If you would like to learn more about transmutation agreements or the real estate department, contact our experienced California family lawyers today. We can check every property you and your spouse own and help you understand the pros and cons of changing ownership status. Before understanding the importance of a transmutation agreement – and changing the classification of ownership – it is important to understand the difference between community and separate ownership. Couples can also enter into similar agreements after entering into the marriage, but before the divorce. In addition, married persons are governed by the Family Code, Section 721, which “imposes on each spouse an obligation of the best faith and fair action and must not benefit the other from an unfair advantage.” The goal is to protect spouses from the exploitation of trust in their relationship. Where the spouses engage in an activity in which one party is disadvantaged and the other is favoured, the court finds that the recipient party has exerted an inappropriate influence. The Tribunal considers that the recipient party may have used its position in its confidential relationship to induce the other party to enter into an agreement in which it is disadvantaged. Transmutation agreements can be established in passing or intentionally. In some cases, spouses may not be aware that they are deferring the legal property status of the property. Suppose A and B get married.
One owns a car and decides after the wedding that B must also appear on the title. One of the many forms that will be signed A and B to add B`s name to the title is a transmutation agreement. A`s car, which was the separate property when they married, is now the condo of the wedding. If A and B divorce, the car is no longer considered an A car. Instead, it is subject to community ownership laws. In the event of a challenge to a conversion agreement, the spouse who receives the economic benefit (i.e. property) must overcome the presumption that the conversion agreement is the result of undue influence. If the spouse does not overcome this presumption, the conversion agreement may be struck down.
A transmutation agreement may result in a shift in the classification of properties in one of the three directions. First, a spouse can convert separated property into common property. Second, spouses can convert common ownership into separate ownership. Finally, a spouse can convert his own property into the separate property of the other spouse. (Z.B. Spouse A transfers ownership to Property X to Spouse B.) Family Code Section 852 (a) states: “The conversion of private property or property is not valid, unless it is made in writing by an express statement made by the spouse whose interest in the property is impaired, with which he agrees or accepts.” In order for a letter to meet the “explicit statement” requirement, it must indicate on its face that there is a change in character or ownership of the subject`s property. See In re Marriage of Benson (2005) 36 Cal.4th 1096, 1100. This does not expressly require the use of the terms “transmutation,” “common property” or “separate ownership” in the written agreement. However, the written agreement must “clearly indicate a change in the character or ownership of the property.” In re Marriage of Starkman (2005) 129 Cal.App.4th 659, 664.