In a California divorce, the community property of the spouses is divided evenly between them. Any separate property is confirmed to the appropriate spouse.
Except as otherwise provided by statute, all property acquired by a married person during the marriage while domiciled in California is community property.[i] On the other hand, separate property of a married person includes: (1) all property owned by the person before marriage; (2) all property acquired by the person after marriage by gift, bequest, devise, or descent; and (3) the rents, issues, and profits of the such property.[ii]
Thus, generally, whether property is characterized as community or separate is determined at the acquisition of the property. However, it is possible for the parties to change the character of property such that community property becomes separate property or vice versa. Family Code section 852 governs these changes, called “transmutations.”
The Code states: “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.”[iii] This means that to change the character of property, spouses must reach an agreement in writing; the writing must expressly state that the character of certain property is changing and must signed by the spouse whose interest in that property is affected negatively. (A transmutation of real property will not be effective as to third parties without notice thereof unless recorded.[iv])
The requirements of Family Code section 852 do not apply to a gift between the spouses of clothing, wearing apparel, jewelry, or other tangible articles of a personal nature, provided (1) the item is used solely or principally by the spouse to whom the gift is made, and (2) that the item is not substantial in value taking into account the circumstances of the marriage.
That said, should a spouse contest a transmutation, then the other spouse must show that the agreement did not result from undue influence. Meaning, the spouse trying to enforce the agreement must show that the spouse contesting the agreement’s validity did in fact enter the agreement freely and voluntarily with full knowledge of all relevant factors, and with a complete understanding of the effect of the transfer.
To best ensure compliance with Family Code section 852 and best avoid a court striking a transmutation agreement, it is best practice to consult with an attorney.
[i] Family Code § 760.
[ii] Family Code § 770 (a).
[iii] Family Code § 852 (a).
[iv] Family Code § 852 (b).