Transmutation Agreement

Home » Agreement Articles » Transmutation Agreement

Transmutation Agreement

A Brief Introduction About the Transmutation Agreement

A transmutation agreement is an agreement between spouses through which separate property can be converted into community property or vice versa. Transmutation of property, under family law, means the process by which separate property is converted into marital property. The property is then treated as the joint property of the couple. Separate property is a property that is individually owned by one spouse before marriage or property that is received through inheritance or as a gift. A question that arises is when does separate property become community property? This can happen in the following ways and can give rise to another question – which of the following would result in a transmutation? A transmutation can take place either when the title in the property documents is changed to include the joint names of the parties, or through a written agreement or it can also be done through certain actions of the parties. Agreeing is considered as the best way of doing this.

Who Take the Transmutation Agreement – People Involved

A transmutation agreement is entered into between a married couple who wishes to provide clarity on which properties are separately owned and which properties are jointly owned by the couple.

Purpose of the Transmutation Agreement – Why Do You Need It?

The purpose of this agreement is to provide clarity on the ownership of all the properties of the couple. The agreement is useful to change the character of the property that the parties own at the time of making the agreement and any properties that they may acquire in the future. According to California family code 852, which talks about the enforceability of transmutation, a transmutation of any property must be in writing to be considered as valid. There must be an express declaration given by the spouse whose interested in the property is being affected adversely. Hence this agreement is signed, and it must be in writing to be considered as valid proof of the transmutation.

Contents of the Transmutation Agreement

A transmutation agreement must include the names of the persons who are agreeing, the date on which it is created and the intention behind creating this agreement.

The essential requirement to make the agreement valid is that there must be an express declaration that the ownership of the property is being changed. The agreement must specifically talk about all the properties of which the parties desire to change the ownership. It must be laid down that the parties wish to change the status of such property from separate property to communal property.

The agreement should also mention that the parties stand in a fiduciary relationship with each other, that they are entering into this agreement out of their own free will and that they are under no duress or undue influence.

How to Draft the Transmutation Agreement

The following are the steps to follow while drafting a transmutation agreement:

  • The parties have to decide among themselves how their properties will be dealt with. They will have to decide which properties which will be held individually by them and which properties will be treated as marital or communal property.
  • The agreement should be drafted in such a manner as to clarify all these details so that it can be used as evidence in the future.
  • The agreement must be signed by both spouses.

Negotiation Strategy

  • In such an agreement, the negotiation between the spouses concerning which properties will be considered as marital and which will be kept separate.
  • The spouses have to make a very fair arrangement that works best for both of them.

Benefits and Drawbacks of the Transmutation Agreement

The following are the benefits and drawbacks of having a transmutation agreement:

  • A big advantage of this agreement is that it provides clarity on which properties are separate and which properties are shared between the spouses. If such an agreement is in place when the couple files for divorce, it can make the divorce proceedings easier.
  • This agreement can be used as evidence in case of any property dispute. Sometimes there can be a dispute as to whether a particular property was a gift or not. If this agreement covers all the properties owned by the couple, it provides evidence on the owner of all the properties.
  • They can also be certain tax advantages of creating this agreement. It can be used to avoid double taxation when a particular property is distributed to heirs.

What Happens in Case of Violation of the Transmutation Agreement?

There might be cases where the signature of a spouse is taken by some fraudulent means, or a spouse does not enter into this agreement with his / her full consent. In such a case, the agreement may be considered void, and the courts may declare that no transmutation has occurred. The accused spouse will have to prove that the agreement was created by both parties voluntarily, Hence, as mentioned above, it is important to include an express declaration that the ownership of the property is being changed and it is the intention of the parties to change the nature of the property.

In conclusion, a transmutation agreement can be beneficial as it provides solid evidence as to whether a particular property is held jointly or separately. This agreement proves beneficial during the divorce proceedings of the couple as there is no dispute as to ownership of the properties.