When Does Separate Property Become Community Property?

Separate Property vs. Community Property in California

In a divorce case, a court must tackle issues involving the division of property between the parties. In California, issues of property division upon divorce are resolved in accordance with principles of community property.

California courts will equally divide the community estate of the parties upon divorce, which is comprised of all assets and items of property that qualify as “community property” in California. An asset is deemed to be divisible community property if it was acquired after the parties got married and before the date of their final separation.

Conversely, assets that do not fit the California community property definition are not subject to equal division upon divorce.

What Is Considered Separate Property in a California Divorce?

Property that a spouse acquired before getting married or after the date of final separation is considered to be their sole and separate property and is not subject to division the way community property is.

However, a couple can circumvent the legal characterization of their property under California law. For example, a couple can enter into a premarital contract where they agree to treat certain assets as community property that otherwise qualify as separate property.

Agreements to characterize property differently from how the community property rules of California dictate are known as “transmutations.”

What Is a Transmutation?

Spouses can legitimately change the community or separate property character of an asset through what is technically referred to as a “transmutation.” Under California law, an effective transmutation of property is subject to certain legal requirements regarding the form and execution of the purported transmutation.

California Family Code § 852 governs the proper form of transmutation of property, providing the following:

• “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.
• A transmutation of real property is not effective as to third parties without notice thereof unless recorded.
• 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.
• Nothing in this section affects the law governing characterization of property in which separate property and community property are commingled or otherwise combined.
• This section does not apply to or affect a transmutation of property made before January 1, 1985, and the law that would otherwise be applicable to that transmutation shall continue to apply.”

The Three-Step Approach to Transmutations

California courts follow a three-step approach to determine the validity of an alleged transmutation:

• Step 1: Courts determine whether the transmutation in question conforms to the formal requirements under California Family Code § 852 that a transmutation be made in a written, express declaration that is accepted by the spouse whose property interests would be adversely impacted.
• Step 2: California courts will consider whether the transmutation was the result of wrongdoing, such as fraud or undue influence. Significantly, the party arguing in favor of a transmutation’s validity must provide sufficient information overcoming the legal presumption that a transmutation is procured by undue influence.
• Step 3: Involves determining whether a spouse’s right to reimbursement under California Family Code § 2640 was waived by the transmutation, which provides that “[a] party shall be reimbursed for the party’s separate property contributions to the acquisition of property of the other spouse’s separate property estate during the marriage unless there has been a transmutation in writing …or a written waiver of the right to reimbursement.” Generally, a party’s right to reimbursement survives a transmutation.

Bremer Whyte Brown & O’Meara Is Ready to Assist You

If you are seeking an experienced attorney to guide you through the sophisticated legal issues of your divorce, you should consult one of our experienced attorneys at Bremer Whyte Brown & O’Meara for advice. Our dedicated team of lawyers has the necessary background and understanding of California family law to help you protect your legal interest in matters such as property division in divorce cases.

For an initial consultation, please call Bremer Whyte Brown & O’Meara at 949-229-8546 or contact us online today.