When it comes to marriage and divorces in California, one concept that you must absolutely understand is the idea of community versus separate property. The idea is fundamentally very simple. In a nutshell, when you are married, the items you acquire during the marriage are — with a few exceptions — “community property” (see California Family Code section 760). Think of community property as belonging to both spouses equally. In the event of divorce, community property needs to be divided equally. Property that you acquire before or after the married couple separates is “separate property” (see California Family Code section 770) and is not divided during a divorce because it is owned just one of the spouses.
When you take your apple cutting seriously.
Applying this idea in the real world, however, can be complicated for a few reasons.
- When something was acquired (e.g. during the marriage, before the marriage, etc) is really important. The parties can disagree about that and there is, unfortunately, not always a clear cut way to prove when something was acquired.
- Sometimes, the date of acquisition is not always a single date. This often happens when, for instance, one spouse buys something (e.g. a house or car) when they are single and pays for it over time that is partly when they are single and partly when they are married.
- Third, most normal people do not think of assets in terms of when it was acquired, what money was used to pay for it, etc. As a result, mixing or commingling of assets is very common, especially for inherently fungible items like money.
Because of these problems and those like them, applying community and separate property principles in the real world can be extremely involved and requires spending huge amounts of time and money. Most people eventually realize this and reach a settlement to resolve their property division problems.
There are any number of ways in which such a settlement can be done. That is the nature of settlements, after all. In reaching a settlement, however, it is very common for the divorcing couple to trade property back and forth. For example, spouse A might have a retirement account through their employer that they acquired during the marriage. This retirement account could easily be community property because it was acquired during the marriage which means spouse B would be entitled to part of it. To reach a settlement, however, spouse B might voluntarily give up her claim to spouse A’s retirement account in exchange for other property.
This settlement might be reached as part of a divorce case, but it doesn’t have to be. If spouse A and B marry and agree at the outset that, for example, A and B will each keep their respective retirement accounts as their separate property, they can do that. A prenuptial agreement under, say, Section 1610 or so of the California Family Code could also be used for this purpose.
If spouses A and B are going to reach any sort of agreement to trade property back and forth or waive claims they have in each other’s property, what they are essentially doing is transforming something that is community property (e.g. a retirement account of one spouse) in to the separate property of just that one spouse. This transformation process is referred to legally as “transmutation” and it’s governed by sections 850 to 853 of the California Family Code. Out of these sections, the one I’d consider the most important is section 852(a) which provides:
“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”
Even if section 852(a) did not exist, I’m hoping that common sense and prudence will tell you that a written agreement (e.g. dated, signed by the parties, etc) is much more reliable than an oral agreement or promise. If you read my post on the New York Statute of Frauds , you’ll know that the law requires certain agreements to be in writing in order to be enforced. Oral agreements are not enough. California also has a Statute of Frauds that embodies this same idea that certain agreements are void if they are not put in writing. I — for some reason — don’t have a blog post on the California Statute of Frauds, but do have a video on my Youtube channel about it. Here it is.
If I absolutely had to pick a take-away for this post, it’d probably be this requirement that transmutations **must** be in writing in order to be valid. Well, that and the point that transmutation is even a thing at all.
The precise contents of a transmutation agreement in California will vary depending on the circumstances. I haven’t looked, but I’d venture a guess that there is no such thing as a universal transmutation agreement although I am sure there are common topics or points that any good transmutation agreement will contain.
My usual disclaimer applies: I hope this post helped you. It is not intended as a comprehensive or exhaustive discussion about transmutation agreements in California. If you do have a situation in California where you’re dealing with a transmutation-related problem, I encourage you to find an attorney in your area with whom you can discuss the intricacies of your case.
Andy Chen
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