COMMUNITY PROPERTY
PROFESSOR JANICE KOSEL
FINAL EXAM
JUNE 2002
INSTRUCTIONS
This is a closed book exam.
If you believe you lack sufficient facts to answer the question, please specify what additional
information you require and how it will affect your answer.
The total time for this exam is 2 hours.
Read, think and analyze before you begin to write.
Good luck!
Harold and Wanda were married on Valentine's Day, 1996 -- right in the middle of
Harold's first year of law school at Golden Gate. Wanda supported the couple doing
research at a local biotechnology company. When her salary was added to Harold's
student loans, they maintained a pretty upscale lifestyle for a law school couple.
They lived in a condo in Emeryville that Wanda purchased for $200,000 in 1994. (It
is now worth $300,000.) The $40,000 down payment came from annual gifts to Wanda
from her parents. The annual gifts continued during marriage and Wanda applied
them to the principal balance on the mortgage which is now only $50,000.
Unfortunately, they were both so wrapped up in their careers that they spent little
time together after Harold's graduation in 1998. As they continued to drift apart, both
found solace in new companions they met at the office -- people with whom they felt
they shared more common interests. Harold moved out of the Emeryville condo into
an apartment in San Francisco in July 2000.
Neither Harold nor Wanda pushed for the legal conclusion of their relationship.
They remained good friends and talked or dined together several times a month. They
continued to file joint tax returns.
In September 2001 Harold was seriously injured in a head on collision in the wine
country when he got drunk and drove over the center line. Harold had to admit that
Wanda had really come through for him. Wanda took him into the spare bedroom of
the condo and nursed him back to health. The personal injury suit has not been
resolved, but Harold's insurance company estimates liability in the neighborhood of
$600,000; Harold has coverage for only $500,000.
The accident was a real wake-up call for Harold. He seriously considered how he
wanted to live his life. In January 2002 he left his big firm practice and set up shop as
a sole practitioner.
Harold has finally gotten around to getting a dissolution of marriage. After telling
you his story, in response to your questions, he reveals the following additional assets:
1. A money market fund in the amount of $113,000 in Wanda's name alone. The
source of the fund was a $50,000 inheritance in 1998 from Wanda's grandmother.
Wanda was an active and successful daytrader until early 2000 when a radio talk
show host suggested listeners liquidate their holdings. Wanda is awaiting his signal to
enter the market again. Wanda had always told Harold that her grandmother's money
was their security blanket; it would allow them freedom to do whatever they wanted
with their lives.
2. A Keogh retirement plan for Harold in the amount of $120,000. Harold
contributed 20% of his annual earnings as a lawyer to the plan.
3. Options in the stock of Wanda's employer, Biotech. Wanda began work there
June 1, 1995. One option to purchase 1,000 shares at $3 per share was granted on
June 1, 1999 and is first exercisable on June 1, 2004. A second option for 1,000
shares at $7 per share was granted on June 1, 2002 and is first exercisable on June 1,
2007. The options can be exercised if, and only if, Wanda is still working at Biotech at
the time of the exercise of the option. Biotech stock is currently trading at $10 per
share.
Harold has consulted you about the division of marital property. Advise him.