When Title Alone Isn't Enough

The Legal Limits of Interspousal Transfer Deeds and the Risk to Separate Property in California

In California, the idea of "what's mine is yours" is more than just a romantic sentiment, it's the legal default. California is a community property state, which means that any property acquired by either spouse during the marriage is presumed to belong to both of them equally. This presumption applies regardless of whose name appears on the title. That's a detail that often surprises my clients. Many people assume that if they purchase property "solely in their name", it automatically becomes their separate property. It does not. Under California law, that assumption is not only incorrect, but it can also be very costly.

Consider the scenario: you're married, you buy a home, and you take title as "a married person as their sole and separate property." You may even have your spouse sign an interspousal transfer deed at the request of the lender or title company. You think you're protected. Until you are getting divorced, and you seek advice from a family law lawyer who tells you, unfortunately, that you are not. This is because unless specific legal steps are taken, a court could very well still determine that the home is community property. The key isn't in whose name is on the deed, it is in two things: (1) The origin of the money used to purchase the property and (2) Whether there was a legally effective agreement to change its character from community to separate.

Under California Family Code section 760, virtually all income and assets acquired during marriage, including wages, bonuses, rental income, business profits, and even certain benefits, are presumed to be community property. The law recognizes some exceptions. Gifts and inheritances received during the marriage remain separate, as does any property one spouse owned before marriage or acquired after separation. Proceeds from personal injury settlements may also qualify as separate in certain cases. But once separate and community funds are mixed in the same account, or used together to purchase property, characterizing that property can become legally complex. This is where many people, and even professionals, misunderstand the role of the interspousal transfer deed. It's often used as a practical tool to satisfy lenders or title insurers, and on its face, it seems to confirm separate ownership. But legally, it doesn't necessarily establish that the property is separate. To change the character of property acquired during marriage, the law requires much more.

Under Family Code section 852, any transmutation, the legal term for changing property from community to separate, must be in writing and must include an "express declaration" that the spouse signing away their interest understands they are giving up their rights in the property. Without this express declaration, a deed transferring title from one spouse to the other is just that- A transfer of title, not a legally binding change in property character. This distinction has been reinforced by the courts again and again. In Estate of MacDonald (1990) 51 Cal.3d 262, the California Supreme Court held that a transmutation must include language showing a clear intent to change the property's character. The phrase "as her sole and separate property" may be enough but only if it's embedded within a broader context that makes the purpose unmistakably clear. In In re Marriage of Starkman (2005) 129 Cal.App.4th 659, a spouse signed an interspousal transfer deed, but the court ruled it invalid for transmutation purposes because it lacked the required express language. The result? The property remained community property, despite the deed.

In my own practice, I had a case earlier this year that echoed this very issue. A husband bought a home during the marriage using community earnings. His wife signed an interspousal transfer deed, and he took title in his name alone. Years later, during divorce, he was shocked to learn that the court still viewed the house as community property. The interspousal transfer deed lacked the language required to effectuate a transmutation. There was no express declaration, no acknowledgement that the wife understood she was surrendering her community interest. Without that, the court followed the presumption that all property acquired during marriage is community property, and the asset was divided equally. That oversight cost my client several hundred thousand dollars.

It's a cautionary tale I often share. The law doesn't care about your assumptions; it cares about your paperwork. If you're buying property during your marriage and you want it to be your separate property, it's not enough to simply title it in your name or have your spouse sign a form at escrow. You need to be deliberate. Use traceable separate funds. Avoid commingling. And, most importantly, seek out an experienced family law attorney to help you draft a separate Transmutation Agreement, so that you can document your intent properly. It is worth the time and money to have an attorney draft a separate written transmutation agreement signed by both parties, one that states unequivocally that the property is being converted to separate property, and that the spouse giving up their interest does so knowingly and voluntarily.

The truth is, even in amicable marriages, it pays to plan for clarity. Circumstances change. People divorce. People die. And when that happens, the law will fall back on its presumptions unless you've given it clear reason to do otherwise. If you intend for property you purchased during your marriage to remain separate, say so clearly, in writing, with the full weight of legal compliance behind you. Because in California, love may be shared, but unless you're careful, your assets might be too.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.