Transmutation and Community Property in California Divorce

When you’re untangling a big knot, you loosen the strings and try to figure out where they came from. The process of characterizing assets in a California divorce is somewhat similar. Each string– meaning each asset–may look like it should be characterized as separate property or community property, but you can’t tell for certain until you follow the string back to see where it originated and what happened to it along the way.

One of the first steps toward getting the right allocation of property in your divorce is to ensure that all assets are properly characterized. At Holstrom, Block & Parke, APLC, we have the experience and financial acumen to help you protect what’s rightfully yours in divorce, and that includes making strong arguments to show why property should be characterized in your favor.

Community Property vs. Separate Property in California

In California, property acquired during marriage is generally considered community property, and it's divided equally between spouses upon divorce. Conversely, separate property is any property one spouse owned before marriage or acquired during the marriage by gift or inheritance. It typically remains with the original owner after a divorce.

However, it’s important to realize that separate property can transform into community property. Moreover, property that might appear to be jointly owned marital property can be kept separate through a prenuptial agreement or a validated postnuptial agreement.

Transformation of Property in California

The character of property can be changed or prevented from changing through a written agreement, and it can also change when separate property is commingled with community property. For instance, if a spouse inherits money and deposits it in a joint bank account, the spouse has commingled separate property with community property, and it becomes more challenging to divide the funds in that account during divorce.

Transmutation is a more formal process for changing the character of property. It requires a written agreement.

Creating a Transmutation Agreement

At one time, a spouse in a California divorce was allowed to claim that the other spouse informally agreed to change the character of certain property, and that oral agreement could be enforceable. But these unwritten agreements were very hard to prove, so California law now requires transmutation agreements to be in writing and to follow specific rules.

The terms of the agreement need to be clear and unambiguous and both parties must receive certain essential information before signing or the agreement could be ruled invalid. In addition to ensuring that a transmutation agreement meets legal requirements, it is also important to consider the implications of the agreement such as the impact on tax liability.

Holstrom, Block & Parke, APLC Protects Your Share of Property in Divorce

Whether you're considering transmutation or dealing with any other divorce-related issue, the team at  Holstrom, Block & Parke, APLC, is here to help. We understand the intricacies of California law and can guide you in making decisions that protect your interests. Call us today at (844) 237-5791 or contact us online to schedule a consultation with a knowledgeable divorce lawyer in Southern California.

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