When One Spouse Signs the Marital Home Over?

When One Spouse Signs the Marital Home Over?

In many marriages and for many different reasons, one spouse may execute a quit claim deed on the family home in favor of the other so that only the one spouse is on title. This could be done for financing reasons, tax reasons, liability reasons, or also simply to recognize that the family home is the separate property of the other spouse. But when the spouses reach divorce court, the question arises whether or not the quit claim deed was a valid transmutation such that the one spouse has lost their community interest in the house which is now the separate property of the other spouse who is on title. “Transmutation” is the family law term when community property becomes separate or when separate property becomes community property. Even though there is usually a presumption of title that the title holders are the owners, this presumption does not apply in divorce court where the court will determine whether or not a community interest exists.

It is helpful at this time to refresh our understanding of what community property is. Community property is any asset or any debt incurred during the course of the marriage excepting gifts and inheritances received by one spouse. So if a spouse brought something into the marriage, it is their separate property and if something was acquired during the marriage it is community property. This article analyzes what happens with a community property house when one of the spouses has signed a quit claim deed removing them from title and whether or not a valid “transmutation” has occurred changing the community property house to the separate property of one spouse. There are a couple of Family Code laws that make it quite difficult for there to be a valid transmutation in most situations. They are Family Code Section 721 which imposes fiduciary duties on each spouse as to the other and Family Code Section 852 which imposes the requirements of what is required for a valid and enforceable transmutation of community property. Because of the duties spouses owe to each other, whenever an alleged transmutation results in one spouse obtaining an advantage at the expense of the economic interests of the other spouse, a presumption of undue influence arises against the advantaged spouse. In such a situation, the advantaged spouse must overcome the presumption by “clear and convincing” evidence that the transmutation was not the product of undue influence.

Section 852 requires transmutations to be supported and established by some kind of written express declaration that is joined in, consented to or accepted by the spouse whose prior interest was adversely affected. In order for there not to be undue influence, the declaration must show the spouse understands that they have a property right and that they are giving up that property right. Even where that language exists or is added to a quit claim deed, the transmutation is still not automatically valid just because they have satisfied Family Code Section 852 with a proper writing because of the fiduciary duties owed pursuant to Family Code Section 721.

In fulfilling their fiduciary duties owed to one another, spouses cannot take advantage of one another in property dealings and must regard each other’s interests no less than their own. Fiduciary duties impose the highest duty of good faith and fair dealing between spouses and this duty continues on into divorce court and until the parties become unmarried by a final Judgment of dissolution. When an asset is transferred between spouses during marriage without consideration (i.e. for no compensation for its value), the transmutation is presumed invalid and to be the product of undue influence. It is the burden of the party claiming the transmutation is valid to rebut that presumption by clear and convincing evidence showing otherwise.

It can be an uphill battle for a spouse trying to assert a valid transmutation. The advantaged spouse must show that the transfer was made freely and voluntarily, was made with full knowledge of all of the facts, and was made with a complete understanding of the effect of the transfer. The spouse holding title must present evidence regarding the intentions and understandings of the parties so as to support the existence of a valid transmutation.

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