What is Transmutation of Property in Divorce?
Divorce is often overwhelming. The addition of tough questions surrounding division of property can feel like too much. Add to that the unfortunate reality that dealing in legal issues comes with inevitable run-ins with legal terms and concepts that most are unfamiliar with. One term/concept that can be bewildering when it comes up in divorce and property division cases is “transmutation.” But it is important that people understand transmutation of property – because the way you handle your property during the course of the marriage can affect how it is divided in the event of a divorce.
What Does “Transmutation” Mean?
California is a community property state, meaning it follows community property law. Generally, this means that everything acquired during marriage belongs to both spouses and is community property. It is generally divided equally. There are exceptions to this general rule, such as assets that are acquired by one spouse by inheritance or gift. Those assets remain separate property.
However, community property and separate property can change its character. That is what is meant by “transmutation” – when property changes from separate to community, from community to separate, or even from one spouse’s separate property to the other spouse’s.
Why Does This Matter?
When you divorce, the court must determine which assets are community and which are separate. If you have transmuted separate property into community property – or vice versa – it could seriously impact how your assets are divided. You cannot accidentally transmute property. California has strict rules to prevent people from being tricked out of their rights.
According to California Family Code section 852, the following must be met in order for a transmutation of real or personal property to be considered valid:
- A transmutation must be in writing; and
- It must include an express declaration from the spouse who is giving up a right, saying they understand and agree to the change.
The spouse losing his or her right to property must clearly, knowingly acknowledge what they are doing. It cannot be a vague sentence buried in a contract. Oral agreements won’t suffice. Transmutations must be in writing. Additionally, Family Code section 853 states that designating property as “separate” in a will or trust does not change its legal character. A transmutation of real property is not effective as to third parties (like creditors) unless it is recorded.
The requirements of Section 852 does not apply to a gift between 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.
Transmutation is a powerful concept that can significantly impact how your property is divided in divorce. Whether you are thinking about marriage, already married, or in the midst of divorce, it is essential to understand how your financial choices may affect your rights.
Contact Cardwell Steigerwald Young, LLP
If you are unsure whether you property has been transmuted, or you want to make sure you are protecting your assets the right way, contact the family law attorneys at Cardwell Steigerwald Young, LLP. Our experienced team can help you understand what your estate needs, and the best steps to take as you navigate onward.
