Texas Bar Exam - Community Property

Front 1

What does a spouse's separate property consist of?

Back 1

1. Property owned or claimed before marriage

2. Property acquired during the marriage by gift, devise, or descent; or

3. Property acquired during marriage with separate funds

4. The recovery for personal injuries sustained, except any recovery for loss of earning capacity during the marriage

4. Formerly community property that was converted to separate property by written partition or exchange of community property

Front 2

How are assets purchased w/ separate funds (or with the proceeds from the sale of separate assets) characterized

Back 2

Separate property

Front 3

Mnemonic for Separate Property

Back 3

PET BOA

1. Partition or Exchange of community property
2. Tort recovery for personal injury (not medical expenses, which are a community obligation or loss of earning capacity
3. Bought with separate funds;
4. Owned before marriage
5. Acquired by gift, inheritance, or will

Front 4

H dies intestate, survived by W and kids, how is separate real property divided?

Back 4

W gets a life estate in an undivided 1/3 of H's separate realty

Kids get the remainder as to W's 1/3 and outright ownership of the other 2/3

Front 5

How is the gift of property from one spouse to the other during marriage characterized?

Back 5

A gift from one spouse to the other during marriage is the donee spouse's separate property

Front 6

How is a gift given to both spouses during marriage characterized?

Back 6

A gift donated to both spouses during the marriage is community property

Front 7

What is considered community property?

Back 7

There is a strong presumption that any assets acquired during marriage are community assets

Clear and convincing evidence is needed to overcome the presumption

Front 8

Who has the burden of proof in rebutting the community presumption?

Back 8

The burden of proof of establishing the separate character of a particular asset is on the party contending that it is separate

Front 9

How can the community property presumption be overcome?

Back 9

By "tracing" so as to establish separate ownership

The party contending the asset is separate must show by clear and convincing evidence that the property was:

1. Owned before marriage
2. Acquired during marriage by gift, devise, or descent;
3. Acquired during marriage by the expenditure of separate funds

Front 10

What happens when separate and community funds (or other assets) are commingled?

Back 10

It is possible that the separate property will lose its identity - that it will, in effect, "become" community property

Front 11

Under conflict of laws principles, marital ownership of an asset is determined how?

Back 11

Under the laws of the state in which the couple was domiciled at the time the asset was acquired

Front 12

What happens to the characterization of an asset when a couple moves from a community property state to a common law state or from a common law state to a community property state?

Back 12

Nothing. There character of the asset is not altered

Front 13

What is "quasi-community property"?

Back 13

Property acquired in another state, which would have been classified as CP if acquired under the same circumstances while the owner was domiciled in TX

The property is treated the same as community property for purposes of division on divorce

Front 14

State the Inception of Title Rule

Back 14

1. The separate or community character of an asset is determined at the time the asset is acquired; AND

2. No subsequent actions will alter its character, unless there is agreement via a marital agreement to change the character of the asset

If title is acquired before marriage, it is the acquiring spouse's separate property

If title is acquired during marriage, the community presumption applies

Front 15

Can an asset be characterized as part separate and part community?

Back 15

Yes

A common example of this occurs in home purchases where a down payment is made with separate funds and the mortgage is acquired with community credit

Front 16

How are assets acquired on credit during marriage presumed to be acquired?

Back 16

An asset acquired on credit during marriage is presumptively acquired on community credit

Front 17

When can the presumption of community credit be rebutted?

Back 17

The presumption of community credit can be rebutted where:

1. Lender agrees to look solely to the separate estate of the borrowing spouse;
2. Spouses agree the asset is separate property and payments are made out of separate assets; or
3. Spouse intends to pay debt with proceeds of sale of separate property

Front 18

What property may creditors reach for contracts that do not involve necessaries when only one spouse is a party to the contract?

Back 18

1. The contracting spouse's separate property;

2. The contracting spouse's sole management community property (e.g. spouse's salary); and

3. Joint community property

The creditor cannot reach the non-contracting spouse's separate property or sole management community property

Front 19

Do subsequent expenditures during the marriage used to improve the separate property of a spouse affect the underlying title?

Back 19

NO

However, the community estate may have a claim for economic contribution against the spouse's separate property

Front 20

Does a spouse have a reimbursement claim for separate funds expended for living expenses?

Back 20

No

Front 21

What happens if property is acquired with community funds or community credit but title is taken only in one spouse's name?

Back 21

Property titled in one spouse's name is presumptively that spouse's sole management community property

A bona fide purchaser can rely on the apprarent authority of one spouse to sell

The spouse without his or her name on title cannot demand a return of the property if its purchased by a BFP w/o knowledge of the asset's community character

Front 22

How are cash dividends received during marriage classified?

Back 22

Cash dividends received during marriage are community property

Front 23

How are stock dividends received during marriage classified?

Back 23

Stock dividends received during marriage are separate property

Front 24

How are stock splits acquired during marriage classified?

Back 24

Stock splits acquired during marriage are separate property

Front 25

Other than cash dividends, how are all other corporate distributions received after marriage classified as?

Back 25

Except for cash dividends, all other corporate distributions (namely stock splits and stock dividends) are separate property

Front 26

How is income received from a discretionary trust characterized?

Back 26

Separate propertyq

Front 27

How are capital gains from separate property classified?

Back 27

Separate property

(because the proceeds from the sale of separate property during marriage remain separate property)

Front 28

How is income from separate property classified in Texas?

Back 28

In Texas, the income from separate property is community property

Front 29

How are earnings of either spouse during marriage characterized?

Back 29

The earnings or salary of either spouse during marriage are community property

Front 30

How are employee retirement benefits characterized?

Back 30

1. If employment arose during marriage and the benefits were earned during marriage, the benefits are all community property

2. If employment arose before marriage and the benefits were earned during marriage, the benefits are part community property and party separate property

The separate property component is: (the number of years employed before marriage) / (the total number of years employed to the date of divorce)

Front 31

What property is subject to the tortious liability of either spouse incurred during marriage?

Back 31

1. All the community property

2. The defendant spouse's separate property

(the judgment creditor cannot reach the other spouse's separate property if the tort occurred before the marriage)

Front 32

How is a tort recovery from personal injury characterized?

Back 32

Pain and suffering - separate property

Loss of consortium - separate property

Medical expenses - community property


Loss of earning capacity - community property

Front 33

Is either spouse liable for torts committed by the other spouse before marriage?

Back 33

NO

Neither spouse is liable for torts committed by the other spouse before marriage

Thus, the judgment creditor cannot reach the other spouse's separate property or sole management community property

Front 34

If a life insurance policy is characterized as a spouse's separate property, does the other spouse have standing to challenge the beneficiary designation as being in fraud of his rights?

Back 34

NO

Front 35

During marriage, what community property can a spouse have sole management, control and disposition of?

Back 35

The community property that he or she would have owned if single, including but not limited to:

1. Personal earnings;
2. Revenue from separate property;
3. Recoveries for personal injuries;
4. The increase and mutations of, and the revenue from, all property subject to his or her sole management, control and disposition

Front 36

What rights does each spouse have with regard to his or her sole management property?

Back 36

Contractual and managerial powers

Each spouse can transfer such assets w/o the other spouse's joinder or consent (subject to the homestead rule and the fraud on the spouse rule)

Each party can enter into contractual liability with respect to such assets

Front 37

What rights does each spouse have with regard to his or her separate property?

Back 37

Each spouse has the sole power to manage, control, and dispose of his or her separate property w/o the other spouse's joinder, consent, or participation

The only limitation would be if the property qualified as a homestead.

Front 38

What duty does each spouse owe to the other spouse?

Back 38

The duty to support the other spouse

A spouse who fails to discharge a duty of support is liable to any person who provides necessaries to those to whom support is owed

Front 39

What property can be reached to satisfy either spouse's contracts for necessaries?

Back 39

All forms of marital property (all CP; H and W's SP)

Front 40

For contracts that do not involve necessaries, what can a creditor reach?

Back 40

1. The contracting spouse's separate property

2. The contracting spouse's sole management community property; and

3. Joint community property

Front 41

When does property become subject to the joint management, control and disposition of the spouses?

Back 41

When one spouse's SMCP is mixed or combined with the other spouse's SMCP, the mixed or combined CP is subject to the joint managment, control, and disposition of the spouse, unless the spouses provide otherwise by power of attorney in writing or other agreement

Front 42

How is property possessed by either spouse during or on dissolution of marriage treated?

Back 42

Property possessed by either spouse during or on dissolution of marriage is presumed to be community property

Front 43

Does the court's just and right division power upon divorce applies to the spouses' separate property

Back 43

NO

Just and right division only applies to community property

Front 44

What are some facts that the court may consider in dividing the estate of the parties in a manner it deems just and right?

Back 44

1. Disparity of incomes and earning capacities
2. Relevant earning power, business opportunities, capacities, and abilities of the parties
3. Size of spouse's separate estate
4. Nature of the property (whether it's readily divisible)
5. Relative rights of the parties and the children
6. Benefits which spouse not at fault would have derived from a continuation of the marriage

Front 45

Are premarital agreements valid in Texas?

Back 45

Yes

* They must be in writing and become effective upon the marriage of the parties
* No consideration is necessary

* During the marriage, the agreement can be amended or revoked only a writing signed by both parties

Front 46

What subject matters can a premarital agreement cover?

Back 46

the agreement can cover most rights and most matters but the right to child support upon divorce cannot be adversely affected by the agreement

Front 47

Are marital agreements valid in Texas?

Back 47

YES

* they must be in writing and signed by both parties

* Agreement cannot be unconscionable as to defraud existing creditors

Front 48

When does a marital agreement terminate?

Back 48

The agreement terminates upon divorce

Even if the parties remarry the agreement is not revived

Front 49

What specific things can the parties agree to in a premarital agreement?

Back 49

1. Rights and obligation of each party in any of the property of either or both of them whenever and wherever acquired

2. The right to buy, sell, use, transfer, exchange, abandon, lease, consume, expend, assign, create a security interest in mortgage, encumber, dispose of or otherwise manage and control property

3. The disposition of property on separation, marital dissolution, death, or the occurrence of nonoccurrence of any other event

4. The modification or elimination of spousal support;

5. the making of a will, trust, or other arrangement to carry out the provisions of the agreement

6. The ownership rights in and disposition of the death benefit from a life insurance policy

7. The choice of law governing the construction of the agreement; and

8. any other matter not in violation of public policy or a statute imposing a criminal penalty

Front 50

What can be agreed upon in a premarital agreement in Texas?

Back 50

Generally parties may agree to anything except to interfere with the obligation to pay child support, to violate public policy, or to violate a criminal statute

Front 51

How is a gift donated to both spouses characterized?

Back 51

Separate Property

The spouses own an equal undivided one-half separate property interest in the gift

ONE CANNOT MAKE A GIFT TO THE COMMUNITY! - even if the transferring document says to "H and W, as their community property"

Front 52

Examples of Separate Property Personal Injuries

Back 52

* Wrongful Death damages
* Physical Pain
* Mental Anguish
* Emotional Distress
* Loss of Consortium
* Loss of Companionship of a Child
* Disfigurement
* Loss of Part of Body
* Loss of Mental and Intellectual Function

Front 53

Examples of Community Property Damages

Back 53

* Medical expenses during marriage
* Loss of services of spouse during marriage
* Loss of earning capacity during the marriage
* Property acquired from punitive damages

Front 54

Personal Injury Settlement Burden of Proof

Back 54

When a spouse receives a settlement from a lawsuit during the marriage, some of which may be CP and some of which may be SP, it's the spouse's burden to demonstrate what portion of the settlement is his or her separate property

In the absence of sufficient proof, everything is community

Front 55

In a divorce action, when is the court allowed to treat property acquired in another state that would have been separate property in that state as community property?

Back 55

The court can do this if at the time of the acquisition, the property would have been community property in Texas

Front 56

What is mixed character property?

Back 56

Property acquired during the marriage partly with CP funds and partly with SP funds

The property is partially SP and partially CP in the proportion that the property was purchased with SP funds and with CP funds

Front 57

When is property purchased on credit during a marriage separate property and not community property?

Back 57

When there is an express agreement on the part of the lender to look solely to the separate estate of the purchasing spouse for satisfaction of the indebtedness

Front 58

What is the impact of an offer that specifies a deadline for receipt of acceptance?

Back 58

The mailbox rule doesn't not apply because the offer must be received by the date specified in the offer

Front 59

What is does it mean to "dispatch" an acceptance?

Back 59

As applied to the mailbox rule, "dispatch" simply means putting the acceptance in the mailbox

The "dispatch" does not mean the acceptance letter has to be processed in the mail system (picked up, postmarked, delivered, etc)

Front 60

In questions involving mutual mistake and impracticability issues, what is important thing you should look for?

Back 60

Ask whether the party that would bear the risk of loss should have forseen the risk because they are in a business where some potentially problems in executing the contract is foreseeable


For example, an excavation company should be able to investigate the condition of the ground

Front 61

Under the common law, when is an option contract revocable?

Back 61

When it is not supported by consideration

Front 62

What is the UCC's firm offer rule?

Back 62

An offer by a merchant contained in a signed writing which by its terms gives assurance that it is firm will be irrevocable notwithstanding lack of consideration for the time stated in the offer (if less than three months)

Front 63

Who is a merchant?

Back 63

Any person while engaged in a business or profession or a seller who deals regularly in the type of goods sold