Simply put, a transmutation changes the character of property from separate to community, community to separate, or the separate of one to the separate of another. Under the California Family Code, transmutations may only occur between spouses or registered domestic partners, and they do not involve third parties.
The Family Code outlines the method to effectuate a valid transmutation. In order for spouses or partners to change the character of their previously acquired property, there must be a written express declaration of the intent to transmute. The writing must be consented to by the party whose property interest is adversely affected. There are tax consequences of transmutations for registered domestic partners unlike for spouses.
For example, suppose a retirement account acquired and funded with community funds during a marriage is the community property of Spouse A and Spouse B. If the couple wishes to transmute the retirement account to the sole and separate property of Spouse A, Spouse B must consent, by way of a written declaration, to the change in character because Spouse B’s interest in the retirement account, as a fifty-percent community property owner, will be affected adversely by the transmutation. While there is no “magic language” to effectuate a transmutation, legal experts generally agree that it is best to include the word “transmute” in any such writing.
If you have questions regarding whether a transmutation is effective, or you would like to discuss your property rights if a transmutation were to occur, please contact us for further information.