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Community Property Concepts: Transmutation

California is a community property jurisdiction. Which means that there is a presumption that all the assets and debts that are attained during the marriage are community in nature, belonging to both husband and wife. In the event of a divorce, the property is divided equally among the parties. This is only a presumption and it can be rebutted under certain circumstances.

Transmutation

One legal concept used to rebut the presumption of community property for assets attained during the marriage is “Transmutation”. This is the process by which the parties change the character of a property from community to the separate property of another or from separate property of one spouse to community property. Depending on when the property was transmuted there might be a need for a writing evidencing the transfer. Transmutations after 1984 require a writing. These writings need to be clear on their face that there is an intent by one party to transfer his/her community interest in an asset to the other’s separate property estate.

Divorce attorneys know that Los Angeles family courts are very suspicious of these transactions because they are counter-intuitive. Why would one spouse give up a right he or she has to a property? Hence in such transactions, the courts want to make sure that there is no breach of a fiduciary duty in these transactions between spouses. Several documents can satisfy the writing requirements. These include but are not limited to written agreements such as

Several documents can satisfy the writing requirements. These include but are not limited to written agreements such as Post-nuptial Agreements and deeds. For a deed to hold up in court, the language on the deed transferring title needs to specifically state that it is the intent of the parties to transfer one parties community property interest to the other parties separate property. If such details are included in the deed then it will likely satisfy the writing requirement under the law.

Even if a transmutation is evidenced by the requisite writing, its validity depends on the spouses’ compliance with the special standards of disclosure respecting marital property that arises out of their confidential and fiduciary relationship. Family C section 721 (b), 1100, Marriage of Haines (1995) 33 CA4th 277, 293. Thus, the individual contesting the transmutation can still set aside the deed or any other agreements that support the transmutation by showing that the transfer of the community asset was based on a breach of fiduciary duty and or the result of undue influence.

Transmutations are subject to the Fam C 721(b) fiduciary standard, a transmutation that advantages one spouse over the other is presumed to have been induced by the undue influence. One way to contest a procedurally valid transmutation is to show that you have been disadvantaged because of the transactions i.e. you have not received just compensation for transferring your interest in the property to your spouse. When the disadvantaged spouse contests the alleged transmutation, the advantaged spouse has the initial burden of producing evidence that the transaction was freely and voluntarily consummated with full knowledge of all the facts and a complete understanding of the effect of the transfer

One way to contest a procedurally valid transmutation is to show that you have been disadvantaged because of the transactions i.e. you have not received just compensation for transferring your interest in the property to your spouse. When the disadvantaged spouse contests the alleged transmutation, the advantaged spouse has the initial burden of producing evidence that the transaction was freely and voluntarily consummated with full knowledge of all the facts and a complete understanding of the effect of the transfer Marriage of Haines at 296-297, Marriage of Delaney (2003) 111 CA4th 991, 996.

One of the most common cases in which the issue of transmutation arises is when one spouse is in control of the finances and makes a decision to purchase the property under his or her name to take advantage of a low-interest rate because they have better credit than the other spouse. At the time of divorce the spouse, whose name the property is under, might try to claim that the property should be his sole and separate property because the deed satisfies the writing requirement for transmutation.

Los Angeles family courts are a court of equity. During a marriage, a husband and wife are in a very close and confidential relationship. During their life together they make a lot of oral promises to each other and conduct their financial affairs with one other with the utmost confidence. It would be very unfair to deny equal division of their assets because of oral promises they have made to one another or because of decisions that have been made during their marriage that only benefits one the parties at the time of divorce.

If you have any questions about your community property rights in Los Angeles, call Berenji & Associates today for a free consultation with a qualified attorney.

Berenji & Associates
9107 Wilshire Blvd #750
Beverly Hills, CA 90210
(310) 271-6290