,000. No community funds were invested. A court applying the Pereira approach would most likely:
- Award Husband the entire business as his separate property because no community funds were invested
- Award Wife 50% of the entire business because it grew during marriage
- Award the community a return equal to the fair rental value of the business's separate property capital, with the remainder treated as community
- Award the community a fair return on Husband's labor, with the remainder treated as separate property (Correct answer)
Correct answer: Award the community a fair return on Husband's labor, with the remainder treated as separate property
Under the Pereira approach, the court allocates a reasonable return on the separate property investment (here, $80,000 × a fair rate) to the separate property estate, and attributes the excess growth to Husband's community labor, making that excess community property. By contrast, Van Camp allocates the reasonable value of Husband's services to the community and leaves the residual to separate property.
Question 6: During marriage in California, Wife uses her separate property funds to purchase a parcel of land and takes title 'as Wife's separate property.' She later executes a written agreement with Husband stating the land 'shall be community property.' This agreement is best described as a:
- Void agreement because separate property cannot be changed once acquired
- Valid transmutation converting the land to community property (Correct answer)
- Unenforceable oral contract lacking consideration
- Valid gift from Wife to the community requiring delivery of a deed
Correct answer: Valid transmutation converting the land to community property
California Family Code § 850 permits spouses to transmute (change the character of) property from separate to community property by a written agreement that expressly states the change in ownership. Because the agreement was in writing and expressly declared the land to be community property, it constitutes a valid transmutation.
CAS Bar Community Property
During their marriage in California, Husband inherits $50,000 from his father and uses the funds to purchase stock.
At divorce, the stock is best characterized as: