When a California couple divorces, one of their primary tasks will be determining how to divide their property. In some cases, a couple’s assets may be subject to a transmutation agreement. If your California divorce concerns transmutation, knowing how this type of contract may affect your case is important. Here is more on understanding transmutation during your California divorce.
California Community and Separate Property
Community Property
In California, the income and assets a couple acquires during marriage are presumed to belong to each spouse equally. These shared assets are known as community property. During a divorce, each person will have an equal ownership interest in these jointly-owned resources.
Separate Property
Outside of certain limited exceptions, what a person owns before marriage belongs solely to them. These premarital assets are known as separate property. During a divorce, separate property generally remains the possession and responsibility of the owning spouse.
Although property may be deemed community or separate, there can be circumstances when spouses may decide to enter into an agreement that changes how these assets will be treated. One way to accomplish this is through a transmutation agreement.
What is a Transmutation Agreement?
Transmutation refers to the conversion of property ownership. A California transmutation agreement is a legal contract that can be used to convert community property into separate property and vice versa. This type of agreement can also be used to transfer assets between spouses.
When are Transmutation Agreements Used?
Spouses use transmutation agreements to establish who has certain ownership interests. Unlike a prenuptial agreement, which couples enter into before marriage, this document is developed and executed after marriage and therefore is considered to be a postnuptial agreement.
What do Transmutation Agreements Do?
When a married couple enters into a transmutation agreement, they change the legal ownership of the property to either community (owned 50/50) or separate (belonging to one spouse). Without a California transmutation agreement, assets and income acquired by the couple during the marriage would be presumed to be community property. Likewise, outside of certain limited circumstances, property owned by one spouse before marriage would continue to be their separate property.
Why Would a Couple Use a California Transmutation Agreement?
Transmutation agreements provide a way to establish and clarify ownership. A couple may elect to use a California transmutation agreement to minimize the possibility of conflict over assets during divorce. There may also be certain tax benefits or other reasons for this decision. In some cases, a transmutation agreement may also be used for estate planning purposes. For example, one spouse may want to designate their inheritance as a community asset, which would normally be separate property.
Transmutation Agreement are Legal Contracts
It’s important to know that a transmutation agreement is a legal contract with significant implications. As with any contract, the document must be entered into knowingly by both parties in order to be binding. If there is evidence that a spouse was forced or tricked into signing the agreement, it may be considered void. In addition, these contracts may impact an individual’s tax liability.
Transmutation agreements can be complex and have a significant impact on those who are subject to the agreement. Someone who wants to use this type of postnuptial document should consult and work with an experienced California family law attorney. Your lawyer can help you evaluate your assets and determine the best ways to meet your goals.
Contact a California Divorce Attorney
Do you have questions regarding a transmutation agreement or other divorce issues? The attorneys at the Law Offices of Judy L. Burger are experienced family law attorneys who can help. Call us at 415-293-8314 to schedule a private appointment or visit our website. We assist clients along California’s Northern to Southern Coast, including San Francisco, Beverly Hills, Marin, San Jose, Gold River, San Diego, Santa Barbara, Ventura/Oxnard, and surrounding communities.