Can A Quit Claim Deed Change Community Property to Separate Property?

By Sabi Mand, Esq.

What is Community Property in California?

California is a community property state. Community property is any property, asset or even debt accrued by the couple during the course of their marriage. Courts have held that the character of the property as separate or community is typically determined at the time of its acquisition.  However, one of the ways the parties can change the character of a property is with a quit claim deed, assuming several factors are met.

What is a quit claim deed and how does it work in Family Law?

A quit claim deed is used to transfer interest in real property. The person transferring the interest is called the grantor and the person receiving and benefiting from the deed is called the grantee.  The grantor of the deed terminates any right and claim to the property, therefore allowing the right or claim to transfer to the recipient, the grantee.

In Family Law, a quit claim deed is one possible way of transmuting community property and such deeds are called Transmutation Agreements. Such an agreement is an inter-spousal transfer that results in a change in the characterization of the property. In California, transmutation can be made with or without consideration. Under California Family Code section 850, married persons may, by an agreement or transfer do the following:

1. Transmute community property to separate property of either spouse,
2. Transmute separate property of either spouse to community property, and or
3. Transmute separate property of one spouse to separate property of the other spouse.

In order for transmutation to be valid, it must not be fraudulent in nature and must be in writing and consented to by the spouse being adversely affected by the transmutation.

Presumption of Undue Influence

Simple transactions with payment of full consideration to the grantor spouse do not automatically give rise to undue influence. However, in a transaction where one spouse obtains an advantage over the other, the presumption of undue influence arises.

Under California Family Code section 721, spouses are subject to general rules governing fiduciary relationships that control the actions of persons occupying confidential relations with each other. This confidential relationship imposes a duty of the highest good faith and fair dealing on each spouse, and neither can take any unfair advantage of the other.

What is the Burden of Proof?

Generally speaking, where one spouse obtains an advantage in the transaction with the other spouse, the benefitting spouse must rebut the presumption of undue influence. In order to do so, the benefiting spouse must show that:

1. The transfer was made freely and voluntarily,
2. The transfer was made with full knowledge of all the facts,
3. The transfer was made with a complete understanding of the effect of the transfer.

The validity of the transmutation relies heavily on the express consent of the adversely affected party and the deed’s ability to indicate that the adversely affected spouse understood the consequences of the transmutation. Parties have to be very diligent in effectuating such a transfer, in order to avoid future legal complications.

This area of law is only one of the complex issues that can arise in divorce cases. This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact us directly.