Community property, separate property, and the benefit of trusts (1 of 2).

December 19, 2013, by

stock certificate 2.jpgDonna and Kelly got married in 1986. Donna's parents had a successful business and gave stock to her. Because she received it in this way, the stock was her separate property despite the marriage. After a while Donna and Kelly became aware of certain tax advantages in agreeing that the shares should be community property instead. This they did, despite another document signed by all the company's owners that required a two-thirds vote to authorize any transfer of the shares.

The couple separated in 2002 and Donna filed to dissolve their marriage. She argued that the shareholders' agreement trumped their community property agreement and made ineffective their attempted change of the stock to community.

The trial court sided with Kelly, finding that at least as between these two parties for purposes of their marital dissolution, the stock was community property.

Donna took the issue to the Court of Appeals. She repeated her argument of the conflicting shareholders' agreement there. She also contended that the ownership status agreement was invalid because it was done without each party's having a separate attorney. This second is often a consideration in cases where a premarital agreement, a somewhat similar arrangement, is contested. What result for Donna and Kelly?