A question people often ask while negotiating prenups or navigating bankruptcy, legal separation, divorce, or the dissolution of a domestic partnership is: is the house community property under California community property law?
3 key factors that determine if a house is community property under California community property law are:
- Time – when the property was acquired
- Title – who and how a spouse or spouses hold title to the property
- Transmutation – whether a spouse validly transformed the character of community property into separate property or separate property into community property
The three key factors that determine if a house is community property in a marriage, legal separation, divorce, or a domestic partnership and the dissolution thereof, must be analyzed collectively and consecutively to accurately ascertain the legal character of a home under California family law.
The California Legislature has enacted legal presumptions about the characterization of property acquired before marriage, during marriage, and after separation, but they aren’t always conclusive and many only apply for purposes of dividing property in legal separation or divorce. Hence, determining whether a house is separate property or community property, or a bit of both, can be confusing. (This article is not exhaustive and is an introduction to general and common principles and presumptions.)
The myriad legal presumptions are as follows.
Time of Acquisition
California Family Code § 760 creates what is commonly referred to as the general community property presumption and states:
Except as otherwise provided by statute, all property, real or personal, wherever situated, acquired by a married person during the marriage while domiciled in this state is community property.
A spouse may overcome the Cal. Fam. Code § 760 presumption by proving, among other things, that the spouse acquired the property during the marriage by gift, bequest, devise, or descent (California Family Code § 770), or after the date of separation with said spouse’s separate property (California Family Code § 771), or that a spouse validly transmuted or legally changed the character of community property into separate property (California Family Code § 852).
Title to the Property
California Family Code § 2581 is a specific presumption that applies only in divorce, legal separation, and the dissolution of domestic partnership cases where the spouses acquired a house during marriage and affirmatively specified a form of joint ownership in the conveyance of title provides, such as “joint tenancy”. It removes the house from the presumption created by Cal. Fam. Code § 760 and cannot be overcome by a tracing (Speier v. Brace 9 Cal.5th 903 (Cal. 2020). The § 2581 presumption can only be overcome by a clear statement in the deed or written agreement. The Code reads:
For the purpose of division of property on dissolution of marriage or legal separation of the parties, property acquired by the parties during marriage in joint form, including property held in tenancy in common, joint tenancy, or tenancy by the entirety, or as community property, is presumed to be community property. This presumption is a presumption affecting the burden of proof and may be rebutted by either of the following:
For purposes of bankruptcy in a dispute between a married couple and the bankruptcy trustee, if a couple acquired a house as joint tenants with community funds before January 1, 1975, the real property is presumed to be the separate property of each spouse, but if they acquired it after January 1, 1975, the property is presumptively community property under Cal. Fam. Code § 760. The pre-1975 and post-1975 distinction determine whether a bankruptcy trustee can reach all or half of the house. “If the property is separate, then the trustee can only reach the debtor spouse’s 50 percent share. If the property is community, then the trustee can reach all the property, including the non-debtor spouse’s share” (Speier v. Brace 9 Cal.5th 903 (Cal. 2020).
If a married spouse solely holds title to a house acquired during marriage by gift, bequest, devise, or descent, the house is said spouse’s separate property (California Family Code § 770), but the community might have acquired an interest in the house after the transmutation if the spouse used community property funds to reduce the mortgage principal or make improvements that increased the equity, or if the spouse refinanced the mortgage during marriage (Marriage of Marsden (1982) 130 CA3d 426; Marriage of Moore (1980) 28 C3d 366).
Transmutation of the Character
If, on or after January 1, 1985, a married spouse changes/changed the legal character of a house from community to separate, or from separate property to community property, and is disadvantaged by the interspousal transaction, the change in character (the transmutation) is valid only if the advantaged spouse overcomes a presumption of undue influence. (California Family Code § 850 – 852 and § 721). [On a related note – a spouse who is named as a Grantee in a transmutation must accept the interspousal transfer for it to be valid (In re the Marriage of Anna and Grzegorz Wozniak 12/29/20 CA 4/1: D074813). If a married spouse transmutes a separate property house into community property, and the advantaged spouse proves the validity of the transmutation, the house is community property, but the disadvantaged spouse may have a separate property right of reimbursement under California Family Code § 2640. If a married spouse transmutes a community property house into a separate property, and the advantaged spouse proves the validity of the transmutation, the house is separate property, but the community may have acquired an interest in the house after the transmutation (Marriage of Marsden (1982) 130 CA3d 426; Marriage of Moore (1980) 28 C3d 366).
If a married couple used/uses community property funds to acquire property as joint tenants on or after January 1, 1985, the joint tenancy titling in the deed alone is insufficient to transmute the community character of the property into the separate property of the spouses; the deed itself does not satisfy the requirements in Cal. Fam. Code, § 852, subd. (a); see id., subd. (e) for a valid transmutation. (Speier v. Brace 9 Cal.5th 903 (Cal. 2020).
If a married couple acquired a house between January 1, 1975 and December 31, 1984, “the act of taking title as joint tenants is, in itself, insufficient to prove a transmutation; however, a court may consider the manner of taking title in determining whether the spouses had an oral agreement or common understanding.” (Speier v. Brace 9 Cal.5th 903 (Cal. 2020).
The primary evidence that determines if a house is community property under California community property law are:
- Property deeds
- Wills and Trusts
- Prenuptial, postnuptial, and transmutation agreements
- Articles of Incorporation, Partnership Agreements, and LLC Articles of Organization and Operating Agreements
