THURMAN'S TIPS - VALID AND INVALID TRANSMUTATIONS:
Family Code Section 852
A "transmutation" is an interspousal transaction by which the
character of personal or real property is changed in one of three ways:
from separate to community, from community to separate,and from the separate
property of one spouse to the separate property of the other spouse (or
Family Code section 850].
This area of the law is woefully complex and critically important, in part
because most transmutations are entirely inadvertent in the sense that
parties rarely intend to give up or waive an interest in property they
owned before marriage. But, in many common situations, that is exactly
what occurs. An illustration of a typical situation is where a wife (or
husband) owns a home prior to marriage. Legal title is held in her name
alone. During the marriage it seems advantageous to refinance the mortgage,
especially today when interest rates are at historic lows. Possibly the
husband's signature is needed on the loan in order to qualify. At
the close of the refinance escrow, the escrow or title officer includes
as one of the many documents that wife must sign an interspousal transfer
deed, a quitclaim, or a grant deed which recites that the property is
being transferring from wife to husband and wife, as joint tenants or
as community property. Or maybe there is no refinance, but instead in
the course of estate planning or discussions about "what happens
when I die" the husband's name is added to title as a joint tenant
to ensure that he inherits the property with the minimum of legal expense.
In either situation the wife may have no intention whatsoever to give
up an interest in her separate property, certainly at least not for purposes
of a divorce, but in both the result is that a transmutation has occurred
such that the home is no longer wife's separate property but instead
is belongs to the community.
Family Code § 852 addresses the formalities of what is required in
order to create a valid and enforceable transmutation. Prior to 1985 spouses
could orally transmute property, which meant that one spouse could claim
that the other promised them an ownership interest in some asset during
"pillowtalk," for instance. This inevitably led to huge and
unseemly liar's contests.
Section 852 was enacted to overrule prior law to require that transmutations
be supported and established by some kind of written "express declaration"
that is "joined in, consented to, or accepted" by the spouse
whose prior interest in the property was "adversely affected."
It therefore typically applies to real property and the kinds of personal
property for which title documents exist.
However, the transmutation formality rules are not necessarily limited
to title situations - subjection (c) addresses interspousal gifts of "clothing,
wearing apparel, jewelry, or other tangible articles of a personal nature...."
Family Code section 852(c) requires that gifts given during marriage (i.e.,
not that two karat engagement ring ) also require an express declaration
signed by the party who is financially disadvantaged unless the value
of the gift "is not substantial ... taking into account the circumstances
of the marriage." Hence, in order for a gift to be a valid transmutation
in the absence of a writing saying that was the party's intent or
having that effect, courts must consider its value in light of all the
parties' circumstances. The most obvious circumstance would be a gift
the value of which was minimal in light of a party's earnings or the
over-all worth of the community estate.
Keep in mind that in transmutations where one spouse obtains an advantage
at the expense of the economic interests of the other, there is a presumption
that the transmutation resulted from the exercise of undue influence.
Transmutations can be set aside or voided unless that presumption can
CALIFORNIA FAMILY CODE
CHARACTERIZATION OF MARITAL PROPERTY
TRANSMUTATION OF PROPERTY
Family Code Section 852
(a) A transmutation of real or personal property is not valid unless made
in writing by an express declaration that is made, joined in, consented
to, or accepted by the spouse whose interest in the property is adversely affected.
(b) A transmutation of real property is not effective as to third parties
without notice thereof unless recorded.
(c) This section does not apply to a gift between the spouses of clothing,
wearing apparel, jewelry, or other tangible articles of a personal nature
that is used solely or principally by the spouse to whom the gift is made
and that is not substantial in value taking into account the circumstances
of the marriage.